What you need to know:
- The law gives NSSF the power to impose fines on employers who fail to comply with any of its many provisions.
- The audit further questions the irregular disposal of the agency’s underdeveloped 70-acre piece of land in Mavoko, Machakos.
The National Social Security Fund (NSSF) cannot account for billions of shillings of workers’ monthly contributions.
This puts at risk the benefits of thousands of workers who retire every year.
It has emerged that the agency’s book of accounts has a Sh5.6 billion hole in unremitted contributions because of its failure to enforce the legal provisions mandating it to ensure that employers deduct money from workers and remit it to the Fund on time.
The Auditor-General’s report on NSSF for the 2017/18 financial year further casts doubt on the accuracy of Sh14 billion that is indicated as the balance of the members’ contributions as of June 30, 2018.
A review of members’ contributions status from 183 branches across five regions of the agency shows that outstanding contributions and related penalties stood at Sh6.3 billion as of June 30, 2018.
Of this figure, Sh1.7 billion was in outstanding unremitted contributions while the balance of Sh4.5 billion was related to accrued penalties.
The report tabled in the National Assembly last week says while the agency’s recovery efforts had borne fruit, only Sh771 million had been collected by March 2019, leaving an outstanding balance of Sh5.6 billion.
“The recoverability of the unremitted members’ contributions accumulated over the years amounting to Sh5.6 billion remains doubtful,” says the report signed by retired Auditor-General Edward Ouko.
The law gives NSSF the power to impose fines on employers who fail to comply with any of its many provisions, including late remission of statutory contributions.
While the agency had indicated that the balance of members’ contributions stood at Sh14 billion as of the end of the financial year, a review of collection records and related documents for the year under audit disclosed variances.
For example, the monthly reports generated from the Software and Social Security Pension Administration System (SSPAS) showed that monthly collections for the year stood at Sh14,016,684,188.61 while the figure in financial statements was Sh14,044,262,078, translating into a difference of Sh27.5 million.
On the other hand, while the SSPAS showed that the NSSF global report on the contributions was Sh14,030,656,823.31, the one captured through the financial statements was Sh14,044,262,078, indicating a variance of Sh13.6 million.
The management says the variance between the global and monthly collection is because branch reports do not include M-Pesa payments, miscellaneous income and payments receipted through reconciliations.
But the auditor rejects the explanation, saying it is not clear why the receipts were not reflected in the branch reports since receipting under SSPAS is centralised.
“In any case, reconciliation between amounts in the global and branch reports was not presented for audit verification,” the report says.
Similarly, the contributions in transit, representing contributions that had not been posted to individual member accounts, declined by Sh99 million in the year under review from Sh762 million in the 2016/17 financial year to Sh663 million in the following year.
The Retirement Benefits Act requires NSSF to maintain employer contributions, clearing accounts where total contributions are posted from the employers to the credit of members’ account for the settlements of benefits upon qualification.
The NSSF did not do this, and the Auditor-General accuses the management of failing to reconcile and post the remaining balance of Sh663 million, which has accumulated over the years to the respective members’ accounts.
The report further questions the Sh6 billion worth of assets the agency has put under construction.
While the audit questioned NSSF for failing to collect Sh2.8 billion from buyers of its executive apartments at Milimani in Nairobi County, it doubted whether the Hazina Towers would be completed by the new revised date of June 2019, and with the revised contract sum of Sh4 billion.
The construction of Hazina Towers in Nairobi started in 2013 and was to be undertaken in 155 weeks with a completion date of July 2016.
However, during the audit, the works were scaled down to 15 floors from the initial 34 floors, while the contract sum was reduced to Sh4 billion from Sh6.7 billion.
The contractor for the apartments — Nanchang Foreign Engineering Company (Kenya) Ltd — completed the project at a cost of Sh1.6 billion and handed the houses to the agency in April 2018.
The board approved the sale of the houses and it was expected that the agency would collect Sh3.6 billion, but even though it realised total sales, it received a paltry Sh753 million as of April 2019, the date of the handing over.
The audit further questions the irregular disposal of the agency’s underdeveloped 70-acre piece of land in Mavoko, Machakos, which has put to risk investments worth Sh126 million.
The land was subdivided into seven plots of 9.88 acres each and disposed off at Sh18 million each.
The plots were sold to AMS Properties Ltd at a total cost of Sh126 million. However, only sh12.6 million was paid while the balance has never been paid to date.