LAUNCH OF THE EXAMINATION INTO THE OPERATIONS OF THE DEPARTMENT OF PENSIONS PRESENTED BY THE DIRECTOR/CEO KACC. 21 st March 2007

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1 LAUNCH OF THE EXAMINATION INTO THE OPERATIONS OF THE DEPARTMENT OF PENSIONS PRESENTED BY THE DIRECTOR/CEO KACC 21 st March 2007

2 The Permanent Secretary - Ministry of Finance, The Financial Secretary, The Director/Secretary- Department of Pensions Members of the Media, Ladies and Gentlemen, All Protocols observed. 1

3 The Kenya Anti-Corruption Commission (KACC) is established under the Anti-Corruption and Economic Crimes Act. No 3 of The Commission is mandated to: Investigate corrupt conduct Trace and recover corruptly acquired public property, Offer advice on corruption prevention mechanisms and Educate the public on the dangers of corruption The Commission uses a three-pronged approach of investigation, prevention, 2

4 and Public Education in the fight against corruption. The overall objective of the Preventive Strategy is to promote and sustain good governance in public organizations. This is achieved through interventions that pre-empt corrupt practices and promote integrity and accountability in the way organizations are run and managed. Preventive activities focus on reforming policies, practices, and procedures with a view to seal corruption loopholes and other inefficiencies that may lead 3

5 to loss, poor service delivery and other malpractices. They are based on the premise that prevention is better than cure. Indeed prevention is a cost effective and a sustainable strategy. This is because the approach offers the majority of the employees an environment where ethical values and good governance practices are institutionalized. Thus these employees find it easier to perform their duties without engaging in corrupt practices. This therefore clearly differentiates prevention from investigation as the latter is mainly carried out after a crime has been committed or is about to be committed. The importance of corruption prevention cannot therefore be underestimated as it has been recognized as the ultimate strategy in fighting corruption. 4

6 In the experience of the Kenya Anti-Corruption Commission and from studies world-wide, it is evident that Corruption loopholes exist in almost all management and operational systems in many organizations. Such loopholes may be found in the law, policies and procedures. For example, where the law vests certain individuals with discretionary powers, such powers may be abused if there is no system of checks and balances in exercising such discretion. The Examination which we are launching today is part of the Commission s preventive strategy and is intended to help us identify corruption loopholes in the systems, policies, procedures and practices of the Department of 5

7 Pensions. The process will entail studying all the instruments applied by the Department in carrying out its functions. After the loopholes identification process, KACC will offer appropriate advice to the Ministry of Finance on the best ways to seal the loopholes and to enhance good governance in the Department. The decision to conduct the examination into the operations of the Department of Pensions was guided mainly by the following factors: Firstly KACC recognizes the important and strategic role of the Department of Pensions in Processing and paying retirement benefits in respect of public 6

8 officers. Retirement benefits which are processed by the Pensions Department provide social security to retirees. Inefficiencies in handling of Pension claims and disbursement of payments cause untold suffering to the senior citizens of this country most of whom have no other forms of social security. The multiplier effect of such inefficiencies is lack of access to basic services such as health, water, housing and education. Where such inefficiencies lead to improper flow of income, retirees do not effectively participate in national wealth creation either through savings or using their earnings for investment. This negatively affects economic growth. 7

9 Furthermore, after retirement, many Kenyans go back to the rural areas. The rural community look up to them to provide guidance in community development activities by sharing experiences gained before retirement. Indeed retirees are expected to act as role models to the community. However, some do not meet such expectations because they are disillusioned when the flow of income is not forthcoming due to inefficiencies in pension management. This may create a loss of confidence in Government not only by the senior citizens themselves but also by the public at large. It is therefore in the interest of the Government and the Kenyan public to have a robust and efficient pension management Department. 8

10 Secondly, numerous reports of corruption in the Department have been received at the KACC Report Center. The Commission has received over 70 reports concerning various inefficiencies and corrupt practices in the Department. There are allegations of corrupt practices related to: Delays in processing pension Some of the reports indicate that pension claims take more than six years to process. One complainant claims not to have been paid his dues since Demands for Bribes complainants allege that some officials in the Pensions Department solicit for bribes from 9

11 retirees in order to process their benefits. The bribes usually range from Kshs 1,000 to even Kshs 100,000 depending on the amounts due to the pensioner. Payment Irregularities - In some instances pensioners dues are paid to wrong accounts some of which belong to employees of the Department. In certain instances the incorrect amounts are paid and have to be regularized later. The pensioners are not informed and only find out when they fail to get their subsequent dues. Fraud - In certain instances, officers of the Department approach certain individuals to allow them to use their bank 10

12 accounts to transfer retirees funds with intent to defraud. In one case, an individual was approached by an officer of the Department to allow him to transfer close to 1 million from the Department. These complaints and many others suggest existence of weaknesses and loopholes, in the policies and methods of work applied by the Pensions Department. It is envisaged that the results of the Examination will not only assist the Department of Pensions but will also reinforce other reforms the Ministry of Finance is undertaking in the fight against corruption. 11

13 As part of the assignment, the Examination Team will be expected to study carefully the examination report of the Kenya Anti Corruption Authority (KACA) which was submitted to the Department of Pensions in November The issues addressed in the Report by KACA focused on the following among others: procedures for receiving documents Procedures for paying of pension Payroll administration 12

14 Dispatch of cheques and General supervision These issues will be considered particularly with a view to establishing the extent to which the recommendations were implemented and constraints encountered in the process of implementation. They will also be considered with a view to establishing their relationship to corruption issues which have emerged since the Report was submitted. I take this opportunity to acknowledge the various initiatives by the Ministry of Finance for corruption prevention. I am aware that the Ministry has set up a Corruption Prevention Committee whose members were trained by 13

15 KACC. The Ministry has also developed a Code of Conduct in line with the Public Officer Ethics Act. It is my hope that these initiatives are bearing fruit. Above all, the Ministry is spearheading reforms aimed at enhancing pension earnings for the Civil Service. This therefore requires that the systems and procedures of the Department of Pensions are strengthened to effectively implement any changes arising from these reforms. I urge the Departmental Staff and those in the Ministry at large to accord the Commission s officers all the necessary cooperation. I now declare the Examination into the systems, policies, procedures and practices of the Department of Pensions officially launched. 14

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