Auditor-General flags NSSF for mismanagement, risky deals and irregular spending
The audit for the financial year ending June 30, 2024, revealed that NSSF purchased government bonds worth Sh5 billion at a premium and later sold them at a loss, incurring over Sh272 million in losses.
The Auditor-General has uncovered serious financial mismanagement at the National Social Security Fund, revealing a pattern of risky investments, procurement violations, and poor internal controls that threaten billions in workers’ retirement savings.
The audit for the financial year ending June 30, 2024, revealed that NSSF purchased government bonds worth Sh5 billion at a premium and later sold them at a loss, incurring over Sh272 million in losses.
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The report says this happened because the management failed to weigh capital losses against yield returns, a basic principle of sound investment for pension institutions.
Further scrutiny revealed that NSSF wrote off over Sh940 million in tax refunds due to delayed reconciliation and missing documentation.
“Management did not provide for audit review evidence of progress made in a refund of the overpaid taxes. In the circumstances, NSSF has not been getting any returns on the long outstanding tax receivables balance of Sh940,336,114.00,” the Auditor-General’s report stated.
Procurement violations ran deep across several departments. A desktop computer for the reception area was purchased for Sh2.08 million, raising questions about value for money.
Additionally, the Fund spent Sh317.58 million on single-sourced conference venues, irregular travel claims, and unsupported subsistence allowances. Fuel worth Sh51 million was bought entirely in cash, bypassing public procurement procedures.
The Fund also spent Sh410 million on renovation works awarded through irregular processes and bought an eight-bay bulk filer for Sh1.04 million without following procurement laws.
The report paints a picture of a fund plagued by poor decision-making, lack of due diligence, and deliberate disregard for public finance rules.
These failings, the Auditor-General warns, not only risk the Fund’s future solvency but also undermine the goal of securing retirees’ savings.
Beyond financial missteps, the Fund’s real estate strategy has also come under scrutiny. The land in Upper Hill purchased for Sh115 million lacked a valid title deed after the allocation was revoked, raising questions about whether any due diligence was conducted.
In Nairobi’s central business district, several NSSF-owned buildings are lying idle and generating no income, while others are rented out without valid lease agreements.
In Kisumu, an investment property valued at Sh228 million was flagged for irregular operations, though investigations are still ongoing.
The Fund has also tied up large sums in poor-performing or doubtful investments.
These include Sh127 million in underperforming quoted stocks, a Sh38.4 million stake in Consolidated Bank that has lost over Sh209 million in value, and investments in collapsed institutions such as Imperial Bank, Chase Bank, and Real People Microfinance.
In total, NSSF has recorded Sh946.6 million in provisions for doubtful debts and accrued income that may never be collected.
Despite setting a return on investment target of 15 per cent, the Fund only achieved 8 per cent, well below industry benchmarks.
According to the audit, this poor performance, when combined with risky investment decisions, threatens the Fund’s ability to meet future pension payouts.
Internally, the Fund is burdened with a bloated workforce and unpaid staff loans. Over Sh1.3 billion in employee loans and Sh158.3 million in staff mortgages remain unrecovered, with most not being serviced.
Governance costs were also flagged, with the board of trustees holding 14 full meetings and nine finance and investment committee sessions—more than double the government-approved limit—costing Sh68.78 million.
The Auditor-General described this as an abuse of governance structures.
Pending bills of Sh8.97 million, some dating back over two years, add to the Fund’s growing list of financial troubles.
The audit cited poor record-keeping and unreconciled transactions as further evidence of institutional failure.
The Sh128 million Bamburi boundary wall project has stalled without explanation, and two custodial bank accounts holding Sh3.5 million are operated by an entity not officially contracted by NSSF, raising further accountability concerns.
As concerns mount, calls for accountability are expected from civil society, trade unions, and Parliament’s oversight committees. With billions already lost or tied up in questionable dealings, the pressure is now on NSSF’s leadership to explain how workers’ savings were mismanaged so severely.
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