NSSF loses $3m on IT
The National Social Security Fund has lost over sh6b or US$3m in setting up a computerised system that has failed to work, according to an audit on the project.
By Felix Osike
The National Social Security Fund has lost over sh6b or US$3m in setting up a computerised system that has failed to work, according to an audit on the project.
PKF, an international audit firm was sanctioned to audit the NSSF Integrated Management Information system by the Auditor General. The findings show serious flaws in the project that was meant to make NSSF a modern organisation.
The report, “Review of Integrated Management Information System for NSSF,†of November 26, 2005 says the system cannot process members’ benefit payments leading to a backlog of claims and posing a huge risk to stakeholders.
It says it now takes over six months to get paid one’s benefits claim yet the system was supposed to reduce this to 14 days. NSSF, worth sh500b, has been capturing members’ data countrywide since the project started in September 2004.
Over a year since its implementation, several issues continue to plague the project and NSSF operations.
Sources said NSSF management had paid out more than US$3m though the project was budgeted at US$1.5m as per the contract.
NSSF spokesman Charles Muhoozi, however, said the system was operational.
“We are using it at the moment to pay benefits and all our offices are now integrated,†he said.
Muhoozi said the Fund collects about sh9b every month from over 200,000 members countrywide.
But he observed, “Like any other system, migrating from old to new data, there are some delays and consultants are here to help.â€
An example of the process that is problematic is the claims process.
“Claims cannot be paid unless one is re-registered in the new system. Even then, your registration has to be kicked in JD Edwards’s software, which is the financial module part of the application, which has its own set of unique problems,†the report says.
It adds that even if one is registered in JD Edwards’s system, he or she cannot be paid until the statement is manually cleaned, which could give room for data manipulation, error and fraud.
For the statement to be cleaned a physical verification must be conducted on the physical records and the files red offsite at Lumumba Avenue building to verify the account details and only then can the new statement be reprinted and the cheque processed.
If any of the other processes has a problem, then the claim is stuck.
It was also found out that the system cannot capture the contribution from members and most of them are going to suspense account.
This means that in case you come to claim your benefits in the future, NSSF will show that you never contributed sometimes and will most likely walk away with less than what you paid to NSSF.
The report says the only module operating as originally intended is the registration module.
However, even this does not have a user acceptance document that is signed.
“The system cannot print out statements for members in time.
To disguise this problem, NSSF has printed out a few statements to corporate companies that have complained. In case it prints out the statements, they have the wrong contributions.
“Data processing operations are the heart of any information system. If the data is not reliable and accurate, the reports and information from the system is not reliable,†said the report.
The biggest problem in the entire system according to the audit is the incomplete and inaccurate data sitting in the system. The report points out that the suspense account in JD Edwards is sh13,000,000,000 and rising every day.
The audit put the accuracy of the statements even after cleaning at best 90% accurate.
“With these types of issues, the integrity of the IMIS System is questionable and it is very risky for NSSF-UG to continue to use the system in its current state.
“The potential to cripple the NSSF through error and fraud is extremely high at the moment.
“This could lead to other issues such as litigation from members and employers that can become very expensive,†says the report.
The report cited failure to follow the terms of the contract by management as one of the problems in the implementation of the contract.
“Most of the things that were agreed to be implemented by the Consultants were not done and yet Management has already paid for them,†says the report.
It also says there is no Disaster Recovery Plan in case the system crushes.
“So NSSF is at risk of losing all the information about the contributors to the fund,†it adds.
Besides, there is no proper training of users of the system. Few people were trained in South Africa and the rest were never trained.
The report says lack of skills transfer has impacted on the project, crippling of NSSF operations and imposing a heavy financial burden on the Fund.
“The single most critical issue is data cleanup. Until this matter is adequately addressed, it will not be possible to ever get the correct, accurate, complete and reliable data from this system,†the report says.
On data processing, the report says the Microsoft Excel spreadsheet cannot differentiate between the letter o and the number 0.
It also says the system cannot at the moment read and translate information into digital format and this can only be done by human translation, a gruelling process.
It adds that the company that NSSF signed with the contract sub-contracted to other companies, some of which have closed down or whose the key staff have left.
“There are no consultants to fix the problem. Up to now, some areas of the system have not been signed off. There are no programming standards in place.â€
For this system to work as originally intended, the report says there will be a lot of programming required.
It recommends, “It is important that standards are put in place to control the programming standards.
“Due to the risks posed in a badly-designed programme, there is need for a system to control ownership of software and software code.
“The software code is controlled by the South African companies that have in some cases collapsed.â€
As of now, everything that can be used on the system has to be imported from South Africa yet it could be procured cheaply in the local market.
“As a result, management continues to pay exorbitant fees for support even when the consultants are not in the country,†the report says.
The report concludes that lack of proper supervision by management of the project has resulted into massive financial loss to the Fund.
NSSF has in the past been rocked by scandals in the implementation of projects, the latest being the multi-billion Nsimbe Housing project in which billions of shillings were lost.
