State auditor exposes rot at the NSSF

• Fund disregarded critical ministries in Sh43.7bn stock market investment

Capped allowance

The managing trustee’s house allowance was similarly raised from Sh80,000 to Sh100,000 monthly. This was in total disregard to an Office of the President circular of November 2004 which capped the allowance payable at Sh80,000.

With Sh1.2 billion in administrative expenses during the period, the fund incurred a total of Sh76.1 million in legal expenses. This was Sh16.1 million above the budget that was not approved by both the board and the parent ministry.

While the fund continues to battle several suits in the corridors of justice, the provisions of these are not made in the financial statements. This goes against requirements of the International Accounting Standards, which say that contingent liabilities that might arise in the future from ongoing cases be disclosed.

“It was further observed that most of the fund’s cases arose from litigations related to property and not from its core mandate. In addition, it was not clear how the legal firms that are representing the fund in the cases were identified and whether or not their fees were competitive,” asserts the auditors report.

Part of the fund’s spending, according to the report, was on boosting its Information Communication Technology platform. Despite spending Sh60.9 million, the project according to the report is not fully operational and no tangible benefits appear to have been realised.

While the fund’s core mandate has been the management of pensioners fund, it has invested part of this in land and property. Its investment in land as at the end of the year under review was Sh4.4 billion.

However, out of this the auditors say title deeds for land valued at Sh400 million cannot be traced. “In the absence of title deeds, it has not been possible to confirm the ownership status of the land.

Further, it has also not been possible to confirm that the undeveloped land balance of Sh4.4 billion is fairly stated in the financial statement.”

The fund is also on the spot over irregular sale of properties at prices below valuation. The audit says the sale of two plots was not done in accordance with the provisions of the Public Procurements and Disposal Act 2005.

Forestall loss

One plot on Hospital Road measuring 1.07 hectares was sold at Sh85 million against valuation of Sh150 million. The other on State House Road measuring 1.14 hectares was sold at Sh85 million. The piece’s value is noted as Sh226.4 million at the time of sale.

The National Audit Office wants NSSF to appoint a fund manager and custodian to comply with Retirement Benefits Authority rules and to forestall loss of public funds.

The new managing trustee, however, seems aware of the uphill task ahead of him.

“We will ensure that investment is done prudently unlike in the past and we are discussing with RBA so that we comply with all the legislation,” conceded Mr Kazongo when he took over the mantle.