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Per diem system too open to fraud: report

By // Kenya News | Per diem system too open to fraud: report
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By Bernard James
The Citizen Reporter
Dar es Salaam. A new report by a Norwegian agency has added weight to the contention that the current government system of per diem and allowances is too open to fraud.It proposes a uniform rate for all civil servants to control further abuse. Released last month, the study by the Norwegian Agency for Development Corporation (Norad) recommends that per diem be limited to travel-related expenses only. This comes against the backdrop of growing concern over billions of shillings paid annually by government institutions in allowances and per diem at the expense of development programmes and the national budget.

According to Sikika, a local civil society advocacy organisation, Sh272 billion and Sh171 billion were allocated respectively for training and allowances in the 2008/2009 budget.

The amount was scaled down in the next budget on the instructions of the Ministry of Finance, but the allocations rose to Sh269 billion in the 2010/2011 budget. The expenditure pattern continued in the 2011/2012 budget at Sh262 billion.
Controller and Auditor-General  (CAG) Ludovic Utouh said yesterday that he would not consent to the proposal to standardise travel allowances because this had not been adopted even in the countries of origin of those proposing it.  He promised to give detailed comments on the report after he had seen it.

According to the study—which covered Tanzania, Malawi and Ethiopia—seminars and workshops are now organised opportunistically and payment of bonus exaggerated to justify per diem.

Some of the malpractices and fraud reportedly condoned by the current system include buying of loyalty by managers with discretionary authority and other more serious abuses at higher echelons of administration.

The report recommends standardised per diem rates calculated on the basis of surveys of hotels, restaurants and conference centres across the country concerned, regardless of seniority of staffs.
“Per diem rates should not be differentiated by staff seniority or salary level,” says the report. “Regardless of rank, staff stay in similar hotels and eat similar meals.”

Norad commissioned Chr. Michelsen Institute to undertake the study, which sought to highlight challenges associated with the use and abuse of per diems and to assess its effects on development programmes and national budgets.

Since the rank of staff is reflected in the regular salary system, it should not be enforced by a travel compensation system. “Reimbursement should be provided only when expenses have actually been incurred,” says the report.  
To take corruption and fraud out of per diem, the report says, a salary top-up in what would have been paid as per diems might be the only opportunity for civil servants to earn a decent salary.

This recommendation backs the 2010/2011 report of the CAG, which says the government can substantially increase salaries of its employees by restricting and consolidating personal allowances into actual salaries.
The CAG’s report was categorical that allowance allocations, including per diems, were taking up the greater part of expenditure on personal emoluments.

The percentage of allowances rose from 41 per cent in 2009/10 to 57 per cent in 2010/11 without any measure being taken to abate the situation.

“The other problem of allowances is that they are prone to abuse,” says the CAG.
A study of civil service performance in Uganda and Tanzania in 2008 found that three-quarters of the civil servants surveyed considered allowances as important as basic salary in their total income, while 13 per cent found allowances to be much more important than salaries.  

The recommendation is likely to please civil servants and their counterparts in the private sector for whom allowances of all kinds, including travel-related per diems, which are considered generous, contribute significantly to total income.

The report proposes that development partners organising training and workshops in Tanzania and the two other countries to beware as the events are increasingly turned to be opportunities for manipulation of per diems.

“Extra payments are used too frequently to attract participants and this ‘inflationary’ practice has contributed to inducing civil servants to expect ‘something extra’ simply for doing their regular job,” says the report.

Internal controls lay too much emphasis on what the seminar is all about and the number of participants instead of focusing on the outcomes in terms of better service delivery.

The report also discusses the key role development partners can play in reducing the problem by reforming their system of organising and disbursing the payments. This will also help control government spending of development aid and loans.
On many occasions, development partners have complained about the difficulty of attracting civil servants to their seminars to enhance competence and efficiency in state administration and civil society organisations without offering something extra.

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