Seventh Report On Consideration Of The Auditor General's Report On Financial Statements Of Selected State Corporations

REPUBLICOFKENYA

THENATIONALASSEMBLY

THIRTEENTHPARLIAMENT-FOURTHSESSION-2025

THESEVENTHREPORTOFTHEPUBLICINVESTMENTSCOMMITTEE ONSOCIALSERVICES,ADMINISTRATIONANDAGRICULTUREON THECONSIDERATIONOETHE-AUDITOR-GENERAL'SREPORTSON THE FINANCIAL STATEMENTS OF SELECTED STATE CORPORATIONS

DIRECTORATEOFAUDIT,APPROPRIATIONS&GENERAL-PURPOSE COMMITTEES CLERK'SCHAMBERS PARLIAMENTBUILDINGS NAIROBI.

TABLEOFCONTENTS

ListofAbbreviations/Acronyms.

| CHAIRPERSON'SFOREWORD | CHAIRPERSON'SFOREWORD | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | EXECUTIVESUMMARY V PREFACE. | EXECUTIVESUMMARY V PREFACE. | | 1.1 | Establishment andMandateoftheCommittee | | 1.2 | CommitteeMembership.. | | 1.3 | CommitteeSecretariat. | | 1.4 | CommitteeProceedings.. | | 2.0 | General Committee Observations andRecommendations | | 2.1 | LackofPossession and ownershipdocuments on land and buildings. | | 2.2 | Delayin availingdocumentsto theAuditor-General | | 2.3 | Delayed Accountabilityof Imprest.. | | 2.4 | Poor Governance... | | 2.5 | Long outstandingreceivables. | | 2.6 | Long outstanding payables. | | EXAMINATIONOFTHEREPORTOFTHEAUDITOR-GENERALONTHEAUDITED ACCOUNTS OF NATIONAL SYNDEMIC DISEASES CONTROLCOUNCIL (FORMERLYNATIONALAIDSCONTROLCOUNCIL)FORTHEFINANCIALYEARS 2017/2018TO2023/2024 8 | EXAMINATIONOFTHEREPORTOFTHEAUDITOR-GENERALONTHEAUDITED ACCOUNTS OF NATIONAL SYNDEMIC DISEASES CONTROLCOUNCIL (FORMERLYNATIONALAIDSCONTROLCOUNCIL)FORTHEFINANCIALYEARS 2017/2018TO2023/2024 8 | | 3.1 | FINANCIALYEAR2017/2018 | | 3.2 | FINANCIALYEAR2018/2019 12 | | 3.3 | FINANCIALYEAR2019/2020 13 | | 3.4 | FINANCIALYEAR2020/2021 15 | | 3.5 | FINANCIALYEAR2021/2022 23 | | 3.6 | FINANCIALYEAR2022/2023 24 | | 3.7 | FINANCIALYEAR2023/2024 27 | | 4.0 EXAMINATIONOFTHEREPORTOFTHEAUDITOR-GENERALONTHE FINANCIALYEARS2021/2022-2023/2024.. .34 | 4.0 EXAMINATIONOFTHEREPORTOFTHEAUDITOR-GENERALONTHE FINANCIALYEARS2021/2022-2023/2024.. .34 |

| 4.1 | FINANCIALYEAR2021/2022 34 ACCOUNTSOFTHENATIONALCANCERINSTITUTEOFKENYAFORTHE | |----------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------| | EXAMINATIONOFTHEAUDITORGENERALREPORTONTHEAUDITED ACCOUNTSOFTHECHILDWELFARESOCIETYOFKENYAFORTHEFINANCIAL YEARS2015/2016TO2018/2019... *...169 | EXAMINATIONOFTHEAUDITORGENERALREPORTONTHEAUDITED ACCOUNTSOFTHECHILDWELFARESOCIETYOFKENYAFORTHEFINANCIAL YEARS2015/2016TO2018/2019... *...169 |

ListofAbbreviations/Acronyms

| | PIC-SSAA-PublicInvestments Committee onSocial ServicesAdministration andAgriculture | |-------|---------------------------------------------------------------------------------------| | Ag. | Acting | | AG | Attorney General | | CEO | ChiefExecutive Officer | | CS | Cabinet Secretary | | DCI | DirectorateofCriminalInvestigations | | EACC | Ethics and Anti-Corruption Commission | | FY | Financial Year | | IAS | InternationalAccountingStandards | | NSDCC | NationalSyndemicDiseasesControl Council | | NSSF | National Social SecurityFund | | NCIK | National CancerInstitute ofKenya | | CWSK | ChildWelfareSocietyofKenya |

CHAIRPERSON'SFOREWORD

ThePublicInvestmentsCommittee onSocialServices,AdministrationandAgricultureis oneof thesixWatchdogCommitteesinthethirteenthParliamentthatexaminesreportsoftheAuditorGeneral laidbeforetheNationalAssemblytoensureefficiencyandeffectivenessin theuseof publicresources.The Committeeisestablishedpursuant toNationalAssemblyStandingOrder 206B.

ThePublicInvestmentonSocial Services,AdministrationandAgriculture,withregard to the agriculture,public administration,health,and socialprotection sectors;examines thereports and accounts ofpublicinvestments,examine thereportsoftheAuditor-General onpublicinvestments; and in the context of theautonomy and efficiency of thepublicinvestments,examine whether the affairsofthepublicinvestments,arebeingmanagedinaccordancewithsoundfinancial orbusiness principles andprudent Commercialpractices.Thisensuresimplementation ofArticle229(8)of the ConstitutiononreportslaidbeforetheHousebytheAuditor-General.

Inexaminingtheaccounts oftheAuditor-General,theCommitteeinvitedaccountingofficersin eachoftheState Corporationsunderreviewadduceevidencebeforeit.

Therearemore thanfourhundred(40o)State Corporationsundertaking different mandatesin their unabletoconcludeexamination of the accounts of theAuditor-Generalof these State Corporations.

Consideringtheworkloadand thebacklog,theNationalAssemblyresolvedtoamend thestanding ordersbysplittingthePublicInvestmentCommitteeintothreeCommittees,PublicInvestments Committee onSocial Services,Administration andAgriculture(PIC-SSAA)being oneof them.

The Committee(PIC-SSAA),withaview to clearing thebacklogin examining thereports of the Auditor-General,embarked on the process ofinviting the accounting officers for the State Corporationsunderitsmandate toadduce evidencebeforeit.Thisreport contains observations, findings,andrecommendations arisingfrom the examination ofreports oftheAuditor-Generalfor four(4) statecorporationsfor differentfinancialyears.Thereport is structured asfollows:

• i General observations on each of the cross-cuttingqueries;
• ii) Recommendationstoeach of thecross-cuttingqueries;
• iii)Auditqueriesidentifiedby theAuditor-Generalinhisauditreportsofeach state corporation.
• iv)Managementresponses toeach of thequeries;
• v) Committee observations/findings on each query;and
• vi)Committeerecommendations to eachqueryraised

In thisreport,the Committeemakespolicyrecommendationsand at the same timerecommends specific actions against specificofficers.Itfurtherrecommendsfurtherinvestigationsofcertain mattersby competent investigative agenciessuch as theEACC and theDCI.

The CommitteeappreciatestheOfficesoftheSpeaker and theClerkoftheNationalAssemblyfor thesupport accorded toit tofulfil itsConstitutional mandate.TheCommitteefurtherextends its appreciationtotheOfficeof theAuditor-GeneralfortheservicestheyofferedtotheCommittee duringtheentireperiod.

Ialsoextendmy appreciation tomyfellowMembersof theCommitteewhosecontributions and dedicationtodutyhasenabled theCommitteetoexaminethe audit queriesandproduce thisreport. Onbehalf of the PublicInvestments Committee on Social Services,Administration and Agriculture and pursuant toNational AssemblyStanding Order199(6),it ismypleasant duty and honour to present the 7h Reportof the PublicInvestments CommitteeonSocial Services Administration andAgriculture on theexamination of theReports of theAuditor-Generalon the Financial Statementsoffour(4)State Corporations.

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Signature...

Date.

HON.EMMANUELWANGWECBS,MP CHAIRPERSON-PUBLICINVESTMENTSCOMMITTEEONSOCIALSERVICES. ADMINISTRATIONANDAGRICULTURE

EXECUTIVESUMMARY

The 7hReport ofthePublicInvestmentsCommittee onSocialServices,Administration and Agriculturecontains theCommittee'sexaminationoffour(4)StateCorporations.

Inits examination andscrutinyof theauditedfinancialstatementsofthevariousState Corporations,theCommittee'sprimaryapproachwastoelicitbackgroundinformationastowhy particularcoursesoffinancialand/ormanagementactionswereorwerenottaken.Thiswasdone with therelevant lawsinmind,including the Constitution,thePublicFinance Management Act, 2012,and theattendantRegulations,thePublicAuditAct,2015,theStateCorporationsAct,and thePublicProcurement&AssetDisposalAct,2015.

Theprefaceofthereportcontains preliminaries on the establishmentoftheCommittee,its MembershipandSecretariat,mandate,and theguidingprinciplesgoverningthe Committeewhile undertakingitsmandate.

Parttwoofthereportcontains theCommittee'sgeneralobservations/findingsoncross-cutting issuesanditsrecommendations.

Part three of the report contains reports of the specificState Corporations,Committee Observations,findings,andfinally,CommitteerecommendationsontheStateCorporations.

PREFACE

1.1EstablishmentandMandateoftheCommittee

1. ThePublicInvestments Committeeisestablishedunder theNationalAssemblyStandingOrder (S.O.)206Bandisresponsiblefortheexaminationof theworkingofpublicinvestmentsbasedon their auditedreports and accounts.Itismandated to- 2. i examine thereports and accounts ofpublicinvestments; 3. ii) examine the reports,if any,of the Auditor-General on public investments;and 4. ii)Examine,in the contextof the autonomy andefficiency of publicinvestments,whether the affairsof thepublicinvestments arebeingmanagedin accordancewith sound financial orbusinessprinciples andprudent commercialpractices. 5. 2.The Committee,in considering the audited accounts of State Corporations,was guided by the Constitution ofKenya and thefollowing statutesandregulationsin carryingout itsmandate;

• i) ThePublicFinanceManagementAct,2012;

7. ii) ThePublicAuditAct,2015; 8. ii)The State CorporationsAct,1986; 9. iv)ThePublicProcurement andAssetsDisposal Act,2015; 10. v)TheNationalAssembly Standing Orders;and 11. vi)TheNational Assembly(Powers and Privileges)Act,2017.

