Home Business Balance Sheet of Kenya’s Pension Fund hits Sh 224.02 billion amid numerous audit queries

Balance Sheet of Kenya’s Pension Fund hits Sh 224.02 billion amid numerous audit queries

by kenya-tribune

The balance sheet of state pensioner National Social Security Fund (NSSF)
increased in size to Sh 224,024,782,277.00 at the close of financial year ended
30th June, 2018. This is compared to Sh 198,537,050,527.00 the
previous period. Its developed property investment portfolio also grew to Sh
21.8 billion in 2018 compared to Sh 20.8 billion the previous year.

According to abridged financial statements for the year ended 30th June, 2018, the pension fund posted an operating surplus of Sh 22.2 billion in
2018 compared to Sh 18.6 billion in 2017.

Contributions receivable increased by 5 per cent from Sh 13.6 billion
in 2017 to Sh 14.04 billion in 2018 while benefits paid out rose to Sh 3.78
billion in 2017/18 compared to Sh 3.661 billion the previous financial year.

While NSSF has posted a surplus, numerous queries from the Office of
the Auditor General puts a damper of the fund’s financial performance.

A detailed Auditor General’s report on NSSF financial statements raises the red flag on a number of issues. These include unremitted members contributions, contributions in transit, long outstanding payments to creditors, unreconciled cash and bank balances, illegal transfer of NSSF land in Upper Hill, Nairobi and non-completion of Nyayo Estate Embakasi Phase six contract where the Fund could lose Sh 215.5 million already paid to a contractor who has since stopped work.

The audit report states that construction of 324 units at Nyayo Embakasi at a total cost of 2.155 billion by M/S China Jiangxi International Kenya Limited had stalled. While the contract was to take 78 weeks from June 2013 to November 2014, only 44 units had been done as at March 27th, 2018. By the time of stoppage, the contractor had been paid an advance fee of Sh 215.5 Million against a Standard Chartered Bank guarantee which expired on 30th September 2015

“ In the circumstances, the Fund risks losing Sh 215,540,744.22 already
paid and additional losses on delayed completion of the project,” said FCPA Edward
R.O Ouko, the then Auditor General.

Other big-ticket projects that have attracted interest from the auditor is the construction of Hazina Trade Centre, which is yet to be completed even after its original designs were scaled down to 15 floors from the original 34 floors.

NSSF bought land in Nairobi’s Upper Hill, next to Milimani courts in 1996 at a cost of Sh 20 million. The auditor states that this 0.21 hectares piece was irregularly allocated to the judiciary and appeals to the National Lands Commission and the Courts have yet to resolve the dispute with the auditor warning that the Fund could lose out workers’ cash in this deal.

In the sale of its 104 Milimani Executive Apartments constructed at a
cost of Sh 1.55 billion, the audit report mentions that the contractor,
Nanchang Foreign Engineering Company Kenya Limited completed the project at a
cost of Sh 1.7 billion and handed over the project to the fund on April 9th,

 The NSSF board approved the sale of these units and expected to make sales of Sh 3.6 billion by the time of the handover. However, total sales realized was Sh 753.5 million at the time of this transition and the fund is yet to realize the balance of Sh 2.86 billion.

The audit further pokes holes on irregular disposal of undeveloped land
in Mavoko, non-beneficial lease of Hazina plaza in Mombasa, unresolved
investment returns on Kisumu Milimani upmarket houses.

It also points to weaknesses in systems and controls at the NSSF, including the purchase of a SAP Accounting Software and Social Security Pension Administration System(SSPAS) at Sh 237.8 million and Sh 397.8 million respectively, which it states was not value for workers’ cash.

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