In a scathing report released by Auditor General Nancy Gathungu, the National Social Security Fund (NSSF) has been thrust into the spotlight for significant financial improprieties, resulting in a staggering loss of over KSh 16 billion for the financial year ending June 30, 2024.
The audit, which scrutinised the operations of Kenya’s largest retirement benefits scheme, paints a troubling picture of mismanagement, questionable investments, and operational inefficiencies that have eroded the fund’s financial health and jeopardised public confidence in the security of workers’ savings.
Ghost Taxes and Overpayments
A key finding in Gathungu’s report is the irregular payment of over KSh 904 million in taxes to the Kenya Revenue Authority (KRA), which the Auditor General described as “ghost taxes” due to the lack of justification or documentation.
According to the report, NSSF management failed to provide evidence of any progress made toward securing a refund or earning interest on the overpaid amount.
“The NSSF management did not provide for audit review evidence of progress made in the refund of the overpaid taxes,” the report stated, raising questions about accountability and oversight within the fund’s financial operations.
Costly Land Deal Gone Awry
The audit also uncovered a problematic KSh 115 million land purchase in Nairobi’s Upper Hill area, which was later deemed public land, leading to the revocation of its title deed.
Despite the significant investment, NSSF’s efforts to challenge the revocation through legal action have yet to yield results.
Gathungu issued a modified audit opinion on this matter, signalling concerns about the recoverability of the funds and the due diligence processes that allowed such a transaction to proceed.
Idle Assets in Prime Locations
Further compounding the fund’s woes, the report highlighted five idle and unused properties in Nairobi’s Central Business District (CBD), collectively valued at KSh 4 billion.
These properties, which could have generated significant revenue through leasing or development, have remained dormant, representing a missed opportunity for the fund to bolster its financial position.
The auditor general’s findings suggest a lack of strategic asset management, leaving billions in value untapped while members’ contributions languish.
Poor Investment Decisions
The NSSF’s investment portfolio came under intense scrutiny in the report, with several decisions contributing significantly to the KSh 16 billion loss.
The fund invested in two companies whose combined value plummeted by 17.6%, resulting in a staggering KSh 27 billion loss to members. Additionally, NSSF poured KSh 38 million into shares of a loss-making bank, which remains stuck with no clear path to recovery.
The audit also revealed that the fund spent KSh 12 billion on government premium bonds, only to sell them at a loss of KSh 272 million.
These investment missteps have raised alarms about the fund’s risk assessment frameworks and the competence of its investment decision-making processes.
Extravagant Spending on Travel and Renovations
Beyond poor investments, Gathungu’s report flagged excessive spending on operational costs, including costly travel and pricey renovations.
While specific figures for these expenses were not detailed in the summary, the auditor general noted that such expenditures were disproportionate and lacked adequate justification, further straining the fund’s resources.
Broader Implications for NSSF and Workers
The findings come at a time when the NSSF is under pressure to deliver on its mandate to provide secure retirement benefits for millions of Kenyan workers. The reported KSh 16 billion loss represents a significant setback for the fund, which manages contributions from both formal and informal sector workers.
Critics argue that the financial mismanagement highlighted in the report undermines public confidence in the institution and could jeopardise the retirement security of its members.
Gathungu’s modified audit opinion shows the severity of the issues, signalling that the financial statements presented by NSSF may not fully reflect its true financial position.
The Auditor General has called for urgent reforms to address the systemic weaknesses identified, including enhanced oversight, stricter investment protocols, and improved asset management strategies.