CommitteeMembership

3.The Committeemembership comprises-

| S/No | Member'sName | Constituency | Party | |--------|------------------------------------------------------|----------------|-------------| | 1. | Hon.EmmanuelWangwe,MPCBS-Chairperson | Navakholo | ODM | | 2. | Hon.CalebAmisi Luyai,MP-Vice Chairperson | Saboti | ODM | | 3. | Hon.FerdinandKevin Wanyonyi,MP | Kwanza | FORD-K | | 4. | Hon.Martin Peters Owino,MP | Ndhiwa | ODM | | 5. | Hon.Amb.Benjamin Langat,MP | Ainamoi | UDA | | 6. | Hon.NixonNicholasNgikorNgikolong,MP | Turkana East | Jubilee | | 7. | Hon.(Dr.)Lilian Gogo,MP | Rangwe | ODM | | 8. | Hon.FatumaJehowAbdiMP | Wajir | ODM | | 9. | Hon.UmulkerSheikhKassim | Mandera | UDM | | 10. | Hon ElijahNjoreNjorogeKururia,MP | GatunduNorth | Independent | | 11. | Hon.CalebMuleMutiso,MP | MachakosTown | MCCP | | 12. | Hon..Bishop Emeritus (Dr.)Jackson Kipkemoi Kosgei,MP | Nominated | UDA | | 13. | Hon.Joshua Kivinda Kimilu,MP | Kaiti | WDM | | 14. | Hon.Michael WambuguWainaina,MP | Othaya | UDA | | 15. | Hon.Paul Nabuin Ekwom,MP | TurkanaNorth | ODM |

CommitteeSecretariat

• 4.Thefollowingmembers oftheSecretariat facilitated the Committee:

Mr.AdenAbdullahi

Principal ClerkAssistantI-HeadofSecretariat

| Ms.Christine Mariita ClerkAssistant III | Ms.MercyKinyua Legal Counsel II | |-------------------------------------------|-----------------------------------------| | Mr.Enock Manwa ClerkAssistant III | Mr.Thomas Ogwel Fiscal AnalystI | | Ms.Esther Kariuki Hansard OfficerIII | Mr.Wesley Abugah Research OfficerII | | Mr.Moses Esamai Audio Officer | Ms.Maryan Gabow CommunicationOfficerIlI | | Mr.StanleyLangat SeniorSergeant-At-Arms | MrYakubAhmed MediaRelationsOfficerII |

CommitteeProceedings

• 5.Initsinquiryintowhether the affairsofpublicinvestments aremanaged in accordancewith sound businessprinciples andprudent commercialpractices,the Committee received both oralandwrittenevidencefrom ChiefExecutiveOfficersofvariousStateCorporations
• 6.Toproduce this report,the Committee held nine(9) sittings in which itexamined the evidence adducedby the accountingofficers of thefour(4)State Corporations.

7. Therecommendations arefoundundervarious sectionsofthereporton eachoftheState Corporations examined. 8. Therecommendations on theissuesraised bythe Auditor-General forthe variousState Corporations are foundunder appropriate sectionsofthe report for each of the State Corporations covered.

• 9.These observations and recommendations,if considered and implemented,will enhance accountability,effectiveness,transparency,efficiency,prudentmanagement,commercial viability,andvalueformoneyinStateCorporations and thepublicinvestmentssectorasa whole.

General CommitteeObservationsandRecommendations

Lack of Possession andownership documents onland and buildings.

• 10.TheCommitteeobservedandnotedwithconcermn thatseveralpublicentitiesdonothavetitle deedsforvariousparcelsof land in their custody.Such caseswere noted in the ChildWelfare SocietyofKenya,inwhichnineteen(19)parcelsoflandofanundeterminedvalue didnot possesstitledeeds.TheNational SocialSecurityFund hadoneofitsland titledeedsrevoked through theKenya Gazette,initiallyissued toaprivate developer,because theNational Land Commission declared theparcel tohavebeenreservedforpublicpurposes.

CommitteeRecommendations TheCommitteerecommendedthat-

• i)Within three (3)upon adoption of thisreport,the Accounting Officers for the respective StateCorporationsshouldliaisewiththePrincipalSecretariesfortherespectiveState DepartmentsinthelineMinistries and theNationalLand Commissiontofast-trackthe processofacquiringtitledeedstoresolveownershipdisputes andensurelegal actions are takenagainstprivateindividualswhohaveillegallyacquiredpublicland.

• ii)Within threemonths upon theadoption ofthisreport,theInspector General for the inspectorate ofState corporationsin collaborationwiththeAttorney Generalshould compilea reportofallthepubliclandswithownershipdisputesinvarious courts and submit to theNationalAssembly tobeused asa basisofinitiatinginquirieson ownership status of thepublic lands andrepossessionwhere applicable.Alsoput caveats on all the parcelsofStateCorporationsland that areinprivatehands.
• ii)TheNationalAssembly shouldenact alawprescribingthatallpubliclandownership documents should centrally be heldunder the custody of the National Treasury for safekeeping.

Delayinavailingdocumentsto theAuditor-General

• 11.The Committee observed that some accounting officers didnot avail complete and reconciledfinancialandaccountingrecords/documentationintimeforauditreviewand verification during the audit exercise leading to unnecessary queries.Thisis contrary to theprovisionsofArticle226oftheConstitution andSection68(2)ofthePFMAct2012 which requires that the financial and accounting records arepresented within three(3) monthsafter thecloseofthefinancialyear.Section62of thepublicAuditActof2015 obligates accountingofficerstoproviderequireddocumentsforauditfailuretowhich they be sanctioned.

CommitteeRecommendations

The Committeerecommendedthat-

• i)Accountingofficersshould alwayscomplywiththeprovisionsofSection68(2)ofthe PublicFinanceManagementActof2012bysubmittingall therequiredinformation for audit within the stipulated timelines.
• i)TheAccountingOfficerwhofailstoproviderequired informationfor auditpursuant to62(1)ofthePublicAuditAct,CAP412B should beprosecuted fortheoffence pursuanttoSection62(2)ofthePublicAuditAct CAP412B.

DelayedAccountability ofImprest.

• 12.TheCommitteenotedthatsomeStateCorporationswereinbreachofSection71ofthe PublicFinanceManagement Act CAP412A and the attendantregulations thatrequire

surrenderofimprestswithinsevendaysupon conclusion of the assignmentforwhichthe saidimprest was issued.

Committeerecommendations

TheCommitteerecommendedthat-

• i)The Accounting Officers should ensure thatimprest advanced to officersis surrendered within thestipulatedperiod ofseven(7)daysafterreturn to theworkstationin accordance withsection93ofthePublicFinanceManagement(National Government)Regulations, 2015.
• i)Within sixmonths of the adoption of thisreport,theAccounting Officerswhowill have failed to take necessarysteps to ensure that all outstanding imprests within their jurisdictions arerecoveredfrom the duedateshould besurcharged thefull amount due.
• ii)TheAccountingOfficer shouldsubmit a statusreportwithevidence ofrecovery to the Auditor-Generalforauditandreporting.

Poor Governance

• 13.The Committee noted that some of the entities experience governance-related issues as follows;

i.LackofInternalAuditFunctionandAudit Committeeof theBoard TheCommitteeobserved thatsomeentitiesdidnothaveinternal auditfunctionsandinternal Audit Committees.Where theinternal auditfunctionandAuditcommittees hadbeen establishedperennialweaknessesintheirfunctionalitybasedontheauditissuesraisedbythe Auditor-Generalwere noted.

ii.Irregular Board meetings,Allowances and composition of Board Committees

• TheCommitteenotedthattherewereirregularallowancespaid toBoardmemberseitherby incorporatingmoremembersthanlegallystipulated or holdingmoremeetingsthan stipulated orwithout approval by theState CorporationAdvisory Committee(SCAC),PublicService Commission(PSC),theNational Treasury and theSalaries andRemuneration Commission
• ii.IneffectiveInformation Technology (IT) Internal and Management Controls TheCommitteealsonoted thatsome entitieslacked strongaccounting systems/software capableofaccuratelyrecordingfinancial transactions.Thesystemslackedkeymodulessuch as;payrollprocessing,humanresource management,asset management,procurement,and properinterfaces.Theentitiesalsodidnot haveinplace approvedITstrategiccommittees

Committeerecommendations

The Committeerecommended that-

Within three months ofthe adoption ofthis report,the AccountingOfficersshouldin collaborationwith therespectivelineministries andNational Treasuryinitiate establishment internalAudit functions and audit committees,strengthen theITsystems and therespective committees,putinplacemeasures to curbunnecessaryBoardmeetingsorextramembership in theBoardstoreduce onnugatorycosts.

Long outstandingreceivables.

• 14.The Committeenoted thatsomeState Corporations experienced challengesinrecovering their outstanding debts.This was also coupled with lackofcollection or recovery mechanisms,lackofeffective debtmanagementpolicies,poorrecordingsystems andco ordinationbetween thedebtorsand therecipiententities.

Committeerecommendations

TheCommitteerecommendedthat-

• i.TheAccountingOfficers shouldensure that there are properandrobust debtcollection mechanisms,effectivedebtmanagementpolicies andpropersystemsforrecordingthe debts.
• i.Within three months upon adoption of thisreport all the entitieswith outstanding receivablesshouldinitiaterecoverieswithinthestatutoryprovisionsandidentifyany such debts thatwouldbe deemed irrecoverable,justification forthecause,preparea report on thesame,haveit approvedinternallybytheBoard andforwarded tothe NationalTreasuryfor approvalof thewrite-offs.Acopyof suchreportsshould be submittedtotheNational TreasuryandtheAuditor-Generalforreview.

Long outstanding payables.

• 15.The Committeenoted thatalthough thePFMAct CAP412Aprovides thatanypending billsfrom thefirstchargeinthesubsequentfinancialyearbudget,someStateCorporations experienced challengesinpaying their outstandingdebts.Thiswas occasionedbypoor budgetarycontrolsand alackofproperdocumentation tosupport thepayables.

Committeerecommendations

TheCommitteerecommendedthat-

Within threemonthsupon adoptionof thisreport,all theentitieswith outstandingpayables shouldprepareareportdetailinghow thepayables arose,reasonsfornon-payment,measures taken torepaythedebtsand thereasonable timelineswhen such debtswouldbesettled.A copyofsuchreportsshouldbesubmittedtotheNationalTreasuryand theAuditor-General forreview.

EXAMINATIONOFTHEREPORTOFTHEAUDITOR-GENERALONTHE AUDITEDACCOUNTSOFNATIONALSYNDEMICDISEASESCONTROL COUNCIL(FORMERLYNATIONALAIDSCONTROLCOUNCIL)FORTHE FINANCIALYEARS2017/2018TO2023/2024

Mr.Douglas Bosire Ag.CEOofNational Syndemic Disease Control Council was accompanied byMr.GeoffreyGitu(Chairman-BoardofDirectors),Mr.Bernard Kuria (Legal Officer),Mr Simon Macharia (D.Director Finance)and Mr.William Birech(Dir.HR)appearedbefore thecommittee toadduce evidenceontheAudited Accounts of NationalSyndemic Disease Control Council for the Financial Year 2017/2018to2023/2024.

FINANCIALYEAR2017/2018

1.Cash and CashEquivalents

• 16.TheCommitteeheard that the statementoffinancialpositionreflectsacashandcash equivalentsbalanceofKshs.834,396,362asat30June2018,as disclosedatnote18tothe financial statements,whichincludes the CooperativebankIRAPPprojects account balance ofKshs1,212,020.However,thereconciliationstatementreflectsacashbookbalanceof Kshs1,210,919,resultingin an unreconciled difference ofKshs.1,101.In the circumstances, the validity,accuracy,andcompleteness of the Co-operative bankIRAPPproject account balanceofKshs1,212,020asat30June2018couldnotbeconfirmed.

