Most mandatory social security programmes are created by legislation, decree or some official act of government, to define the mandate of the institution that is responsible for the implementation of the programme. The mandate often draws a distinction between the “board” and “management”, with the board as the governing and policy-making body of the institution and the management as the body that administers the programme and implements the resolutions of the board.
The governance framework that has been developed for these guidelines attempts to span the entire range of responsibilities of the board and management in social security administration. The framework describes social security administration in terms of four broad governance areas: financial sustainability; sound investments; member coverage and contributions, and member benefits and services; and resource management, in particular, human capital and information and communication technologies (ICT) resources. The scope of each of these governance areas is briefly summarized below.
Legislation, decree or policy will establish the governance scope of the institution. For example, there are programmes that are wholly tax financed and hence have no mandate to collect contributions; some have no investment reserve funds, others have units to manage fund investments, while some have fund management institutions that are wholly separate and independent from those that administer member contributions and benefits.
The board and management are duty bound to maintain an adequate level of funding to deliver the promised benefits and services to members and beneficiaries, and to ensure the cost effectiveness of the administration of the social security programme. Maintaining the financial sustainability of the administered programmes and balancing the inflow of contributions and investment income with the outflow of benefit payments are some of the key management challenges in this area.
For programmes with an investment mandate, the board and management must ensure that reserve funds are invested in accordance with basic prudential rules such as profitability, safety, liquidity and diversification. Framing the investment policy and strategy, portfolio and asset–liability management, enforcing the prudent person principle, valuation of assets, representation on the boards of companies in which the institution has significant asset holdings, and policies on investments with socio-economic utility are some of the issues in this governance area.
The raison d’être of social security institutions is to administer the rights and obligations of members and beneficiaries. Coverage extension, collection of contributions, adequacy of benefits, distribution of benefits, quality standards of service for members, and prevention of error, evasion and fraud are some of the central issues in this area.
The board and management must ensure proper resource management, in particular, the availability of competent human capital, and efficient ICT resources to support programme administration and operations. The management of human capital – attracting, retaining, training, mentoring and compensating expert, loyal and motivated staff – is key to the successful governance of any organization. Staffing and compensation, succession planning, merit and performance appraisals, and adherence to a staff code of ethics are among the key policy instruments to consider in motivating and managing the institution’s human capital. In the area of ICT resources, some of the key operational issues include ICT governance, maintaining the integrity of the member database, evaluation of investments in new ICT, matching existing systems with new ICT, and integrity and cost effectiveness of backup and recovery systems for the institution.