The Auditor-General's office has flagged the Policyholders Compensation Fund (PCF) for collecting Sh1.36 billion levies and penalties from insurance companies without using the e-Citizen platform in breach of the government’s directive.
The latest audit report on the institution, which is charged with compensating customers when insurance companies become insolvent, shows it bypassed the platform in the year ended June 2025 when it collected Sh1.33 billion in levies and Sh25.59 million penalties from insurers.
“It was noted that all the collections were not done on the e-Citizen platform contrary to Treasury circular No. 02/2024 on policy measures to enhance State corporations' revenue generation and expenditure rationalization in line with the government's fiscal consolidation efforts,” says Nancy Gathungu, Auditor-General, in the latest report on the Fund.
The circular was issued by then Treasury Cabinet Secretary Njuguna Ndung’u in March 2024, requiring all State corporations to “onboard all revenue collections” into the platform as part of efforts to enhance transparency.
However, the use of the e-Citizen platform continues to attract controversy, particularly over instances of delayed service delivery and inconsistencies in revenue reconciliation between what State agencies process and what the system reports.
For instance, a separate report by Ms Gathungu revealed that at least Sh144 million collected by various government agencies through the platform in the financial year ending June 2025 could not be accounted for.
Bypassing of e-Citizen, a platform whose ownership is still in the hands of a private company, was one of the several issues flagged by Ms Gathungu in her audit report on PCF.
Other issues included payment of Sh33.97 million allowances that were not authorised by the Salaries and Remuneration Commission, lack of a policy on charging of statutory management fees, and weaknesses in the payment of imprest.
PCF asset base hit Sh26.8 billion in the year ended June 2025 from Sh22.4 billion reported in the previous year.
“This growth placed the Fund in a good position to fulfil its mandate, particularly that of payment of compensation to insurance claimants of an insurer placed under a manager appointed under Section 6TC (2) or whose license has been cancelled under the Insurance Act,” said Mohamed Sahal, managing trustee at PCF.
Since the onset of the compensation process in 2021, the Fund has cumulatively compensated 1,278 claimants totalling Sh207.3 million, keeping the fund growing.
Increased levy collections and Investment interest income from government securities saw the fund’s revenue rise by 28 percent to Sh4.96 billion during the review period.
The key source of income for PCF is a levy contribution of 0.5 percent of insurance premiums received by insurers. During the period under review, the levy increased by two percent from Sh1.31 billion on increased premiums.
The fund earns interest on the investments made from levy contributions collections. The investment interest income is used to compensate policyholders of insurers placed under statutory management as well as finance the operations of the Fund.