ManagementResponse:

• 17.Themanagement informed the Committee that NSDCC acknowledges and regrets the reconciliationdifferenceofKsh.1,101.Thiswasrectifiedin thefinancial statements ofthe financialyear2018/19.

Committee Observations

Thecommitteeobservedthat;

• i)The Accounting Officer did notobserveRegulation 90.(3)of the PublicFinance Management-NationalGovernment Regulations 2015,which requires the Accounting Officers to ensure any discrepancies noted during bankreconciliation exercise are investigatedimmediately andappropriate action taken,including updatingtherelevantcashbooks.
• ii)In consideration of the audit processwhere the auditedentity andthe auditors are in constant correspondence,Errors and variances point to inaccuracy in financial statementsand couldaswellbeindicatorsofweakinternal controlswheretransactions aredeliberatelyomittedtoperpetuatefraud.

Committeerecommendations

• i)TheCommitteereprimands thethen accountingofficerforbreachofRegulation90 (3)of the Public Finance Management-National Government Regulations 2015, whichrequires theAccountingOfficers toensure anydiscrepanciesnoted duringbank reconciliationexerciseareinvestigatedimmediatelyandappropriateaction taken includingupdatingtherelevantcashbooks.
• i)Within three months upon adoptionof thisreport,the current Accounting Officer to furnishtheNationalAssemblywithreport onthereportingstructure oftheAccounting andfinance departmentandcontrolsinplace todeter anddetecterrorsorsimilar manipulation ofrecords.

2.Trade and otherPayables fromExchange Transaction.

• 18.The Committeeheard that trade andother payablesfrom exchange transactionsbalanceof Kshs35,723,934includeslong outstandingpayables to suppliers and serviceproviders of Kshs 11,693,644.TheNACC(NSDCC)hasnot explained why thelong-standing payables haveremainedunsettled.Consequently,thevalidity of thelong outstanding trade andother payablesfromexchangeTransactionBalanceofKshs11,693,644asofJune30th,2018,could notbeconfirmed.

ManagementResponse

• 19.Themanagementinformed the Committee thatNSDCCacknowledgesthat the outstanding payables asat30June2018amounted toKsh11,693,644,broken down asfollows;

| S/No | Vendor | Amount | |--------|--------------------------|---------------| | 1 | Huzzan printers | 3,889,250.00 | | 2 | Mass comKenya | 2,586,207.00 | | 3 | KenyaNationalAuditOffice | 825,000.00 | | 4 | PriceWaterhouse Coopers | 4,393,187.00 | | | Total | 11,693,644.00 |

i. Huzzan Printers

On thematterof HuzzanPrintersNSDCCdisputed the amount through the Court processvideCivilCaseNo.61of2013.Judgementwasdelivered on31sJanuary 2022,infavourofNSDCCuponwhichHuzzanprinterlodgedan appeal in theHigh Court at Nairobi(Civil Division)against theNSDCC. ThehighcourtupheldtherulingofthelowercourtonNovember28,2024,and dismissedHuzzanPrintersappeal

ii. Mass comKenya

AmountwassettledintheFinancialYear2018/2019aspertheattachedvendor statement.

i. KenyaNationalAuditOffice

Amountwassettledin theFinancialYear2018/2019aspertheattachedper attachedvendorstatement.

iv. PriceWaterhouse Coopers

AmountwassettledintheFinancialYear2018/2019asper theattachedperthe attachedvendorstatement

CommitteeObservations

The committee observed that;

• i.TheAccountingOfficerwasinbreach of Section53(8)of thePublicProcurement and AssetDisposalAct CAP412Bfor commencingprocurementproceedings before ascertaining thatsufficientfundstomeetthe obligations of theresultingcontract are reflectedinitsapprovedbudgetestimates.
• ii. The thenAccountingOfficers'failure topaytheduesintime andeventuallygoing to contractmanagementleadingtonugatoryexpenditureintheformofcourtfees.
• iii. There wasnoevidence that the amountofKshs 11,693,644owed toother suppliers wasfinallysettled,andreasonswhythesupplierswerenotpaid,yettherewerefunds allocatedduringthefinancialyear.
• iv. theentity's reputation and supplierrelationshipswhich caused Potential Risk of further litigation orPenalties caused by continued delayin settling obligations thus exposingthe entitytolegal disputes,penalties,or additional interestcharges.

CommitteeRecommendations

TheCommitteerecommendedthat;

• i.Within three months upon adoption of thisreport,the Accounting Officer NSDCC to submit totheNationalAssemblyadetailedreport on thelong-outstandingpayables, detailing thereasons for non-settlement,anda clear action plan forsettling the outstandingbalances,thereportshouldalsoincludedetailsofthelawyerswhowere involved in thelegal proceedings against theNSDCCandhowmuch theywere paid.

• ii. Within threemonthsuponadoptionof thisreport,EACCshould investigatehowPrice WaterhouseCooperswasprocuredandsubmit areport totheNationalAssembly.
• iii. Within threemonthsupon adoption of thisreport,if anyofficerisfound culpable, he/sheshouldbeheldliableinaccordancewithsection197(1)(i)ofthePFMAct CAP412for theoffence ofincuring a nugatory expenditure and theDPPshould initiate alegalprocesstorecovertheamountsolostfromtheconcernedofficer(s)at theprevailingCBKrates.

FINANCIALYEAR2018/2019

1. Contingent liability.

• 20.The Committeewasinformed thatnote33to thefinancialstatementswhichindicates thatthe Councilisfacingclaimsandlitigationsfromseveralsuppliersforwhichcontingentliability ofKshs10millionhasbeendisclosed.Managementhasindicated that theyaresatisfiedwith theadequacyand appropriatenessof thebalance disclosed.

Management Response

• 21.Themanagementinformed theCommitteethat,asstatedbytheAuditor-General'sreport,the NSDCCwas facing three litigations.The NSDCCmanagementbelieved acontingency liabilityprovisionof10Mwas adequatetocoverliabilitythatwouldariseincasetheCourts ruledinfavourof thelitigants.TheNSDCCconfirms thatthemattershavesofarbeen resolved.

Committee Observations

The CommitteeObservedthat;

• i.The disclosure ofKshs10million in contingent liabilitiesindicated that the Council wasexposed topossiblefinancial obligationsif the claimswere to materialize,which maystraintheCouncil'sfinancialposition.
• ii. Thatwhilemanagementhadexpressed satisfactionwith the adequacyofthedisclosed amount,the Committee noted thatnodetailed justification had been provided regardingthebasisfortheestimatedliabilityandwhetherprovisionsforpotential settlementshavebeenconsidered.
• iii. The then Accounting Officers'failure to paythe dues in time and the payees eventually going tocourtis a pointer topoorgovernance,financialmanagement,

procurement,andcontractmanagementleadingtonugatoryexpenditureintheform ofcourt fees.

CommitteeRecommendations

TheCommitteerecommendedthat;

• i.Within threemonths upon adoption of thisreport,theAccounting Officer NSDCC to submit to theNationalAssemblya detailedreportonstatusof tradepayables,pending courtcases and provisions forcontingentliabilitiesmadeinrespectofeachcase.
• Within threemonthsupon adoption of thisreport,EACCshouldinvestigatehow the court cases arose,theprocurement of thelegal services,and the amountspaid to them, and submit the report to the NationalAssembly.Further,if any officer is found culpablefor thenugatory expenditure,he/sheshouldbeheldpersonallyliablefor any lossofpublicfunds.DPPshould initiate alegalprocesstorecover the amount solost from theconcerned officer(s)at theprevailing CBKrates.
• ili. In addition,theDPPshould initiate alegalprocessifproved that the actions of any NSDCCofficerled toincurrenceofnugatoryexpenditureinaccordancewithsection 197(1)(i)ofthePFMActCAP412torecovertheamountsolostfromtheconcerned officer(s)at theprevailingCBKrates.

FINANCIALYEAR2019/2020

Budgetarycontrolandperformance.

• 22.The Committeewasinformed that the statement ofcomparisonbetweenbudgeted andactual amounts indicates that during the yearunderreview,the Council's budgeted and actual revenue totalledtoKshs.1055,180,000.andKshs1,119,785,426respectively,resultingina surplusof9,605,426.Further,theCouncil'sbudgeted and actual expenditure totalledKshs 1,055,180,000 andKshs970402,410respectively,resultingin an under-expenditure ofKshs 84,777,590or8%of thebudget.Theunder-expenditurewaswithin theallowed threshold of 10%.

ManagementResponse

• 23.Themanagementinformed the Committee that,in thefinancialyear2019/2020,the underexpenditurewaswithin theallowed thresholdof10%.TheNSDCChassinceendeavoured to maximuly absorbfundsallocatedin ordertoensureeffectiveserviceprovision to thepublic

Thesurplusof9,605,426wasinterestearnedfromdepositsheldincommercialbanks,and the underspentamountofKshs84,777,590wasbudgeted andutilizedinthesubsequentfinancial year.Theunderexpenditurewaswithin theallowedthresholdof10%asper theAuditors report.

CommitteeObservations

The Committee Observed that;

• i.Theunder-expenditurecouldhavebeenaresultof delayedproject implementation,procurementchallenges,or cost-savingmeasures.
• ii. Further,the underutilization by Kshs.84,777,590 could have derailed the realizationof theplannedactivitiesandpublicservicedelivery.
• iii. The council baseditsprojections of revenue andexpenditure onweak assumptions andhencesubstantiallymissed thebudgetarytargets
• iv. Theissue ofunder absorptionrecurred annuallyover thepastyearsandit could havebeenapointereither toincompetency onthepartof thepreparingofficersor deliberatedelayduetointerferencefromthosechargedwithgovernance

CommitteeRecommendations

The Committeerecommended that;

• i)Within three months upon adoption of this report,the Principal Secretary,State departmentforpublichealthandprofessional standardsshouldconductainvestigate the operations ofNSDCC,withrespect to financial activities on use ofresources, staffing,procurement,itsoperations and submit areport oftheir findings to the NationalAssembly andAuditor-Generalforreview.
• i)Within threemonthsuponadoption of thisreport,theDirector General,inspectorate ofstatecorporationsinaccordancewithitsmandateoutlinedinSections18and19of theStateCorporationsActCap446toinvestigateonallmatters affectinggovernance andtheeffectiverunningofNSDCC,sand submitareportoftheirfindings tothe NationalAssembly andAuditor-Generalforreview.

FINANCIALYEAR2020/2021

1.Receivablesfrom Non-Exchange Transactions.

• 24.TheCommitteewasinformed thatthestatementoffinancialpositionreflectsreceivablesfrom non-exchange transactions balance ofKshs 20,720,191.andas disclosed in Note 22to the financial statements.However,thefollowingunsatisfactorymatterswere noted.

1.1.Long outstanding receivables.

