Because safety net programs channel large amounts of public resources, making sure that these reach the intended beneficiaries is important. EFC reduces the economic efficiency of safety net interventions be decreasing the amount of money that goes to the intended beneficiaries and erodes political support for the program.
Distinguishing between error, fraud and corruption as follows:
Fraud occurs when an applicant deliberately makes a false statement, conceals or distorts relevant information regarding program eligibility or level of benefits; Error is the unintentional violation of program or benefit rules, resulting in the wrong benefit amount or payments to an ineligible applicant. One can distinguish between official error due to staff mistakes, and customer error which occurs when a customer inadvertently provides incorrect information;
Corruption commonly involves political manipulation (e.g., registering potential beneficiaries for clientelism purposes to garner political support), bribery of staff to unlawfully obtain program benefits, etc.
| Error & Fraud in Social Safety Net Programs |
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SSN programs are particularly prone to EFC due to the inherent design features. Eligibility for these programs is often based on the economic position of the household, which is more difficult to assess and harder to verify than, for example, for an old-age pension. Because eligibility also verifies through time,
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EFC can also be challenging to enforce since the responsibilities for program implementation are often shared across different departments, agencies, and levels of government.
All these factors increase the risk that benefits do not reach intended beneficiaries in time or in the correct amount. Having the right instruments and tools to minimize EFC is thus more important for SSN programs.
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