Board wars at the NSSF are about sharing the spoils among the elite
What you need to know:
- This is a scandal because the law requires retirement schemes to maintain an account under which all member contributions and other transactions must be recorded.
- As far as commercial properties are concerned, the investigation found irregular engagement of property management companies and recurrence of huge rent arrears.
The on-going power struggle for control of the boardroom of the National Social Security Fund pitting Labour Cabinet Secretary Kazungu Kambi and Cotu Secretary-General Francis Atwoli is a good way to take a fresh look at the financial affairs of the largest retirement benefit scheme in the land.
I have extracted the following facts from NSSF’s annual report and financial statements for the year ended June 30, 2013.
As at this date, NSSF had Sh2.6 billion of contributions held in a suspense account. This is a scandal because the law requires retirement schemes to maintain an account under which all member contributions and other transactions must be recorded.
The fund is not able to post billions of shillings in any of the accounts belonging to members.
Any accountant will tell you that an organisation that runs a suspense account running into billions operates under opacity. It is a perfect environment for financial mismanagement and corruption.
A pensioner or beneficiary may be languishing in abject poverty while his hard-earned savings are invested by the NSSF without a clear formula on how he or she will benefit.
With the Unclaimed Financial Assets Authority beginning to take shape, the billions now sitting in the suspense accounts could end up locked up for protracted periods — away from the reach of the poor pensioner. The statistics also show that out of Sh7.8 billion that was contributed by members in 2013, nearly half — Sh3.6 billion — went into staff expenses.
Compared to the performance of occupation pension schemes, the NSSF performs dismally.
In most of the private sector schemes, the proportion of administrative expenses to receivable contribution is well within the single digit range. In the case of the NSSF, it uses 46 per cent of what is deducted from workers in administrative expenses.
NEITHER CAPACITY NOR DISPOSITION
Indeed, the statistics from the financial statement portray an institution in financial dire straits, which is ill-equipped to effectively perform the purpose for which it was created, namely, to enable the pensioner to replace a good proportion of what he used to earn while working.
The NSSF has been turned into a boxing ring where power players and seekers test their mettle.
Instead of addressing the fund’s very basic financial problems by ensuring cash is posted into members’ accounts, the rent-seeking elite in control only think about big projects.
In 2011, the NSSF was talking of rebalancing its real estate portfolio and disposing of properties based on performance in terms of internal rate of return.
I have seen board minutes that show that a decision was made to dispose of the View Park Towers and Hazina Towers, among the high-value properties belonging to the fund.
Big projects can be planned depending on the Cabinet Secretary calling shots at the ministry.
Large infrastructure projects can be contracted before being interrogated in terms of internal rate of return and potential for boosting lump sum payments to pensioners.
In January 2011, the NSSF engaged PricewaterhouseCoopers to conduct a forensic audit on its property portfolio.
The findings make the most persuasive case that the NSSF has neither the capacity nor the predisposition to deliver economically-viable projects with the potential to boost incomes for pensioners.
As far as commercial properties are concerned, the investigation found irregular engagement of property management companies and recurrence of huge rent arrears.
In the area of implementation of large property development projects, the forensic investigation revealed irregularities in the hiring of consultants.
The report pointed out cases of consultants who had been retained in the panel of consultants since 1994. The tenant purchase schemes were riddled with irregularities and corruption in allocation of houses.
Who will rescue the NSSF from the clutches of the rent-seeking elite? How do we shield the pensions fund from meddling by ministers and turn it into an autonomous body accountable to its members? When will the NSSF hold its next annual meeting?