• 25.Note22to thefinancial statementsreflectsanimpairment amount ofKshs81,560092,which hadbeen carriedin the books of accounts for a longperiod of time.TheNational Treasury hadnotapproveditswrite-offasrequested by the Council.

Managementresponse:

• 26.The management informed the Committee that,NSDCC acknowledges that the long outstandingbalanceofKsh81,560,092whoserecoverabilitybyNSDCCproveddoubtfuland madeaprovisionforthisamountinthefinancialstatementincompliancewithInternational PublicSectorAccountingStandard(IPSAS)number 21,whichobligesPublicorganisations toassesswhether thereisanyindication that anassetmaybeimpairedandif thereissuch an indication thenthe entity shall estimate therecoverable amount.Themoniesinquestionwere advanced tovariousgroups andindividualsasperthesummaryinthetablebelow;
• 27.There isa full listofinstitutions/groups/individuals who were advanced the monies.The NSDCC continues to engage with the Ministry of Health,National Treasury,and other government agenciesin followingup on therecovery of theselong outstandingadvances.A consultativemeetingwasheldbetweenNSDCCandtheNationalTreasuryinthecurrent

| Theoutstandingadvanceslistedbelowwereconsidereddoubtful | Theoutstandingadvanceslistedbelowwereconsidereddoubtful | |-----------------------------------------------------------|-----------------------------------------------------------| | FirstWorldAIDSDay CommemorationAdvance | 2,161,700 | | ACUAdvances | 3,697,926 | | DistrictTechnical Committees | 19,613,358 | | Advancestoformeremployees | 2,216,487 | | CommunityBasedOrganizations | 782,283 | | TOWAPSIAdvances | 53,088,338 | | Total | 81,560,092 |

financialyear2024/2025onthematter,anddemandletterswereissued.Sofar,NSDCChas receivedpaymentsfrom theMinistryof Defenseand theAnglican ChurchofKenya-Diocese ofMtKenya.Further,upon thelapse of the three-monthnoticeperiodcontainedin theletters ofdemand,theNSDCChasescalated thematter totheAttorneyGeneralforfurtheractionas containedin thedemandlettersprovided.

Committee Observations

• i.The PublicInvestment Committee in its 22ndReport had discussed the issue and observed that:
• a.The Council had takenseveral steps toimproveitsfinancial systems,including automation offinancial processes through the adoption of ERP,posting regional accountants tohandle the Council'sfinances,and theuseofmobile moneyforfinancial trailwheredisbursementsweremade.
• b.Some of thefundshadbeen dueformore than sixyears and theStatute of Limitation appliesin such cases.The Council had sought andreceived the Board'sapproval towriteoffsuchdebts.
• ii.The committee observed that no approval from the National Treasuryhad been obtained towriteoffthedebts,andnodocumentaryevidencewassubmitted toprove that the several steps takenbythe Council toimprove theirfinancial systems had yielded anyvalueforthemoneyexpended.
• ii. There wasnoprogress inrecoveryof thereceivable andrecoverabilityin future appearsdoubtful.

CommitteeRecommendations

• i.Within three months upon adoption of this report,the Accounting Officer for the Council toinstituterecoverymeasuresincludelegal action against the officerswho havenotrepaid or accountedfortheir advances.
• i. Within four monthsupon adoption of thisreport,theAccounting Officer for the CouncilshouldprepareandsubmittotheNationalAssemblyastatusreportofthe debts and the steps taken toensure accountabilityoffunds disbursed,especiallyin s

1.2. Long outstanding imprests.

• 28.The Committee wasinformed that Note22to thefinancialstatementsreflects a staffimprest advances balance ofKshs 2,508,712,out of which Kshs 2,258,770relates to theperiod betweenJuly2008 and October2019.Therecoverabilityof the advances appears doubtful. In thiscircumstance,the accuracy andrecoverability of thereceivablesfromnon-exchange transactions couldnotbe confirmed.

Management Response

• 29.Themanagementinformed theCommittee that theNSDCCacknowledges that therewere advances to staff amounting toKsh2,258,770 advanced to staff between 2000 and 2019. These advanceswere issued as imprest to former employees whohave since left the organization.

A breakdownof thelong outstandingImprestsislisted on the tablebelow.

| Customer Name | Total | Remarks | Year ofExit | |-------------------|-----------|---------------------------------------------------|----------------| | Margaret Gachara | 694,801 | Officerwascharged in court and servedprison term. | Court Case | | Mathews Chepkwony | 180,198 | Deceased | 2004-Deceased | | FredrickNzioka | 42,192 | Demand letterIssued | 2002 | | MeshackNdolo | 133,910 | Demand LetterIssued | 2002 | | MicahKisoo | 5,000 | Demand letterIssued | 2006 | | George Onang'o | 8,800 | Deceased | 2006-Deceased | | Edward Kisaka | 396,653 | Demand letterIssued | 2008 | | John A.Otieno | 509,730 | Deceased | 2012-Deceased | | Yuko Matsuoka | 177,136 | Demand letterIssued | 2012 | | Edward Gachoki | 9,000 | Demand letterIssued | 2010 | | Boaz Cheluget | 31,350 | Demand letterIssued | 2008 | | Crispine O.Opondo | 70,000 | Amountrepaid | No outstanding | | Total | 2,258,770 | | |

employeeshavebeenmadeas advisedby theNational Treasury.TheNSDCChasescalated thematterto theAttorneyGeneralforfurtheraction ascontainedin thedemandletters.

CommitteeObservations

• i.The PublicInvestment Committee in its 22nd Report had discussed the issue and observedthat:
• a.The Council had takenseveral steps toimprove itsfinancial systems,including the automationoffinancialprocessesthroughtheadoptionofERP,postingregional accountantstohandletheCouncil'sfinances,andtheuseofmobilemoneyfor financial trailwhere disbursementsweremade.
• b. Some ofthe funds had been due for more than sixyears and theStatute of Limitation appliesinsuchcases.The Councilhadsought andreceived theBoard's approvaltowriteoffsuchdebts.
• ii.The committeeobserved thatnoapprovalfrom theNational Treasuryhadbeen obtained towriteofftheimprestfromthedeceased,andnodocumentaryevidencewas submittedtoprove thattheseveralsteps takenby theCouncil toimprove their financial systemshadyielded anyvaluefor themoney expended.

CommitteeRecommendations

Within threemonthsupon adoption of thisreport,theAccountingOfficerfor the Council shouldprepareandsubmitto theNationalAssemblyastatusreportoftheoutstanding imprests and the steps taken to ensure therecoverability of funds.

2.Inaccuraciesin theStatementof ChangesinNetAssets.

• 31.The Committeewasinformed that the statementof changesinnetassetsreflects abalance as at1stJuly2019ofKshs720,370,594,whichdiffersfromthecorrespondingbalanceofKshs 745,136,393 reflected in the audited statements of the previous year,resulting in an unreconciledorunexplainedvarianceamountingtoKshs24,765,799.Further,thestatements exclude therevaluationreservesbalanceofKshs205,022,345reflectedinthestatementof financialposition.

• 32.In these circumstances,the accuracy and completeness ofthe statement of changes in net assetscouldnotbeconfirmed.

ManagementResponse

• 33.The committee was informed that NSDCCacknowledges and regrets the reconciliation difference and the exclusion oftherevaluationreservebalancecited.Thiswasrectified in the financial statementsofthefinancialyear2021/22

CommitteeObservations

TheCommitteeobserved that:

• i)Thestatementofchangesinnetassetsfortheyearended2021/2022indicated thatthe adjustmentofKshs.24,765,799was not done as allegedin the response.The only adjustment disclosedwas fortherevaluationreserveofKshs.205,022,345thus the financialstatementsweremisrepresented.
• ii)TheauthorizedJournalentriesshowingthetwoaffected accountswerenotprovided to the committee,and therefore,itwasnot clearhow thefinancialstatements balanced without therevaluationreserve disclosed in the statement of changesin net assets.
• ii)Therevaluationreportwasnotprovided to the committee;therefore,thecommittee couldnot establishwhether therevaluationincorporatedinthefinancialstatementswas donebyacompetent/qualified,andregisteredvaluer.

CommitteeRecommendations

• i)ThecommitteereprimandsthethenAccountingofficerforbreachofsection81(3) thatprovidesthatthe accountingofficershall prepare thefinancial statementsin a form that complies with the relevant accounting standards prescribed and publishedbytheAccountingStandardsBoardfromtimetotime
• i)Within three months uponadoption of thisreport,theAccounting Officer for the Councilshouldsubmit therevaluationreporttotheAuditor-Generalforreview andreportinginthesubsequentAudit cycle.

2.Misstatement of comparativebalanceforrelatedparty disclosure.

• 34.The committeewasinformed thatNote33tothefinancial statementsreflectsrelatedparty disclosurecomparativebalanceofKshs 122,166,242.Whichrelates to the financialyear 2018/2019insteadofKshs118,720,393relating totheyear2019-2020.Inthecircumstances, the accuracyofthereportedrelatedpartydisclosurecomparativeamount ofKshs122,166,42 couldnotbeconfirmed.

ManagementResponse

• 35.Themanagementinformed thecommittee thatNSDCCagreeswith theAuditor-General's observationregardingthereconciliation difference cited.Thiswasrectified in thefinancial statementsofthefinancialyear2021/22.

CommitteeObservations

TheCommitteeobservedthattheerrorsandmisstatementsdonthaveanyimpacton the financialstatements,asitis adisclosurematter.However,itwasmisleadingtotheusers of thefinancial statements.

CommitteeRecommendations

ThecommitteereprimandsthethenAccountingofficerforbreachofsection81(3)PFMAct CAP412A,whichprovidesthatthe accountingofficershallpreparethefinancialstatements inaform thatcomplieswiththerelevantaccountingstandardsprescribedandpublishedby theAccountingStandardsBoardfromtimetotime.

3.Unresolved prior matter.

• 36.The committeewasinformed thataprioryearaudit issue onbudgetarycontrolperformance remainedunresolvedasat30June2021.Managementhasnotprovidedreasonsforthedelay inresolving the prior year's audit issues.Further,the unresolved prior year issue is not disclosedintheProgress onFollow-upofAuditors'Recommendationssectionofthefinancial statements asrequired bythePublicSectorAccountingStandardsBoardreporting template.

ManagementResponse

• 37.The management informed the committee thatNSDCCacknowledges and appreciates the issuesraisedby theAuditor-Generalonprioryearunresolvedauditmattersandhassince rectified thesamein thesubsequentyears.

Committee Observations

Thecommittee observed that thefinancialstatementswereincompletesince theunresolved prior yearissueswerenotdisclosedin theprogressonfollow-upofauditors recommendations section of the financial statements,as required by the Public Sector AccountingStandardsBoardreportingtemplate.

CommitteeRecommendations

Thecommitteereprimands thethenAccountingofficerforbreachofsection81(3)PFMAct CAP412A,whichprovidesthattheaccountingofficershallpreparethefinancialstatements inaformthatcomplieswith therelevant accountingstandardsprescribedandpublished by theAccountingStandardsBoardfrom time totime.

