NSSF fails to account for Sh5.8b members money
By Anthony Mwangi, July 14, 2021National Social Security Fund (NSSF) cannot account for nearly Sh5.8 billion of members’ contributions, according to Auditor General Nancy Gathungu.
An audit report of the national pensions fund notes that a review of members’ contributions as at June 2019 shows the management cannot account for the billions.
“Although the Fund’s management has indicated that recovery efforts are in progress at the time of the audit in April 2020, the contributions receivable of Sh5.8 billion was still outstanding and no satisfactory explanation was provided for no recovery,”said Gathungu.
The audit notes that the fund’s financial statements for 2019 revealed that contributions which had not been posted to individual members’ accounts stood at Sh290 million by June.
Members’ accounts
“The management has not provided explanations for failure to reconcile and post the amount to the respective members’ accounts.
Consequently, the accuracy, completeness and validity of the statement of changes in net assets available for benefits for the year ended June, 30, 2019, could not be confirmed,” writes the auditor.
When contacted yesterday to explain the auditor’s findings, NSSF Chief Executive Anthony Omerikwa declined to comment on the matter.
“I am yet to see the report. I will comment once I see and read it,” he told People Daily.
The audit has also unearthed unrecorded receipts in bank statements and cashbooks with different amounts from the ones declared.
Gathungu notes that the bank reconciliation statements reflected receipts in the bank totaling Sh2.1 billion as at June 30, 2019, which was at variance with the amount reflected in the cashbook of Sh1.66 billion.
The report shows that whereas the amounts reflected in the Fund’s cashbook stood at Sh1.75 billion, the amount in the bank reconciliation statement was a mere Sh499 million.
Notes the auditor: “Further included in this amount were payments amounting to Sh1.75 billion which had not been reconcilled.”
The report also shows unsupported returned benefits amounting to Sh269 million which was due to members.
“It was not clear why the returned benefits have been outstanding for a long period of time without being investigated or the beneficiaries identified, paid and cleared from the system,” states the auditor.
Besides the financial mismanagement, NSSF has been blamed for investing in doubtful bonds.
Gathungu observes that in 2018, financial statements reflected Sh7.8 billion on corporate bonds out of which a provision for doubtful investments of Sh667 million was deducted, leaving a net balance of Sh7.1 billion.
A review of the status of investment in corporate bonds confirmed that the Fund entered into contractual agreements with four fund managers namely Old Mutual Investment Group Ltd, Genesis Kenya Investment Management Limited (GenAfrica Asset Managers), British American Assets managers Limited and Stanlib Kenya Limited in February, 2018 in line with Retirement Benefits (Managers and Custodians) regulations.
The fund managers were to have full control and unrestricted power to invest the fund’s money as per the investment policy for maximum returns to trustees.
According to the auditor, information and explanations provided by the fund managers is that both Imperial Bank and Chase Banks were cleared and approved by the Capital Markets Authority (CMA) as the mandated regulators and supervised by the Central Bank of Kenya as legally viable investments vehicles in which fund’s money could be committed.
The auditor, however, says that the approval to invest in the two banks by the National Treasury was not availed for audit verification.
Undeveloped land
Gathungu has also flagged off the irregular disposal of undeveloped land which could see the fund lose billions of shillings.
For instance, undeveloped land in Mavoko municipality in Machakos county measuring 69.2 acres was sub-divided into seven plots of 9.88 acres and disposed off at Sh18 million each.
The plots were sold to AMS Properties Limited on the basis of an agreement dated November 21, 2011 at a total cost of Sh126 million.
However, only Sh12.6 million or 10 per cent was paid. The balance of Sh113.4 million which was to be paid within 90 days from the date of execution of the agreement has not been settled to date.
“The management has explained that the contract has not been terminated since the delay in completing the conveyancing process was caused by a dispute over physical location of the plots involving the Fund and other parties who claimed to have taken a long time to resolve the disputes,” noted the auditor.