Isiolo County ordered to settle Sh676m Lapfund debt

A judge has ordered the Isiolo County government to pay Sh675.7 million to the Local Authorities Provident Fund (Lapfund) Board for accrued interest from unremitted employee deductions.

Justice Onesmus Makau ruled that the county government and the scheme had agreed in February 2022 to settle the principal amount of Sh87 million and the interest. 

Although the judge ruled that the scheme did not serve a notice as required by the Retirement Benefits Act, the parties later agreed to settle the dispute amicably, which was followed by an agreement that was signed by the parties. 

“Consequently, I hold that the agreement dated 23rd February 2022 between the parties herein was signed voluntarily and it is binding upon then. Consequently, the agreed interest on the principal debt is owing from the 1st respondent to the claimant,” said the judge.

In the agreement, the parties agreed that the principal debt was Sh87 million, while the interest was agreed at Sh675.7 million. The principal amount was to be paid in monthly installments of Sh8.7 million and was to be cleared by January 2023. 

The board moved to court in 2021 seeking to compel the county government to remit statutory deductions from its employees to the board.

The county government denied the claims and stated that it had timeously and duly remitted all statutory deductions for its employees.

The court was informed that the parties later agreed on principal debt and the county government requested for waiver of the interest after the case had been filed.

The issue of waiver was kept in abeyance until the principal debt was fully paid and a settlement deed signed.

The board submitted that the interest charged was based on section 53A of the Retirement Benefits Act, as the interest charged on the unremitted contributions was meant to compensate the scheme for the loss, which should have been invested. 

The board said it had incurred financial costs in borrowing funds to meet its obligations.