NSSF lost over Sh2bn in fallen banks: Report

 

NSSF building in Nairobi. Photo/FILE  Nation Media Group

By PAUL WAFULA pwafula@ke.nationmedia.com
Posted  Tuesday, September 18  2012 at  18:08

In Summary

• In its annual report and accounts for the year ended June 30, 2011, NSSF made a Sh2.1 billion provision as doubtful investments for the money deposited in closed financial institutions, a pointer that it has lost hope of recovering the money
• The report shows that Sh989.9 million was deposited in Prudential Building Society, Sh553 million went to Post Bank Credit Ltd, Sh197 million to Trade Bank, and another Sh166.5 million was deposited with Thabiti Finance Company. All these institutions are in liquidation
• Members also lost Sh1.2billion in 2009/2010 in respect of shares purchased through Discount Securities

The national pension fund lost Sh2.1 billion it had deposited with at least 10 financial institutions which have since gone into liquidation, its annual statement shows.

The statement gives the more than 1.4 million active members a rare peek into the financial health of the National Social Security Fund (NSSF) that had been hidden for 47 years. The fund was also duped into buying illegal forest land worth Sh1.13 billion in gazetted areas.

In its annual report and accounts for the year ended June 30, 2011, NSSF made a Sh2.1 billion provision as doubtful investments for the money deposited in closed financial institutions, a pointer that it has lost hope of recovering the money.

The report shows that Sh989.9 million was deposited in Prudential Building Society, Sh553 million went to Post Bank Credit Ltd, Sh197 million to Trade Bank, and another Sh166.5 million was deposited with Thabiti Finance Company.

All these institutions are in liquidation.

The pension fund also lost Sh131 million to Rural Urban Credit Finance, Sh57 million to Continental Credit, and Sh34.9 million to Pioneer Building Society, while Trade Finance went down with Sh6.6 million. The other financial institutions in liquidation include Middle Africa Finance (Sh3.6) million and Nairobi Finance Corporation (Sh3.3 million).

The Auditor General, Mr Edward Ouko, also questioned the firm’s investments in property in gazetted areas in Muthaiga, on Ngong Road and several irregular land transactions by the fund.

“The properties, being in gazetted areas… cannot be owned, possessed, utilised or accessed and any development on such land would be illegal. The carrying values of these properties, as at June 2011, stood at Sh1.13 billion yet no provision for the impairment loss was made in the financial statements during the year,” Mr Ouko said of the pension funds accounts.

Breach of laws

The fund also irregularly sold its Ojijo Road government gazetted plot for Sh303 million, in breach of procurement and disposal laws.

“The sale of the property was not advertised and it could not be confirmed how the buyer was identified and how the selling price was determined,” Mr Ouko noted.

He also took issue with Sh6.5 billion being held by NSSF in suspense accounts without indicating how the affected members would benefit from the money.

Members also lost Sh1.2billion in 2009/2010 in respect of shares purchased through Discount Securities.

Other areas the pension fund will have to deal with even as it goes ahead to shade off its old image as it seeks to transform itself from a provident fund into a pension fund include recovery of debts.