4.Deferredrevenue.

• 38.The committeewasinformed that the statementoffinancial position,as disclosed inNote28 to theFinancial Statements,reflects a deferredrevenue balance ofKshs100million,which wasreceived on4hDecember2017forpurposes of acquiringMaishaPlaza.However,as at 30June2021,fouryearsafterreceiptofthefunds,theCouncilhadnotbeguntheprocessof acquiring the building.In the circumstances.the councilis likely to lose out on funds earmarkedforMaishaPlaza.

Management Response:

• 39.The managementinformedthe committee thatNSDCCreceived Kshs.100million for acquiring Office space,project number NACC.001/2019,againsta requestof Kshs.1.1 billion.Thematterofdeferredrevenueoccurredfollowingthelackoflandallocation to commence the construction.Afternumerousfollow-upswithvariousgovernmentagencies,

theNSDCCand Kenyatta NationalHospital arecurrentlyworking toputupajoint administrationblockattheKenyattaNationalHospitalgrounds

• 40.The1oom was deposited inacurrent account in Citibankwith the anticipation that themoney andobtainedapprovalfromtheNationalTreasurytoopenanewbankaccountinABSABank.
• 41.TheNSDCCdevelopmentAccount held atAbsaBankwasopenedon October25,2021.The Citibankaccountwas closed,and theavailableclosingbalancewas transferred tothenew account.

CommitteeObservations

Thecommittee observed that;

• i.The amountofKshs.100millionremainsunutilizedtodatesinceitsreceipt on4th December2017forthepurposesofacquiringMaishaPlaza.
• ii.The Council budgeted to acquire officespacebeforesecuringfully owned land.
• ii.The fundshavebeenlyingidle since2017andought tohavebeenreturned to the NationalTreasuryforre-budgeting since the intended purpose aborted before implementation.
• iv.Therewasnoevidence that thefundswere depositedin thebank account and hadnot beenirregularlyreallocatedtootherCouncil'soperationalactivities
• v.The Council has been adamantin seeking allocation of land,and the request letter providedtotheCommitteewaswritteninNovember2024asacover-uptoshowthat therewas some progress after theAccountingOfficerwasinvited by the commitee.
• vi.The amount allocated seven years ago was not sufficient for the project,since it requiredKshs.1.1billion,andno other alternativesource offundsor accommodation has been sought.

CommitteeRecommendations

Within threemonthsupon adoptionof thisreport,theAccountingOfficer should submit a comprehensivereporttotheNationalAssemblyandtheAttorneyGeneralontheavailability offundsandlandfortheprojectandthestatusoftheKshs.100milliondepositedinabank account,theaccruedinteresttodate,andevidenceofthesamebywayofcertifiedbank statements.TheAuditor-General shouldreview andreportin thesubsequent cycle

FINANCIALYEAR2021/2022

1.UnresolvedPriorYearMatters

• 42.TheCommitteewasinformed thatin the auditreportofthepreviousyear,severalissueswere raised undertheReport on theFinancialStatementsandReportonEffectivenessofInternal Controls,RiskManagement,and Governance.However,the Management hasnot resolved all theissuesorgiven anexplanationforfailure to doso,in theformat and contentsprescribed bythePublicSectorAccountingStandardsBoard.

ManagementResponse

• 43.Themanagementinformed the committee thatNSDCCacknowledges theissuesraised on unresolved auditmatters and commits to continue adheringto therequirements of thePublic Sector AccountingStandardsBoard.Further,we will adhere to therecommendation of the PublicInvestment CommitteeonallauditissuesraisedbytheAuditor-General.

CommitteeObservations

The committee observed that thefinancial statementswere incomplete since theunresolved prioryearissueswere not disclosedin the progress onfollow-up ofauditors'recommendations sectionofthefinancialstatementsasrequiredbythePublicSectorAccountingStandards Boardreportingtemplate.

CommitteeRecommendations

ThecommitteereprimandsthethenAccountingofficerforbreachofsection8l(3)PFMAct CAP412A,whichprovidesthatthe accountingofficershallpreparethefinancialstatements inaformthatcomplieswiththerelevantaccountingstandardsprescribed andpublishedby theAccountingStandardsBoard fromtimetotime.

FINANCIALYEAR2022/2023

1.BudgetaryControlandPerformance

• 44.Thecommitteewasinformed that thestatement of comparison ofbudgetandactualamounts reflects theincomebudgetofKshs.1,784,118,968andactualrevenueonacomparablebasis ofKshs.1,529,945,655resultinginarevenue shortfallofKshs.254,173,313or14%ofthe budget.Similarly,theCouncil spentKshs.1,365,070,176compared to the approved budget ofKshs.2,194,529,776resultingtounder absorptionofKshs.898,459,600or 38%.The underfundingandunderperformancemay have affected the Council'skeymandate of coordinatingtheHIVandAIDSresponseinKenya.

ManagementResponse

• 45.Themanagementinformed thecommitteethattherevenue shortfallofKsh254,173,313 resulted from the NSDCCreceivingonlyKsh 1,529,945,655insteadof theallocatedKsh 1,784,118,968.FurtherdisbursementsamountingtoKsh201,000,000of theallocatedfunds weremadeinthelastmonthof thefinancialyear,hinderingthe abilityofNSDCCtoabsorb these funds.These fundswere appropriatelybudgeted for and utilizedin the subsequent financialyear.

Committee Observations

• i.The committee observed that the NSDCC received actualfunding of Kshs. 1,529,945,655.However,theyutilisedKshs.1,365,070,176onlyleavingthebalance ofKShs.164,875,479asunutilizedfunds during theyear.
• ii. TheunderutilizationbyKshs164.875,479derailedtherealizationoftheplanned activities andpublicservicedelivery.Thecouncil baseditsprojections ofrevenueand expenditureonweak assumptions andhence substantiallymissed thebudgetary targets.

CommitteeRecommendations

TheCommitteerecommendsthat-

TheAccounting Officershould ensure at all times that thebudgets arerealistic,achievable, and always adhere to annual workplans,procurement plans,andrevenue collection schedules in compliancewith Regulation 44(2)ofthePFM(National Government)Regulations,2015.

2.DeclineinAccumulatedSurplusBalance

• 46.The Committeewasinformed that the statementoffinancial performancereflects a deficit of Kshs.65,225,763,while the statement ofchangesinnet assetsreflects an accumulated surplus balance ofKshs.376,308,053,whichhasdeclined from the accumulated surplusbalanceof Kshs.629,570,629as at30June 2021on account of deficitsregisteredinthepast twoyears, totalingKshs.253,262,576,whichManagementhasattributedtonon-remittanceofrecurrent budgetary allocations.

ManagementResponse

• 47.The declinein the accumulated surpluswas dueto the shortfall in thedisbursement of allocatedfunds.FortheFY2022/23,theNSDCCwasallocated877,000.000butonlyreceived 690,250,000.FromtheexchequerhavingashortfallofKsh186,750,000forthefinancialyear 2022-23,thisresultedin the councilhavinga deficit inthe statement offinancial performance, hence reducing the accumulated surplus.

CommitteeObservations

• i.The committeeobserved that theNSDCCmainlyrelies onexchequerfundingforits operations with nootherreliableown source offunding.However,the Council's reportinga deficitimpliesthat themanagementutilizedfundsnotearned/receivedin theyearunderreview andcouldhaveresultedinirregularreallocations.
• i. Despite theunderutilizationbyKshs164.875,479 thathad derailed therealization of theplannedactivitiesandpublicservicedelivery,theCouncilstillreportedadeficit ofKshs.65225,763,implyingpoorbudgeting,financialmanagement,andcontrol,and theprojectionsofrevenue andexpenditurewerebasedonweakassumptions.

CommitteeRecommendations

TheCommitteerecommendsthat-

• i.The Accounting Officer should ensure at all times that the budgets are realistic, achievable,and always adheretoannualworkplans,procurementplans,andrevenue collection schedulesin compliance with Regulation 44(2)of thePFM (National Government)Regulations,2015.
• ii. Withinthreemonthsupon adoptionof thisreport,theDPPshouldinitiateprosecution under section 199of the PFM Act,CAP412A,if theofficer(s)responsiblefor the irregularreallocationsofKshs.65,225,763,contrarytosection43(2)of thePFMAct CAP412A,whichprovidesthatanaccountingofficerforanationalgovernmententity, other than a state corporation,mayreallocate funds betweenprograms,orbetween Sub-Votes,inthebudgetforafinancialyear.

3.BudgetDeficit

• 48.The Committeewasinformed thatthestatementofcomparison ofbudgetand actualamounts reflects the finalrevenue budgetofKshs.1,784,118,968and the finalexpenses budget of Kshs.2,194,529,776resultinginabudgetdeficitofKshs.410,410,808contrarytoRegulation 33(c)ofthePublicFinanceManagement(National Government)Regulations,2015onbudget guidelines,whichalwaysprovidesthat duringbudgetformulation and approval,thebudget shall bebalanced.In thecircumstances,Managementwasinbreachof thelaw

ManagementResponse

• 49.Themanagementinformed thecommittee thatitacknowledgesthe citeddeficitofKsh 410,410,808asreflectedinthestatementcomparisonofbudgetand actualamounts.Thefinal budgetcolumnof thestatementofcomparisonofbudgetandactualamountsreflecteda budgetofKSh1,527,769,160for otherpaymentsin thesubmittedFinancialStatements. However,the finalapproved budget for this expenditure item was Ksh 1,117,358,352, resultinginavarianceofKsh410,410,808.Thisdoesnothaveanimpactonthefinancial statementsasagreedwith theauditorssincethe councilreceived actualrevenueofKsh 1,529,945,655against actualexpenditureofKsh1,365,070,176.

Committee Observations

The Committee observed that;

• i.TheManagement of the NSDCChad a final revenue budget ofKshs.1,784,118,968 and finalexpenses budget of Kshs.2,194,529,776 resulting to budget deficit of Kshs.410,410,808.Thisimplied that thebudget wasnotbalanced contrary to Regulation 33(c)of the Public Finance Management (National Government) Regulations,2015on budget guidelines.
• ii. Thebudget aspresentedwas inaccurate and incomplete which couldhavebeen a strategytoconceal actualreceiptsfromothersources.

CommitteeRecommendations

TheCommitteerecommendsthat-

• i.The Committeereprimands thethen accountingofficer forbreach ofRegulation33(c) of the Public Finance Management (National Government) Regulations,2015 on budget guidelines.
• ii. The Accounting Officer should ensure atall times that the budgets are realistic, achievableand always adhere to annual workplans,procurement plans and revenue collection schedulesin compliance with Regulation 44(2)of the PFM (National Government)Regulations,2015.
• iii. Within threemonths upon adoption of thisreport,theAccounting Officer-NSDCC shouldprovideadetailedreport onhowthe Councilintended tofinancethedeficit to theNationalAssemblyand totheAuditor-General forreviewandreportingin the subsequent audit cycle.

