A new report by the auditor general has revealed widespread financial mismanagement at the National Social Security Fund.
The review by Auditor General Nancy Gathungu has exposed dubious transactions, inflated procurements and questionable investments that have cost the fund billions of shillings.
The audit, covering the period up to June 2024, paints a grim picture of an institution riddled with irregularities, raising serious concerns about the safeguarding of contributors' hard-earned savings.
NSSF, whose main mandate is to guarantee retirement security for millions of workers, stands accused of systemic financial mismanagement that threatens the very savings meant to safeguard contributors’ futures.
One of the most glaring findings was a bond trading gone awry in which the NSSF purchased bonds worth Sh12 billion at a premium, only to sell at a loss.
The fund assets investment may not have been undertaken prudently, Gathungu said in the review of the year ending June 30, 2024.
“It was noted that some bonds recorded high capital losses, and the yield rate was minimal, and management did not compare the high capital losses with the yield rate for each bond,” she said.
The audit uncovered multiple instances of inflated procurement costs, including the purchase of a desk for the reception area at Sh2,080,000.
The report further flagged non-performing investments, including shares worth Sh127 million in quoted equities and a staggering Sh209 million loss at a local bank.
Additionally, the fund failed to recover millions tied to institutions that have since collapsed, leaving contributors to bear the brunt of poor decision-making.
Furthermore, the NSSF irregularly procured fuel worth Sh3.2 million in cash payments, bypassing standard procurement procedures.
Audit verifications revealed the imprests issued were of high amounts, and the fund should have procured other fuel suppliers competitively to comply with the law, the report reads.
Renovation works worth Sh410 million were also flagged for lacking transparency, while an eight-bay bulk filer was acquired at Sh1.04 million without proper justification.
The report highlighted a suspicious land purchase in Upper Hill valued at Sh115 million, whose title deed has since been revoked, rendering the investment worthless.
Meanwhile, several prime properties in Nairobi’s Central Business District valued at Sh4 billion remain idle, failing to generate returns for the fund.
In Kisumu, an investment property worth Sh228 million was found to be operating irregularly, further denting the NSSF’s financial health.
Trustees of the NSSF pocketed Sh68,782,807 in emoluments after holding 14 full board meetings and nine Finance, Investment, and Social Security Committee meetings, far exceeding the approved limit of six meetings per year.
Additionally, Sh317.586 million was spent on meetings, travel and subsistence, with Sh11.3 million allocated to single-sourced conference facilities, raising red flags over procurement compliance.
The fund is also grappling with unrecovered staff loans amounting to Sh1.3 billion, with no efforts made to reclaim Sh158 million in mortgage loans.
Compounding the problem, the audit established that NSSF has been operating with an overstaffed workforce, inflating its wage bill unnecessarily.
Contributors’ funds were further drained by pending bills totalling Sh8.9 million, some outstanding for over two years.
Even more alarming, the NSSF lost Sh940.3 million in tax refunds due to negligence, while Sh946.6 million was set aside as doubtful income in what auditors said point to severe financial mismanagement.
Despite a target return of 15 per cent, the NSSF managed a paltry eight per cent, underscoring inefficiencies in its investment strategies.
Delays in client payments and the operation of irregular custodial bank accounts—holding Sh2.5 million and Sh1 million under an unauthorised fund manager—further eroded trust in the institution.
INSTANT ANALYSIS
With billions of shillings in questionable expenditures and underperforming investments, contributors are left questioning whether their retirement savings are secure. Regulatory agencies must now step in and implement stringent measures to prevent further losses of contributors’ sweat.
