Tuesday 13 April 2021
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Embracing Technology to Curb Payroll Fraud in Africa

Embracing Technology to Curb Payroll Fraud in Africa


THE emergence of Information Communication Technology (ICT) has been celebrated in Africa as it has facilitated the development of the continent’s innumerable sectors.

It has revolutionised business, sport, media, and arts among other fraternities for decades now. However, its embracing has not been an overnight occurrence and the lagging behind in some areas has cost the continent some valuable revenue which would have been channelled towards development.

Some unscrupulous employees have been taking advantage of the slow uptake of ICT to milk African enterprises through payroll fraud. Payroll fraud which is one of the most common white-collar crimes in the business world. It involves Falsified wages where employees claim compensation for hours not worked or falsifying their timesheets or timecards in some fashion.
Accounting or payroll personnel with access to the payroll system can manipulate the rates of pay or the hours worked. They may even have the opportunity to pay themselves bonuses when none are warranted.

By falsifying their wages, employees have the opportunity to pilfer from an organisation and personally profit.
The Association of Certified Fraud Examiners reports that more than 25 percent of companies are experience payroll fraud, with smaller businesses facing double the risk compared to larger organisations. Sometimes, it’s simply a case of human error, but it’s more often than not instigated by opportunistic and dishonest payroll administrators.

A 2016 survey conducted by Price Waterhouse Coopers, a multinational professional services network revealed that 69 percent of South African companies have suffered at the hands of both internal and external perpetrators, with 28 percent reporting fraudulent human resources activities such as the falsification of employee benefits and the miscalculation of payroll expenses.
This is not limited to South Africa only but is replayed in many parts of the continent where local governments are common victims.

In Liberia, the General Auditing Commission (GAC) revealed that over LD$15m (US$163,000) worth of national funds was lost to payroll fraud. An estimated LD$3m went towards salaries paid to ghost presidential appointees who were no longer part of the government’s payroll. Earlier in the year, Elgeyo-Marakwet County in Kenya payroll manager, Livingstone Kiptoo, was arrested over the loss of Sh14 million (US$133 000) reportedly swindled from the county’s government.
Kiptoo allegedly paid himself three salaries using three separate bank accounts which he had opened in 2013 amassing an unassailable fortune.

The state of Kogi in the West African country of Nigeria has also been seriously plagued by ghost employees where former workers continue to financially benefit from local government despite having left employment. A recent biometric auditing in the federal ministries of Nigeria, departments and agencies (MDAs) revealed 43,000 non-existent workers on the government payroll.

In Cameroon ghost workers are believed to cost the country $12 million every month. In Ghana 10 percent of the total amount spent on public servants are lost every month through the insertion of ghost names on workers’ payrolls.

If left to continue unabated, payroll fraud can hamper the continent’s development in various ways including causing potential investors to shun investing in Africa.

However, analysts feel all is not lost on the continent as the embracing of ICT can go a long way in curbing the vice.
One of the methods ICT experts suggest is using incorporating biometric for employee identification. Biometric system identifies a person by who the person is rather than what the person has, unlike most traditional authorisation systems such as personal identification numbers (PINs), passwords, or identity cards.

Unlike these solutions that rely on “what you have,” biometric credentials such as a fingerprint, finger vein, and palm vein or iris image cannot be lost, forgotten, guessed, or easily cloned. During salary and benefit distribution, biometric identification ensures accurate disbursement to the right employee as well as creating concrete audit trails for employee punctuality which in turn improves service quality.

By utilising a biometric identification system to eliminate ghost workers, governments and business organisation employees can be uniquely identified, virtually eliminating duplicate registration in any form and eradicating ghost worker, payroll fraud plus help establish accountability and punctuality among employees.

Following the adoption of biometric registration in Kenya recently, 12 500 ghost workers were unearthed, in Nigeria 43 000 ghost workers were revealed while the switch to biometric saves the Liberian government over US$4million annually. Organisations can also embrace the use of an automated payroll software which eliminates the need for manual intervention and manipulation.

The less company’s processes need human oversight, the less chance there is of payroll fraud.

Modern payroll technology can automate leave management – leave dates are automatically inputted into the payroll system via an employee self-service authorisation process. The system immediately reports if an employee tries to take more leave days than he or she is entitled to.

“Organisations can also choose payroll softwares that integrate seamlessly with their accounting software as this will further reduce the room for manual intervention,” said Harare based ICT expert Nyaradzai Matiza. “Modern payroll systems are able to set up recurring employee earnings and deductions for automatic processing as well as verifying bank account and ID numbers to confirm new employees’ details,” she added.

Another IT expert, Nyaradzai Mazviwanza, said cloud-based, mobile payroll software makes it easier for those managing payrolls to access relevant payroll information on any device regardless of time or location.

“No information is hidden from view and the accessibility leaves a clear audit trail. Different access controls can be allocated to different employee levels to protect sensitive medical and financial data.

“Thanks to real-time cloud analytics, management can filter data points according to relevant fields and generate daily activity reports with little effort. This way, any payroll fraud will be quickly spotted and stopped fast. The sooner payroll fraud is identified, the less costs a company will incur,” he said.

Research has also shown that African countries can benefit from ICT in relation to payroll systems as they enable them to segregate workflow and add levels of authorisation to human resources and payroll tasks as this helps combat fraud by sharing responsibility of the payment process across two departments.

The time has come for organisations to fully embrace ICT to stop payroll fraud on the continent.