FINANCIALYEAR2023/2024

1.Budgetary Control andPerformance

• 50.The statementof comparison ofbudget and actualamountsreflects thefinalincomebudget ofKshs.2,009,488,195and the actualonacomparablebasis amountofKshs.1,626,250,133 resultinginanunderfundingofKshs.383,238,062or19%.Similarly,the Council spentKshs 1,598,786,567against actualreceiptsofKshs.1,626,250,133resultingtounderexpenditure

ofKshs.27,463,566.Theunderfunding andunder-expenditure affected theplannedactivities andmayhavenegativelyimpactedservicedeliveryto thepublic.

ManagementResponse

• 51.TheManagementinformed thecommittee thatNSDCCconcurswith thisobservationand wishestoprovidethefollowingexplanation.
• i) OutofKsh52,000,000allocatedfor"eliminationofMother toChildTransmission of
• i Similarly,oftheKsh 795,241,337development grant allocation,Ksh348,241,337 (56%)was disbursed.
• ii) TheNSDCCwas able tomobiliseAppropriationInAid amountingtoKsh10,350,854 againstabudgetamountofKsh20000000,resultinginashortfallofKsh9649146
• ii) Cumulatively,the shortfall amounts to Ksh 383,238,062 as indicated by the Auditor-General.Thefailuretoreceivefunds allocated toNSDCChad anegative impactonthereportedrevenueandexpenditure.

CommitteeObservations

The committeeobservedthat;

• i.TheNSDCCreceived actual fundingofKshs.1,626,250,133.However,theyutilized Kshs.1,598,786,567onlyleaving thebalanceofKShs.27,463,566asunutilizedfunds duringtheyear.
• ii. TheunderutilizationbyKshs.27,463,566derailedthe realization of theplanned activities andpublicservicedelivery.The council based itsprojections ofrevenueand expenditure onweak assumptions andhence substantiallymissed thebudgetary targets.

CommitteeRecommendations

TheCommitteerecommendsthat theAccounting Officershouldensureatall times that the budgets arerealistic,achievableandalways adhereto annualworkplans,procurement plans andrevenuecollectionschedulesincompliancewithRegulation44(2)ofthePFM(National Government)Regulations,2015.

2.LongOutstandingDoubtful Debts

• 52.Thecommitteewasinformed that thestatement offinancialposition,as disclosed inNote18 to the financial statements,reflectsreceivables from non-exchange transactions,a balance of Kshs.535,088.It was noted that the Council isowed Kshs.81,560,092,which remained outstanding for more than three (3)years without recovery.In the circumstances,the operations of the Council maybe affected bythe delayed payment of debts.

Management Response

• 53.The Management informed the committee that NSDCC acknowledges that the long outstandingbalanceofKsh81,560,092whoserecoverabilitybyNSDCCproveddoubtfuland made aprovisionfor this amountin thefinancialstatementin compliancewithInternational PublicSectorAccountingStandard (IPSAS)number 21,whichobligesPublicorganisations to assess whether there is any indication that an asset maybeimpaired and if there is such an indication then the entity shall estimate therecoverable amount.Themonies in questionwere advanced tovariousgroups andindividualsasper thesummaryin the tablebelow;

| Theoutstandingadvanceslistedbelowwereconsidereddoubtful | Theoutstandingadvanceslistedbelowwereconsidereddoubtful | |-----------------------------------------------------------|-----------------------------------------------------------| | FirstWorldAIDSDayCommemorationAdvance | 2,161,700 | | ACUAdvances | 3,697,926 | | DistrictTechnical Committees | 19,613,358 | | Advancestoformeremployees | 2,216,487 | | CommunityBased Organizations | 782,283 | | TOWAPSIAdvances | 53,088,338 | | Total | 81,560,092 |

CommitteeObservationsandRecommendations

The Committee upholds theobservations andrecommendations madein22ndReport and similarlyinitsreportforthefinancialyear2020/2021.

3.UnresolvedPriorYearMatters

• 54.The committee was informed that in the audit report ofthe previousyear,several issues were raised under the Report onLawfulness and Effectiveness in Use of Public Resources. However,theManagementhasnotresolved theissues as at30June,2024.

Management Response

• 55.Themanagementinformed thecommittee thatNSDCCacknowledgestheissuesraised and hasimplemented theAuditor-General'srecommendationsunderthereport onlawfulness and effectivenessintheuseofpublicresourcesunder thefinancialyear2022/2023AuditorGeneral'sreport.

CommitteeObservations

Thecommitteeobserved that thefinancialstatementswereincompletesincetheunresolved prioryearissueswerenotdisclosedintheprogressonfollow-upofauditors'recommendations section of thefinancialstatements,asrequired by thePublicSectorAccountingStandards Boardreportingtemplate

CommitteeRecommendations

ThecommitteereprimandsthethenAccountingofficerforbreachofsection81(3)ofthePFM Act CAP 412A,which provides that the accounting officer shallprepare the financial statementsinaformthatcomplieswiththerelevantaccountingstandardsprescribedand publishedbytheAccountingStandardsBoardfromtimetotime.

4.Missed Performance Targets

• 56.Review of the Council'sperformancerevealed thatReduction of NewHIVInfections,Sexual YoungPeople(10-24years)had a targetoffive thousandeighthundredand forty-seven hundred and seventeen (817).Further,Access to Government Procurement Opportunities (AGPO)had a targetofKshs.185,100,00butonlyKshs.129,800,000wasachieved,resulting

inamissed target ofKshs.55,300,000.Inthe circumstances,theCouncilmaynot achieveits strategic mandate.

ManagementResponse

• 57.The management informed that themanagement acknowledges the audit finding on the missed targetandwishestorespondasfollows:
• i.TheNSDCC targeted toachievea 20%reductionin thenumberofnewHIVInfections amongadolescents andyoungpeopleaged10-24yearsfrom7,308to5,847.NewHIV infections among adolescents andyoungpeople aged10-24yearsreducedfrom7,308 to5,030,translating toa 31%reductioninnewinfections.Therefore,this targetwas exceeded.Pleaserefertothelinkfor the2023HIVestimates,whichhadnotbeen validated atthetime ofthe audit.
• ii. TheNSDCCacknowledgesfailure tomeet theAGPO target.Thiswasasresult of revenue shortfallamountingtoKsh383,238,062during the financialyear.This affectedtheabilityofthecounciltomeettheAGPOtarget.

CommitteeObservations

The Committeeobserved that;

• i.TheNSDCChad targeted toachievea20%reductioninthenumberofnewHIV However,newHIVinfectionsforthegroupreducedfrom7,308to5,030,translating to a 31%reduction in newinfections and thus the target was exceeded.
• i.Access to GovernmentProcurement Opportunities(AGPO)figure was provisional yet thefinancial statementswereprepared after theclosure ofthefinancialyear thusthe managementresponseismisleadingimplyingnon-compliancewith section 157(10) ofthePublicProcurementandAssetdisposalActCAP412CandSection30ofthe PFMActCAP412A.
• iii. NSDCCdidnotprovidethelistofthe companies,and theamount wasawarded to eachunderAGPOprocurementstothecommittee.

CommitteeRecommendations

the thenAccountingOfficer,theprocurement Officer and anyother officer found culpable forbreachofSection157(10)ofthePublicProcurementandAssetdisposalAct CAP412C andSection30ofthePFMAct CAP412AwhichisanoffencepunishableunderSection199 of thePublicFinanceManagementAct CAP412A.

5.FailuretoSubmit CarLoanandMortgageFinancial Statements

• 58.The Committeewas informed that the statement offinancial position,as disclosed inNote15 to thefinancial statements,reflects a cash and cash equivalents balanceofKshs.334,025,084. IncludedinthebalanceisKshs.3,295,269forthestaffmortgagescheme andanilbalancefor the carloan scheme,both managed by a bank.However,thefinancial statements for thecar loan andmortgagescheme werenotprovided forauditverification.Thiswas contrary to Regulation 101(4)PublicFinanceManagement(National Government)Regulations,2015 which states that anAccounting Officershall prepare thefinancialstatementsin aform that complieswith therelevant accountingstandardsprescribedby thePublicSectorAccounting StandardsBoard,notlater than three(3)months after theendofthefinancia!yearandsubmit them to theAuditor-Generalwith a copy to the County Treasury,the Controller ofBudget and theNational Treasury.In the circumstances,Management was in breach of thelaw.

ManagementResponse

• 59.Themanagementinformed the CommitteethatNSDCCacknowledges theneed toprepare NSDCC's car andmortgagefinancial statements.The council hasprepared and submitted financialstatementsforthecarloan andmortgageschemefor audit.

CommitteeObservations

• i.The Accounting Officer wasin breach of Section 68(2) (k) of the PublicFinance Management ActCAP412 thatrequires the Officer toprepare annual financial statementsforeachfinancialyearwithin threemonths after theendofthefinancial year,and submit them totheControllerofBudgetand theAuditor-Generalforaudit, andin the caseofanationalgovernmententity,forwarda copy totheNational Treasury.

• ii.The balance of Kshs.3,295,269 and its genesis,that is Car loans and mortgages disbursed tothestaffwerenot accounted for.

CommitteeRecommendations

• i.Within three months upon adoption of this report,the Accounting Officer should prepare andsubmit areport to theNationalAssembly and theAuditor-General on the carloans andmortgagesdisbursed tothestaff duringtheyearsofoperationforreview. TheAuditor-General shouldreview and report thefindings in the subsequent audit cycle.
• i.The Committeereprimands the thenAccounting Officer and the thenFundAdministrator forbreachof Section 68(2)(k)ofthePublicFinanceManagementAct CAP412.

6.UnderstaffingoftheCouncil

• 60.The Committeewasinformed that duringtheyearunderreview,the Council had an approved establishment oftwohundred and thirty-nine(239)membersof staff.However,only one hundred and forty-six(146)were in postresulting to the understaffingby ninety-three(93) positions.Inthecircumstances,the effectivenessofthe Council with the existingstaff deficits couldnotbeconfirmed.

ManagementResponse

• 61.The management informed the committee that it concurs with the Auditor-General's observation.Tomitigate thegapidentified,theNSDCCrequestedandwasgranted authority by theNationalTreasury to fill thirty(30)prioritypositions to ensure effective delivery service.Currently,theCouncilhasfilled166ofthe239approvedstaffestablishmentpositions andwillprogressivelycontinuetofill theremainingpositionsuponthe availabilityof budget andrequisiteapprovals.

Committee Observations

TheNSDCCismainlyfundedby the exchequer forits operationswith no other reliable own source offunding.However,the Council didnot justifywhetherbudget estimates did at any point intimeprovideforproposedrecruitmentsandtherespectivesalaries.

CommitteeRecommendations

Within threemonthsupon adoption of thisreport,theAccountingOfficer shouldprovidea statusreport to theNationalAssemblyon theunfilledstaffestablishment andrecommended waysoffillingit,aswell astheapprovedsourceoffundingforthecostof therecruitedstaff salariesand allowances.

EXAMINATIONOFTHEREPORTOFTHEAUDITOR-GENERALONTHE AUDITEDACCOUNTSOFTHENATIONALSOCIALSECURITYFUNDFOR THEFINANCIALYEAR2021/2022.

