Funds collected for social security schemes already spent

April 17, 2019

My Republica, April 17, 2019

Finance ministry refuses to transfer Rs 22 billion collected over the previous eight years to Social Security Fund

KATHMANDU: Social Security Fund (SSF) has no cash to run social security programs immediately as the government has not provided it Rs 22 billion collected for the purpose over the last eight years. 

The SSF launched several social security schemes with much fanfare on November 27 last year. But it does not have resources to implement any scheme now as the money collected for the purpose over the past years have already been spent like other government revenues.

While launching the schemes, it was declared that the SSF will implement the schemes by using Rs 22 billion collected by the Ministry of Finance over the past eight years.

Every employed person in the country has been contributing 1 percent of their salary to the SSF since FY2010/11. The SSF has started registering firms for implementation of the schemes. A total of 2,245 firms have already registered with the SSF for the purpose till March 22. 

Office of the Auditor General commented in its 56h Audit Report that the government has not implemented Social Security Fund Act which clearly states that government should handover all funds, including collected 1 percent, in the SSF.

The OAG’s report also disclosed that the government put the money collected under the scheme in the revenue account and spent all the money as per the Appropriation Bill. The government should not the use the money collected for the SSF and duly implement the SSF Act duly, the OAG said in its report.

Deputy Auditor General Ramu Dotel said that his office has pointed out contradiction in the law and practice. “The finance ministry has argued that it has already spent the amount for providing non-contributory social security schemes, including allowance for elderly people, and hence cannot provide the fund to SSF,” said Dotel. 

The ministry’s refusal to handover funds to the SSF has thrown contributory social security schemes announced by the government into uncertainty. 

Shyam Raj Adhikari, executive director of the SSF, told Republica that they had requested Ministry of Finance to provide funds immediately after the Social Security Act was endorsed last year. “But the Ministry of Finance did not respond to us,” he said, adding that the SSF was still hopeful that the finance ministry will insert a provision in the next budget and release money to it.

Uttar Kumar Khatri, the spokesperson for the finance ministry, refused to comment on the matter on phone. 

According to new social security scheme, registered companies have to collect 31 percent of workers’ monthly basic salary – 11 percent deducted from worker’s monthly salary and 20 percent contributed by the employers – and deposit it at the SSF. Employees will be entitled to social security benefits thereafter only.