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Pensions fund probed over Sh10bn revenue loss claim

Saturday September 19 2015

Signage is put up at the NSSF building in Nairobi. PHOTO | FILE

Signage is put up at the NSSF building in Nairobi. PHOTO | FILE NATION MEDIA GROUP

WALTER MENYA
By WALTER MENYA
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The anti-corruption commission is investigating allegations that at least Sh10 billion in workers’ contributions to the giant National Social Security Fund (NSSF) is at stake following migration to a new information management system. 

According to documents seen by Sunday Nation — which have been surrendered to the Ethics and Anti-Corruption Commission and the Labour ministry — the amount in question includes unpaid contributions by employers, uncollected penalties and accrued penalties between 1998 and June 2013.

“The commission received the report and the case is still under investigation,” communication from EACC in response to our questions indicated.

In June 2013, NSSF phased out the Comprehensive Rate Information System (CRIS) that was the centralised system used for collection of contributions and receipting, and the Compliance Management and Monitoring System (COMMS) used for penalising late payment of contribution by employers. This was also crucial for producing the list of defaulters.

Further, the applications could monitor cases of employers who had not registered with NSSF as required by the law.

Following the retirement of the two ICT platforms, NSSF installed the current Social Security and Pension Administration System (SSPAS) procured from Greece, which started functioning in August 2013.

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The new system was supposed to take over the functions of the CRIS and COMMS and impose penalties as well as assist in recovery of money.

NSSF’s Public Relations Officer Richard Rori told Sunday Nation the new system was meant to improve efficiency. 

“The Board of Trustees made a decision to put in place an integrated ICT platform to consolidate the core functions of the Fund into one system. The SSPAS integrated member registration, contributions collection, benefits payment and compliance management. Prior to that, each process used to run on a separate standalone system specific for its needs,” he said.

However, according to the reports being investigated by EACC, as late as July 2014, the migration of data from the previous platforms that contained crucial details of defaulters and unpaid penalties could have left at least Sh10 billion from 29,119 employers in uncollected penalties, accrued penalties and unpaid contribution at stake.

The claims being looked into indicate that although the SSPAS can track unpaid contributions and impose penalties on employers who paid late since August 2013, it is not able to do the same for the period prior to August 2013.

According to the reports at EACC, as at July 2014, the unpaid statutory contributions for the period between 2002 to 2013 stood at Sh3.3 billion, the outstanding penalties of Sh4.7 billion for the period 1998 to 2013 while penalty accrued on unpaid contribution since 2002 to 2014 stood at approximately Sh2 billion.

In the intervening period after CRIS and COMMS were phased out, the reports says that NSSF’s compliance officers resorted to manual methods that were prone to manipulation and other attendant limitations.

However, responding to our enquiries, NSSF stated that since COMMS depended on the same data from CRIS to estimate the penalties due, it was not necessary to migrate any data from COMMS — be they penalties that were due or those that had been paid.

“This is as it should be since CRIS was the corporate system responsible for all receipting and, therefore, the only source of truth on matter of cash received by the Fund,” said Mr Rori.

In any case, he said, the additional functionality provided by COMMS for estimating penalties and tracking defaulters were incorporated into the new integrated SSPAS system as part of the Contributions and Compliance Management modules.

“Penalty estimation reports are also available for the period prior to SSPAS cash receipting, that is, September 2013,” the NSSF spokesman added.

Mr Rori also maintained that the compliance officers still have access to the old COMMS reports and workers’ contributions were safe.

“Without prejudice, we wish to state that no money has been lost since the source data was all migrated from CRIS to the new system. All payments by date including penalties were migrated and the necessary features to compute the penalties outstanding was also incorporated in the new system. This applies even for payments done in the past,” he said.

Mr Rori said information that money has been lost or may be at stake is being peddled by detractors who are uncomfortable with on-going reforms to enhance efficiency and accountability at the Fund.

Even then, he said, the recovery of penalties has not been completed as is a continuous process. NSSF “continues to engage employers including, but not limited to, using legal means to recover any debts due to the Fund.”

The whistle-blower had reported the matter to EACC in August but as late as July 2015, he complained to EACC that no action was being taken.

EACC did not respond to these specific accusations when Sunday Nation contacted CEO Halakhe Waqo and his deputy Michael Mubea.

At the time CRIS and COMMS were phased out, some of the employers with large outstanding penalties were former local authorities and parastatals, including Nairobi City Council (Sh699 million), the Teachers Service Commission (Sh327 million), Kenya Post Office Bank (Sh297 million), Kenya Railways (Sh268 million) and Kisumu Municipal Council (Sh234 million).

“About a third of all active employers in the Fund have outstanding penalties and this shows a weakness in the compliance-enforcement system of the NSSF,” the report made to EACC reads.

The implication of an organisation not registering with NSSF is that workers may end up with no pension benefits despite the employer making the deductions on their payslips.

NSSF has in the past been exposed to looting by well-connected individuals, but has slowly been cleaning up its image.