Managers of the National Social Security Fund (NSSF) are in the spotlight after an audit revealed multiple uncounted earnings and payments totalling hundreds of millions even as President William Ruto seeks to increase contributions to the fund.
In an exposé, Auditor-General Nancy Gathungu said NSSF managers also concealed investment revenue amounting to Sh16.6 million from corporate bonds of a company listed on the Nairobi Securities Exchange. The amount wasn’t entered in the fund’s cashbook.
“The statement of changes in net assets available for benefits reflects investment income totalling Sh21.63 billion, which includes interest on corporate bonds totalling Sh124.73 million. However, Sh16.62 million earned from corporate bonds of a listed company were not recorded in the cashbook. No explanation was provided for the omission,” she said.
“In the circumstance, the investment income balance totalling Sh21.63 billion included in the investment income balance for the year ended June 30, 2021, could not be confirmed,” Ms Gathungu added.
The audit also flagged anomalies with the NSSF’s bank overdraft, which showed an overdrawn cashbook balance amounting to Sh206.9 million, although this was not updated in the cashbook nor balanced against other entries.
“Management explained that the overdrawn cashbook balance arose as a result of Electric Funds Transfer (ETF), Real Time Gross Settlement, and cash deposit transactions made by employees who delayed in submitting returns to the fund for posting in the cash book. However, management did not provide sufficient records to support the balance and did not disclose the controls established to prevent such omissions,” the Auditor-General said.
Further, the Auditor-General’s report revealed that NSSF’s bank reconciliation statement for June 2021 for one of its accounts showed long outstanding balances relating to bounced ETFs and unrepresented cheques totalling Sh14.72 million.
“Further, the bank reconciliation statement reflected payments in bank statement not in cashbook totalling Sh169,640,237 which had not been investigated and explained in accordance with Regulation 90(3) of the Public Finance Management (National Government) Regulations 2015,” Ms Gathangu said.
“In view of these discrepancies, the accuracy and completeness of cash balance Sh571,000,978 as at June 30, 2021, could not be confirmed,” she added.
Ms Gathungu also put NSSF on the spot for accumulating expenses amounting to Sh7.07 billion, which is about 2.5 per cent of its Sh284.48 billion worth of assets, contrary to law.
The National Social Security Fund Act, 2013 caps NSSF to accumulating expenses not exceeding 1.5 per cent of its total assets.
NSSF’s return on investment shot up 237 per cent to Sh32.7 billion in 2021 up from Sh9.6 billion in 2020 with the board approving a 10 per cent interest on members’ monthly contributions to the fund.
This is the highest return since 2014 when it paid 12.5 per cent, and is an increase from the seven per cent interest the fund paid in the previous year.
President Ruto wants to increase monthly NSSF contributions tenfold, arguing that the Sh200 monthly contribution to the fund is too low.
“We will be working with our members of Parliament so that we can provide the framework for Kenyans to save so that we can leave an inheritance for our children,” said Dr Ruto.
This is after the High Court last week stopped a bid to increase monthly contributions to the NSSF tenfold to up to Sh2,068 after it ruled that the law supporting the increments was unconstitutional.
In the ruling, Justices Mathews Nduma, Hellen Wasilwa, and Monica Mbaru quashed the NSSF Act of 2013, saying it was not subjected to public participation, in breach of the Constitution.
