- The pension fund also lost Sh666 million invested in dead private bonds
- In general, the report found out that NSSF cannot account for nearly Sh5.8 billion of members’ contributions.
Payment to retirees or their beneficiaries of close to Sh270million was returned to the National Social Securities Fund (NSSF) in 2018/19, raising audit queries.
This is among the issues raised by the Auditor General Nancy Gathungu in the national pension agency's financial books for the year ended June 2019.
According to the audit report, the veracity of net assets available for benefits worth Sh1,959,062,448 could not be ascertained considering that the agency did not give reasons for Sh269,378,392 returned payables.
''It was not clear why the returned benefits have been outstanding for a long period of time without being investigated or beneficiaries identified, paid and cleared out of the system,'' the audit report read in part.
This revelation comes at a time when millions of retirees and their beneficiaries wait for or have to make follow-ups for their delayed benefits, with hundred flocking NSSF offices across the country every day.
At the close of the financial year under review, the agency had grown the number of contributors to 3.5 million from 1.8 million in 2013.
Furthermore, the Auditor General has faulted the pension fund of investing in risky bonds without getting approval from the National Treasury, costing contributors Sh666.9 million.
''In its review of the status of the investments, the audit report has established that the NSSF failed to get requisite approval from the National Treasury before investing in botched Imperial and Chase bank corporate bonds,'' Gathungu said.
The pair of investments was however cleared and approved by the Capital Markets Authority (CMA).
NSSF entered into contractual agreements with four fund managers including Old Mutual Investment, GenAfrica Asset Managers, Britam and Stanlib Kenya in February 2018 to carry out investments in the bonds on its behalf.
The fund has since made a provision for the entire sum invested in line with accounting requirements on impairments, with the auditor cautioning that it may never recover the amounts.
In the circumstances, the realisation of the investment in corporate bonds invested by the fund managers could not be ascertained and members’ contributions are at risk of being lost,” reads the audit in part.
According to the report, Old Mutual pumped Sh174.7 million of the NSSF funds Chase’s bond while GenAfrica invested a lesser Sh160 million in the same bond. Stanlib and Britam sank Sh100 million each while Britam and Old Mutual invested Sh90 million and Sh42.2 million in Imperial bank’s 5.25 years fixed bond.
Both Imperial and Chase bank went down shortly after issuing their commercial papers with investors yet to recoup their investments in the two lenders to date.
In April this year, the CMA commenced enforcement proceedings against former board members of Imperial Bank over failure to oversight the compromised bond issue to investors.
At the tail end of the commercial paper issued in September 2015, details emerged some directors had sustained financial statement fraud since 2006.
While depositors in Chase and Imperial are assured of part of funds held in the banks, corporate bondholders are likely to walk away empty-handed there being no current cover for the asset class.
The audit office 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 subdivided into seven plots of 9.88 acres and disposed of 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.
In general, the report found out that NSSF cannot account for nearly Sh5.8 billion of members’ contributions.