The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A comprehensive overhaul of the Bahamian social security system could cut poverty rates by 5 per cent, and slash the poverty gap by 20 per cent, an Inter-American Development Bank (IDB) report has forecast.

Detailing the $9.6 million Social Safety Net Reform Programme, which was approved by the IDB Board yesterday, the Bank’s report said the project - designed to streamline the Bahamian benefits system and make payments conditional on recipients sending children to school - would save the Department of Social Security an estimated $2 million over five years.

And, with better school attendance designed to lead to improved high school graduation rates, and ultimately better incomes, from children of poor families, the IDB report said the project would generate a $5-$8 million net present value (NPV) “under very conservative estimates”.

Emphasising the benefits of completing secondary school, the report noted that those who did so earned $5,480 more in annual income than those who did not.

“Not completing high school is associated with lower earnings, as the average income differential between workers with complete and incomplete secondary education is $5,480 a year or 1.5 times the poverty line,” the IDB said.

Breaking down the Bahamas’ “broad range of social policies in support of the poor”, the IDB noted that collectively, the Ministries of Education, Health and Labour and Social Development received $540 million in the 2010-2011 Budget, a figure equivalent to 7 per cent of gross domestic product (GDP).

Yet of that $540 million, the Ministry of Labour and Social Development received just $41.8 million or 8 per cent, the lion’s share or $32.3 million going to the Department of Social Services. The latter’s budget had been beefed up from $28.8 million in 2008-2008 to more than $39 million in 2008-2009 and 2009-2010, as the Government sought to mitigate the recession’s impact.

The IDB report said that spending on benefits programmes in 2011, between the National Insurance Board (NIB) and Department of Social Services, totalled $34.3 million in 2011.

The largest chunk, some $16.1 million, came from NIB and went to 5,258 beneficiaries. A further $11.6 million went to 11,533 beneficiaries of the Department of Social Services’ food coupon initiative.

Other benefit spending included $2.4 million to the 3,889 National Lunch Programme participants; $4 million in financial assistance to 8,270 beneficiaries; and $0.2 million to 206 disability allowance recipients.

But, identifying inefficiencies in the programme, the IDB report said: “Although programmes should target the same beneficiaries, each programme requires a separate application and has its own criteria for approval based on self-reported and largely unverifiable income, and a seven-person review process.

“Approval for food coupons can take anywhere from seven weeks to four months. Multiple application requirements increase administrative costs and also increase transaction costs and stigma for applicants. The absence of objective targeting criteria increases the likelihood of subjective selection of beneficiaries.

“Evidence from the 2006 Household Expenditure Survey (HES) suggests that targeting outcomes could be improved as only 42 per cent of beneficiaries of the Food Assistance Program and 24 per cent of beneficiaries of the non-contributory pension are in the lowest 20% of the population. “

Noting that the issuing of benefits “is inefficient and lacks adequate accountability and control mechanisms”, the IDB added: “Food coupons are printed by the Treasury Department or by Family Island staff and distributed to clients who use them at designated food stores. Grocery stores return the coupons to the Ministry of Social Services, where they are reconciled and payments made to stores.

“However, the Ministry of Social Services reports that there is no system for verifying that food coupons are used only for food purchases. Uniform and other in-kind benefits require printing of vouchers, reconciliation and payment of suppliers.

“Beneficiaries complain about the time it takes to get the coupons, few stores accepting them and stigma linked to its use.

“The Ministry of Social Services staff report spending more time on application, payment, processing and verification than on case management. Streamlined delivery systems would reduce administrative costs and free the time of social workers for the latter.”