NSSF was set up by an Act of Parliament and is charged with the responsibility of collecting employer and employee contributions and paying benefits to its members.
The National Social Security Fund has lost over sh6b or US$3m in setting up a computerised system that has failed to work, according to an audit on the project.
PKF, an international audit firm was sanctioned to audit the NSSF Integrated Management Information system by the Auditor General. The findings show serious flaws in the project that was meant to make NSSF a modern organisation.
The report, “Review of Integrated Management Information System for NSSF,†of November 26, 2005 says the system cannot process members’ benefit payments leading to a backlog of claims and posing a huge risk to stakeholders.
It says it now takes over six months to get paid one’s benefits claim yet the system was supposed to reduce this to 14 days. NSSF, worth sh500b, has been capturing members’ data countrywide since the project started in September 2004.
Over a year since its implementation, several issues continue to plague the project and NSSF operations.
Sources said NSSF management had paid out more than US$3m though the project was budgeted at US$1.5m as per the contract.
NSSF spokesman Charles Muhoozi, however, said the system was operational.
“We are using it at the moment to pay benefits and all our offices are now integrated,†he said.
Muhoozi said the Fund collects about sh9b every month from over 200,000 members countrywide.
But he observed, “Like any other system, migrating from old to new data, there are some delays and consultants are here to help.â€
An example of the process that is problematic is the claims process.
“Claims cannot be paid unless one is re-registered in the new system. Even then, your registration has to be kicked in JD Edwards’s software, which is the financial module part of the application, which has its own set of unique problems,†the report says.
It adds that even if one is registered in JD Edwards’s system, he or she cannot be paid until the statement is manually cleaned, which could give room for data manipulation, error and fraud.
For the statement to be cleaned a physical verification must be conducted on the physical records and the files red offsite at Lumumba Avenue building to verify the account details and only then can the new statement be reprinted and the cheque processed.
If any of the other processes has a problem, then the claim is stuck.
It was also found out that the system cannot capture the contribution from members and most of them are going to suspense account.
This means that in case you come to claim your benefits in the future, NSSF will show that you never contributed sometimes and will most likely walk away with less than what you paid to NSSF.
The report says the only module operating as originally intended is the registration module.
However, even this does not have a user acceptance document that is signed.
“The system cannot print out statements for members in time.
To disguise this problem, NSSF has printed out a few statements to corporate companies that have complained. In case it prints out the statements, they have the wrong contributions.
“Data processing operations are the heart of any information system. If the data is not reliable and accurate, the reports and information from the system is not reliable,†said the report.
The biggest problem in the entire system according to the audit is the incomplete and inaccurate data sitting in the system. The report points out that the suspense account in JD Edwards is sh13,000,000,000 and rising every day.
The audit put the accuracy of the statements even after cleaning at best 90% accurate.
“With these types of issues, the integrity of the IMIS System is questionable and it is very risky for NSSF-UG to continue to use the system in its current state.
“The potential to cripple the NSSF through error and fraud is extremely high at the moment.
“This could lead to other issues such as litigation from members and employers that can become very expensive,†says the report.
The report cited failure to follow the terms of the contract by management as one of the problems in the implementation of the contract.
“Most of the things that were agreed to be implemented by the Consultants were not done and yet Management has already paid for them,†says the report.
It also says there is no Disaster Recovery Plan in case the system crushes.
“So NSSF is at risk of losing all the information about the contributors to the fund,†it adds.
Besides, there is no proper training of users of the system. Few people were trained in South Africa and the rest were never trained.
The report says lack of skills transfer has impacted on the project, crippling of NSSF operations and imposing a heavy financial burden on the Fund.
“The single most critical issue is data cleanup. Until this matter is adequately addressed, it will not be possible to ever get the correct, accurate, complete and reliable data from this system,†the report says.
On data processing, the report says the Microsoft Excel spreadsheet cannot differentiate between the letter o and the number 0.
It also says the system cannot at the moment read and translate information into digital format and this can only be done by human translation, a gruelling process.
It adds that the company that NSSF signed with the contract sub-contracted to other companies, some of which have closed down or whose the key staff have left.
“There are no consultants to fix the problem. Up to now, some areas of the system have not been signed off. There are no programming standards in place.â€
For this system to work as originally intended, the report says there will be a lot of programming required.
It recommends, “It is important that standards are put in place to control the programming standards.
“Due to the risks posed in a badly-designed programme, there is need for a system to control ownership of software and software code.
“The software code is controlled by the South African companies that have in some cases collapsed.â€
As of now, everything that can be used on the system has to be imported from South Africa yet it could be procured cheaply in the local market.
“As a result, management continues to pay exorbitant fees for support even when the consultants are not in the country,†the report says.
The report concludes that lack of proper supervision by management of the project has resulted into massive financial loss to the Fund.
NSSF has in the past been rocked by scandals in the implementation of projects, the latest being the multi-billion Nsimbe Housing project in which billions of shillings were lost.
NSSF was set up by an Act of Parliament and is charged with the responsibility of collecting employer and employee contributions and paying benefits to its members.