NSSF may have lost billions in projects, report reveals

The National Social Security Fund could have lost billions of taxpayers’ money through four ongoing construction projects in Nairobi, according to a forensic report that was recently made public. 

The report was commissioned in 2015 by Francis Atwoli, the Central Organisation of Trade Unions (Cotu) secretary-general, and who is also a board member of NSSF.

The report, which was compiled by audit firm Ernest & Young, was presented to the board last September but it is not clear whether it has deliberated on its recommendations.

It exposed the incompetence of the top management of the pension provider in managing the four projects namely: Hazina Towers, Milimani Executive Apartments, Nyayo Estate Embakasi Phase VI and Tassia.

On the Hazina Towers project in Nairobi’s Central Business District, the auditors faulted Tana & Associates, the consultant for the project, for “misleading” feasibility study upon which the board relied on to review the design from 24 to 34 floors.

STALLED

According to the auditors, the consultant did this by overstating the rate of return at 11 per cent with a payback period of nine years. “However, with the escalation of costs, we estimate that the recomputed rate of return for the project will be to 3.3 per cent with a payback period of 30 years,” said the report.

The expansion of the building began in 2013 and was to be completed in 2016 but stalled when Nakumatt Holdings, the then anchor tenant, filed a case to stop NSSF from doing so in 2014.

The auditors also found that the Chinese contractor Jiangxi International (Kenya) Ltd had presented two sets of tender documents of Sh6,228,888,888 and Sh6,599,888,888.

“The Fund management denied knowledge of the Form of Tender that bore an amount of Sh6,228,888,888, although it was contained in a BoQ (Bill of Quantities) whose cover page had been signed by members of the evaluation committee,” said the report.

Mr Jiyong Chen, representing the contractor, told the auditors that though the two documents originated from their office, it might have been due to a mix-up in the final proposal preparation stage.

TENDER

The tender with the higher amount was evaluated and then revised upwards to Sh6,751,653,365. This represented a variation of Sh261 million, part of which the contractor attributed to a mathematical error.

The report further says that the contractor was paid Sh2,301,840,287 between March 2013 and January 2015 without the approval of the board. A further Sh204 million was paid on September 15, 2015 also without board approval.

As a result of these payments, NSSF, as of January last year, had paid the contractor a total of Sh2.506 billion, representing 27 per cent of the contract sum against 21 per cent of the work completed.

PUBLIC MONEY

The report also faulted the Fund for using Sika wrap technology to strengthen the building’s columns, yet the technology has not yet been approved by the Kenya Bureau of Standards for use in the country.

However, when he appeared before the National Assembly’s Public Investments Committee last week, Mr Atwoli absolved NSSF board and management of blame for the stalling of the project and loss of public money.