Why Governments Derive Huge Financial Benefits from Biometric Payroll Cleaning
Many individuals and institutions in a country benefit significantly from biometric identification. But, for me, the biggest beneficiary of national biometric identification is the government. Government benefits come from many sources, including ease of national security operations, support to healthcare systems, and ease of tax administration. Yet, of all these vital benefits, one that stands out probably as the most significant financial benefit is cost-savings from payroll operations. Why is this the case and how this works is the focus of our discussion today.
Looking back at last week, I hope you followed the article on biometric ID verification, which was written to mark the special event that was hosted last Thursday to introduce our verification platform. That article discussed why ID verification is necessary today and how it works. We also had quite a successful program on the verification and are looking to rolling out the platform within six weeks, following further consultations with our potential clients.
Paying Plenty People is Tough to Manage
Governments employ a lot of people to carry out essential public services, like public education, public health, local government administration, policing, and borders management. The more the population of a country, the more the number of employees of the government, I want to believe. These public servants who are in the millions for highly populated countries like China and several thousands for not-too-populated countries like Liberia, are also spread all over the country. These two factors, too many employees and too many areas of assignment, create problems in tracking the employees.
In the case of Liberia, my estimate is that some 65,000 people work directly for the Government of Liberia and probably another 10,000 work for other institutions of the Government, like the state-owned enterprises. These employees work in perhaps more than two thousand localities when you consider Town Chiefs and other local officials. It is therefore no small matter to find out if an employee is still working at a particular job, if the name on the payroll is real, or if the employee is still alive.
The annual cost for paying these employees is estimated at over US$300 million and is the most expensive item on the national budget. Therefore, if you can clean the payroll by even a modest 5% and keep it clean for five years you will safe at least US$15 million per year or US$75 million over five ears.
Having too many employees who work in too many places create challenges that lead to ghost names on the payroll. From what I have observed, ghost names come from inefficiencies and outright fraud. A common case of such inefficiency is failure to remove names of deceased people from the payroll in a timely fashion, thus allowing the deceased people's pays to continue for several months or even years. As you may know, most Government of Liberia salary payments are done through monthly direct deposit into employees' accounts. Therefore, if a school teacher in a remote town in, say, Grand Cape Mount County passes away, the payroll data entry officer in Monrovia will have no way of knowing of that incident. Also, the documents and processes that are needed to inform the payroll people in Monrovia take a long time to complete. While all this is going on, the monthly direct deposits could continue for several months or even a few years. Of course, family members and other people who know about this situation could find ways to withdraw the money from the deceased teacher's account. Yes, the withdrawal is a fraud; but the opportunity for this fraud is provided by slow pace of removing the name from the payroll, and maybe replacing it with that of another qualified person who is available to do the job.
There are also many fraudulent activities that lead to ghost names on payrolls. But fraud is often made possible by both the desire of a criminal-minded person and the opportunity provided that person as well. The unfortunate fact is that our current payroll system provides opportunities for people to place ghost names on payrolls. As an example, consider a situation where a fake name (let's call it Mr. Fake Wilson) is placed on the payroll and a bank account is created into which monthly salaries are deposited for Mr. Wilson. Consider another situation in which a healthcare worker's name is repeated on the payroll either to the knowledge of the healthcare worker or without his/her knowledge. There could be thousands of these names on the payroll. In these two cases, it is the weakness of the system that allows for these fraudulent activities. Therefore, we can reduce these incidents by improving the payroll system in ways to make it modern and strong against fraud.
How Biometric Identification Cleans Payrolls
Biometric identification systems have simple ingredients that can prevent ghost names from entering or remaining on payrolls. The three key elements of biometric identification are: each person must be 1) alive, 2) uniquely identified, and 3) traceable. Deceased people cannot find their way on biometrically cleaned payrolls, neither can fake or duplicate names. It is just as simple as that. When you remove all these ghost names, you save governments so much money and you make payrolls fair - paying only those who work.
Wrapping it up
Governments lose so many millions of dollars to ghost names placed on payrolls because of old systems that provide opportunities for fraudsters. Biometric identification of government employees can minimize ghost names. For the Government of Liberia, this could lead to more than US$75 million in cost-savings over the next five years. A current NIR-MFDP-CSA project is going on in this regard and the final report should be made public this year. Next week, we will take a look at how national healthcare systems benefit from biometric identification.