Mr.David Koross,Managing Trustee/CEO National Social Security Fund was accompanied by Ms.Mr.Ronald Nyamosi (General Manager Finance),Marietta Mutinda (FinanceManager),Mr.PeterMuiruri(ManagerPropertyDevelopment)and Ms.CarolyneMutunga(MarketingOfficer)appeared before the Committeeto adduce evidence ontheAuditedaccountsofNational Social SecurityFundfortheFinancialyear 2021/2022.

FINANCIALYEAR2021/2022

1.Variancesinopeningbalances

• 62.The Committeeheard that theopeningbalancesfor two(2)itemsreflect a total ofKshs.323, 024,763,while the auditedclosingbalances reflected a totalofKshs.323,161,185for the sameitems,resultinginanunreconciledvarianceofKshs.136,422asshownbelow:

| Item | 2021/2022Financial StatementsBalance (Kshs.) | 2020/2021Financial StatementsBalance (Kshs.) | Variance (Kshs.) | |-------------|------------------------------------------------|------------------------------------------------|--------------------| | Staff Loans | 230,590,974 | 232,727,396 | (2,136,422) | | OtherIncome | 92,433,789 | 90,433,789 | 2,000,000 | | Total | 323,024,763 | 323,161,185 | (136,422) |

• 63.In the circumstances,the accuracy and completeness of the comparative balances the staff loans and otherincomecouldnotbeconfirmed.

Managementresponse

• 64.Themanagement informed the Committee that,during the2020/2021audit,otherincome was adjusted aftera castingerrorwas discoveredand theadjustedfinancial statementsbearing the corrected figures(as indicatedin 2021/2022 openingbalances)were submitted on 27h May,2022.StaffLoansfigureremainedKshs230,590,974meaningtherewasnodifference in closing and openingbalancesfor both years.
• 65.TheFundnoted thatcertificationwas done toanearlierversionreceived by theAuditor on 23May2022 that bore theKshs90,433,789.00instead ofKshs.92,433,789while thefinal amendedstatementswerereceivedon27May,2022.Duringthepreparationof2021/2022, the correct balancewas picked for accuracy and consistency.

Committeeobservation

Thecommitteeobservedthat-

• i.Theunreconciledvariance ofKshs.136,422between opening and audited closing balances indicated a non-compliance with IPSAS 1(Presentation of Financial Statements),which requires that openingbalances of the current period must align with the closingbalances of thepreviousperiod.This discrepancy compromised the integrity offinancialreporting.
• ii. The difference wasasaresult of acasting error discovered,adjustmentswere madein financial statementsin2021/2022openingbalancessubmittedon27May,2022,but theauditorsbasedtheirreportonfinancialstatementssubmittedearlier and audited beforethesaid adjustmentswereaffected,and thusthevariance.However,thisimplies thatNSSF did notcommunicate the changes to the auditors,and therefore,the adjustmentswerenotverifiedfor authenticity.

CommitteeRecommendations

Thecommitteerecommendsthat-

The Committee reprimands the then AccountingOfficer for failingto appropriately communicatetheamendmentstothefinancialstatementstotheAuditor-Generalforaudit reviewand eventualreporting,leading tounreconciledbalances that are questionable to the Auditor-General.

2.0UnsupportedSalariesandAllowances

• 66.The Committeeheard that thestatementofchangesinnet assets availableforbenefitsreflects thestaffcostofKshs.3,839,298,069asdisclosedinNote 13 tothe financialstatements. Includedin the staffcosts are salaries and allowances amounting toKshs.3,117,840,121. However,the supportingledgersreflectan amountofKshs.3,145,463,745resulting to an unreconciledvarianceKshs.27,623,624.
• 67.Inthecircumstances,the accuracy ofsalaries and allowances ofKshs.3,117,840,121not be confirmed.

Managementresponse

• 68.Themanagementinformed theCommittee thattheamountofKshs.3,145,463.745captured in the audit report isnot thecorrectfigurein thefinal audit schedules.The correct arount is Kshs.3,143,774,532.85.TheamountofKshs.3,143,774,532.85includesanamountofKshs. 44,707,264.06,whichrelatestomealallowance,accountedforunderNote14(AdminCosts), leavingabalanceofKshs3,099067,89,whichispurestaffcosts.Inaddition,therearestaff relatedcoststhathavebeenprocessed throughjournalentries,amountingtoKshs18,772,852.
• 69.Therefore,thetotalstaffcosts areasummationofKshs3099,067289and18772,852,giving atotalofKshs3,117,840,121
• 70.Inviewof the above,theAuditors'computedvariance doesnotcompare thecorrect numbers. ThemakeupofstaffcostsofKshs3,117,840,121isassummarizedinthetablebelow:the management confirms that thereisnounreconciledvariancebetweenthestaffcosts and the payroll schedules.

Committeeobservation

TheCommitteeobservedthat-

Salariesand allowancesconsistedofexpenditure itemsinthepayrolland adjustmentsposted fromfinanceforitemsnot originatingfrompayrollsuchasfinal dues,transport allowances for staff on transfer,among others,leading tovariances asnoted by the auditors.However, theNSSFmanagement ought tohave madepayments through the payroll for taxpurposes, anda properexplanationgiven to the auditors during the audit.Failure togiveanexplanation totheauditorsduringthe audit amountedto derelictionofduty,punishableundersection 62 ofthePublicAuditActCAP412B.

CommitteeRecommendations

The Committeerecommendsthat-

The Committeereprimands the thenAccounting Officer forderelictionofdutypunishable undersection62ofthePublicAuditActCAP412B.

3.0Non-PerformingInvestmentinUnquotedEquities

• 71.The Committee heard that the statement ofnetassets available for benefitsreflects the unquoted stocks balance of Kshs466,465,299as disclosedin Note 27 tothe financial statements.Included in the balance areinvestmentsin three(3)companies which had not declareddividendsoninvestmentsworthKshs.408,752,504asshownbelow;
• 72.TheFund continues tohold investmentswithnoreturn byway ofdividendsorcapital appreciation.Thecarryingvaluation for theinvestment in the three companies has notbeen determined.

| Company | NoofShares | Value | |--------------------------------------------|--------------|-------------| | ConsolidatedBankOrdinaryShares | 2,225,000 | 86,694,264 | | Consolidated4%CumulativePreference Shares. | 8,050,000 | 161,000,000 | | UAPHoldingsLimited | 1,116,460 | 161,058,240 | | | 11,391,460 | 408,752,504 |

• 73.Inthe circumstances,the accuracy and fair valuation ofthe unquoted stockscould not be confirmed.

Managementresponse

• 74.Themanagementinformed the Committee that the unquoted stocks are notfor sale,hence
• 75.TheFundhasbeenmonitoringtheperformanceof ConsolidatedBankwithaviewto divesting.ConsolidatedBank tabledaturnaroundstrategytoshareholders,whichhingesupon recapitalisationforthebanktoreturn toprofitability.Thebankhasindicatedthatdiscussions willbeheld with shareholders and theFund,alongside the appointedFund Manager,Old MutualInvestment Group,isexploringvariousexitoptionswhichwillbeoptimalforthe Fund.

Committeeobservation

TheCommitteeobservedthat-

• i.TheFund continues to hold investments withno return by wayof dividends or capital appreciation,and therefore,thevalue for money on theinvestment isworth Ksh 408,752,504hadnotbeenachieved.The marketvalueof theseinvestmentshasbeen erodedby theinflationaryeffectsin theeconomywithoutanycorrespondinggainin termsofinterestorcapitalgains.
• ii. The Committeefurthernoted thatmanagementholdingnon-performinginvestments contradicted theprinciplesofsoundfinancialmanagementandprudentuseofpublic resourcesasoutlinedinArticle201(d)oftheConstitution.

CommitteeRecommendations

The Committeerecommendsthat;

• i)Within three months upon adoption of thisreport,the Accounting Officer and the BoardoftheFundshouldreviewitsinvestmentpolicytoalignwiththeprinciplesof soundfinancial management and prudent useof publicresources as outlined inArticle 201(d)ofthe Constitution and theNSSFAct.Acopyoftheapprovedinvestment

• policyshouldbesubmitted totheNationalAssemblyandtheAuditor-Generalwithin thisperiodforreview.
• i)Within threemonthsupon adoptionof this report,theBoard and theAccounting Officershould initiate therecoupmentoftheFundofKshs.408,752,504investedwith noreturns and submit areportwithin thesameperiodtoNationalAssemblyof the status andevidence ofrecoupment or steps taken.
• ii)Within three months upon adoption of thisreport,the National Assembly should amend thePFMAct,CAP412A and the attendantRegulations tocreate aprovision that anyofficerwhoinvestsrecklesslyto theeffectthat theinvestmentresults intoloss ofpublicfunds,tobeheldpersonallyliablefor the lossinCapital investedand the interestthatwouldhavebeendeemed toaccrueattheCBKprevailingrates.

4.0Investment inNon-PerformingQuotedEquities

• 76.The Committeeheard that thestatement ofnet assets availableforbenefits and as disclosed inNote28to thefinancial statementsreflects abalanceofKshs.57,804,630,700representing the Fund's investment in quoted stocks.Included in the balance is Kshs.221,601,474 for shares held bytheFund,three(3)quoted as detailed below;
• 77.Areviewof thestatusofinvestmentinquoted stocksconfirmed that theFundentered into contractualagreementswithsix(6)FundManagersnamely;OldMutualAssetManagement (K) Ltd,CIC Asset Management Ltd,Sanlam Investments EA Limited,Gen Africa InvestmentManagement Limited,African AllianceAsset Management Limited and Coop Trust Investment ServicesLimited.The Fund Managerswere tohave fullcontrol and

| Company | NoofShares | PriceasatJune2022 | Value | |-----------------------------|--------------|---------------------|-------------| | Athi RiverMining | 2,957,500 | 5.55 | 16,414,125 | | East AfricanPortland Cement | 24,300,000 | 8 | 194,400,000 | | SameerAfrica | 2,838,776 | 3.8 | 10,787,349 | | Total | | | 221,601,474 |

• unrestrictedpowertoinvesttheFund'smoney aspertheinvestmentpolicyformaximum returns totheTrustees.
• fromtheNairobiSecuritiesExchangeaftermorethan twoyearsunder administrationwhich failed toreviveits operations.Moreover,thecompany's stockwas suspended from trading ontheNSEindefinitely,effectiveMay8,2020.Further,theEastAfricanPortland Cement Companyrevenueshavebeen declining offsettinggainsfromreducedcostofsalesand the Kenya Commercial Bankattacheda debenture toall the Company's assets ina demand for therepayment of an outstandingKshs.6billion.
• 79.In addition,SameerAfrica revealed through its 2020annualreport that it declared107 positionsredundant,translatingtooverKshs.245millioninstaffcostsavingsinabidtocover losses.In August 2022,Sameer Africa issued a profit warning for the year ending 31 December 2022,citing global disruption in its supply chain,which then impacted the availabilityofkeyproductsforitstyrebusiness.
• 80.In thecircumstances,theaccuracy andfairvaluationof andfairquoted investment ofKshs. 221,601,474in three(3) companiescouldnotbeconfirmed.

Management response

• 81.Themanagementinformed theCommitteethatthevaluationofKshs221,601,474wasbased onthesharevalueasat30thJune2022.

a)Athi RiverMining

• 82.Fund Managers attempted todivest from Athi RiverMiningbefore itwas delisted,and a provisionhasbeenmadeinthe2023/2024financialstatements

b)Sameer

• 83.TheFundheld an investment in Sameervalued at Kshs.2.8million as at 30thJune,2024.Over the last three years,Sameer Group has restructured its operations to shut down tyre manufacturingand concentrate onpropertyletting.InFY2024,Grossprofitgrewby4.8%to Kshs.373MillionwhileNetprofit increasesbyover100%fromKshs.42.2Million toKshs. 262.9million.

• 84.TheFund has asked theFund Managers tocloselymonitor theperformance of the company with aviewtoprofitable divestingfrom the investment.

c)EastAfricanPortland

• 85.TheEastAfricanPortland share currently hasbeen on therise from a low of 7.82per share on31/8/2024toKshs.40.25pershare in31/3/2025.
• 86.The Company'sperformance currently hasbeenrisingwithits declaration of thefirst dividend ofKshs.1per share in13yearson28April,2024.TheFundreceivedKshs.24,300,000

Committeeobservations

TheCommitteeobserved that-

• i.Despite theFund delegatinginvestment authority to sixFundManagers,there appears tobeinadequate oversight,monitoring,andevaluationmechanisms to ensure that Fund managerscomplywith theinvestmentpolicy.
• ii. TheFundcontinuestoholdinvestmentswithnoreturnbywayof dividendsorcapital appreciation andthereforethevalueformoneyontheinvestmentworthyKshs. 221,601,474hadnotbeenachieved.Themarketvalueof theseinvestmentshasbeen erodedbytheinflationary effects,delistingofthe companyinthecapitalmarkets s
• ii. The Committeefurthernoted thatmanagementholdingnon-performinginvestments contradicted theprinciplesofsound financialmanagementandprudentuse ofpublic resourcesasoutlinedinArticle20l(d)oftheConstitution.
• iV. Although theFund had indicated thatmanagement(NSSF)had asked the Fund Managerstocloselymonitortheperformanceofthecompanywithaviewtoprofitable divestingfrom theinvestment,nomonitoringreportwasprovidedto theCommittee to confirm the status.

CommitteeRecommendations

TheCommitteerecommendsthat-

• i.Within three monthsupon adoption of this report,the Accounting Officer and the Boardof theFundshouldreviewitsinvestmentpolicytoalign to theprinciplesof soundfinancial management andprudentuseof publicresources as outlined inArticle 201(d)oftheConstitutionand theNSSFAct.Acopyof theapprovedinvestment policyshouldbesubmitted totheNationalAssembly and theAuditor-Generalwithin thisperiodforreview.
• ii. Within three monthsupon adoption of thisreport,theAccountingOfficer should submittotheNationalAssemblyandtheAuditor-Generalthemonitoringreport indicating the conclusionsandrecommendationsmadeby theFund managers.
• ili. Within three monthsupon adoption of this report,theBoard and the Accounting Officershould initiatetherecoupmentoftheFundofKshs.408752,504investedwith noreturnsandsubmitareportwithinthesameperiodtoNationalAssemblyofthe statusandevidenceofrecoupment orstepstaken.
• iv. Within threemonthsupon adoptionof thisreport,theNationalAssembly should amend thePFMAct,CAP412Aand theattendantRegulations to create aprovision that any officerwhoinvestsrecklesslytothe effect that theinvestmentresultsintoloss ofpublicfunds,tobeheldpersonallyliableforthelossin Capitalinvested and the interest thatwouldhavebeendeemed to accrue attheCBKprevailingrates.

5.0Non-PerformingInvestment inHazinaPlaza-PolanaMombasaBuilding

• 87.The Committeeheard that thestatementofnet assets availableforbenefits andas disclosed inNote 29to the financialstatementsreflectsaninvestmentpropertybalanceofKshs. 35,414,340,317,whichincludesanamount ofKshs.425,000,000inrespecttoHazinaPlaza Polana Mombasa building.Reviewof thevaluationreport forJune,2022revealed that the property was purchased at a cost on Kshs.450,000,000 in the year1994 andits value appreciatedtoKshs.530,000,000as at30June,2021.However,thevalue reduced toKshs. 425,000,000 during the year under review resulting to an impairment loss of Kshs. 105,000,000.
• 88.Further,physical inspection inFebruary,2023revealed that thebuildingwasvacant andin a dilapidated state.Thelessees and tenants,whowereevictedon18March,2019fordefault in

• rent,hadextensivelyvandalizedthepropertyclaimingthattheyhadinstalledmostoftheitems prior totheiroccupation.
• 89.In the circumstances,the accuracy and fairvaluation of investment inHazina Plaza-Polana MombasaBuildingvalued atKshs.425,000,000could not beconfirmed.

Managementresponse

• 90.TheFund carries open marketvaluation of allitsinvestment properties at the endofevery 425,000,000.00,comprising thevalue of landand thevalue of theimprovement (building) duringtheyear under review.Thevalue is believed tobe authentic and accurate since the valuationwas conductedby aregisteredprivatevaluer.
• 91.To unlock value out of thisproperty for thebenefitofthemembers,Management has commencedrefurbishmentoftheproperty,whichisexpected tobefinalisedinthe2025/2026 financialyear,afterwhich thepropertywill startgeneratinginvestmentreturns.

Committeeobservations

TheCommitteeobserved that;

• i.Thematter had been discussed in thepreviousPIC22nd and 23rdreports;
• ii. TheFund did notinvolvetheStateDepartmentof PublicWorkswhen contractingM/s TechnoHoldingsLtd torenovate thebuilding.The scope ofrenovationswasnot documented and agreedupon anywhere,thus opening aloopholeforthe tenant toarm twisttheFundonthecostofrenovations.
• ili. NSSFwon thecourt caserelatingtothe ownershipofHazinaPlaza-PolanaMombasa Building;
• iv. Thepropertywaspurchasedby theBoard of Trustees in1992atKshs.450,000,000 andhadanetbookvalueofKshs.530,000,000 as at30June2020;
• V. Thebuildingwas advertisedfor saleon3rSeptember,2009,atKshs.300million reservedprice,butthebidsreceivedwerebelowthereserveprice.Itwasnotclearwhy thereservepricewasplaced toolow,yet the land on which the hotelis situated had appreciatedinvalueovertime.Thebasisuponwhichthereservepricewasdetermined

wasnotprovided totheCommitteeforreview,and thedevaluationof theproperty wasskewedtofavor acertainbidder.

• Vi. Thevaluationreportfrom theMinistryofLands,PublicWorks,HousingandUrban Developmentasatthetimeofadvertisementwasnotprovidedforaudit.

CommitteeRecommendations

Within three months upon adoption of thisreport,theAccounting Officer (NSSF)should prepareandsubmitvaluationreportofHazinaPlaza-PolanaMombasaBuilding tothe NationalAssemblyand theAuditor-Generalforreviewandreportinginthesubsequentaudit cycle.

1.0Misstatementofassetsunderconstruction

• 92.TheCommitteeheard thatthestatementofnet assets availableforbenefitsreflects assets under construction,withabalance ofKshs.154,985,746asdisclosedinNote 30to the financial statements.Thebalanceisnetoffan amountofKshs.105,158,476reportedunder the Tassia Scheme,which relates to costsincurredby the Fund in undertaking feasibility studies on the TassiaInfrastructureProject.TheProjectwas terminated by theBoard,and therefore,the costs havebeenimpaired.However,noadjustmentshavebeen madebyway of write-offstorecognisetheimpairment.
• 93.In the circumstances,the accuracy and completeness of the assetunder constructionbalance ofKshs.154,985,746couldnotbeconfirmed.

Managementresponse.

Themanagementinformed theCommitteethatthefinancial statementshavebeenamended toinclude animpairment to theTassiaInfrastructureProjectcost.

Committeeobservation

TheCommitteeobservedthat-

• i.Although, the current audit issue entails the impairment of the project and no adjustmentshadbeenmadebywayofwrite-offstorecognizetheimpairment,the

PublicInvestment Committeeinits24Reporthaddeliberatedontheissueinrespect of delayinprocessing ownership documentsforpersonswhohadacquired interest in the project..

• i.The project did not take off as planned.

CommitteeRecommendations.

The Committeerecommendsthat;

• i.The Committee reiterates therecommendations made in the PIC 24Report that the ManagingTrusteeforNSSFshouldensurethatall thelandrelatedissueshavebeen resolved byisolatingthosewithproblems andhaving them addressed.
• ii. TheCommitteeonImplementationshouldfollowupontheimplementationofpast PICsrecommendations.

7.0UnconfirmedTaxReceivables

• 94.The Committeeheard thatthestatementofnetassets availableforbenefitsreflectsreceivables andprepaymentsbalanceofKshs.7,465,104,760asdisclosedinNote 23to thefinancial statements.Thebalanceincludes thetaxreceivables amountofKshs.935,901,481relatingto taxrefundcomprisingoverpaid taxofKshs 493,257,328andKshs 411,646,389totalling Kshs.904,903,717inadvertently paid to theKenyaRevenueAuthority(KRA) in 1997after theFund becameincome tax exempt in1996.The taxrefund duefrom theKenya Revenue Authoritywasnot supported by an acknowledgementfrom theKenyaRevenueAuthority. Further,thebalance includes an amount ofKshs.24,502,894relatingto taxoninterestearned from bankbalances andlow interest taxofKshs 6,494,870credit,which has not been explained.
• 95.In the circumstances,the accuracyandfair statement of the taxreceivablesbalanceofKshs 935,901,481couldnotbeconfirmed.

Managementresponse

• 96.Themanagementinformed theCommittee thattheFundhasalong-standingtaxreceivable amounting to KES904,903,717,whichremains due from theKenya Revenue Authority (KRA)asanunresolvedrefund.Thisoutstandingamounthasbeen thesubjectofanaudit

query from prior financial years,in which the Public Investments Committee (PIC) recommended thatKRA settle therefundwithinsixmonths.Furthermore,aHighCourtruling issuedin2016affirmedthevalidityof thisrefundclaim.

Committeeobservation

The Committeeobservedthat-

Thematter onTaxreceivableswas addressedinthePIC19and24Reports,wherethe Committeerecommended thattheKenyaRevenueAuthority shouldrefund NSSF the overpaid tax ofKshs.904,903,717.However,the tax refund due was not supported by an acknowledgement from the Kenya Revenue Authority,and therefore,the refund is still outstanding.

CommitteeRecommendation

The Committeerecommendsthat-

Within threemonths uponadoptionof thisreport,the Commissioner General,KenyaRevenue Authority,shouldprepareandsubmittotheNationalAssemblyastatusreportpertainingto the taxrefund amountingtoKshs.904,903,717.

OtherMatter

1.0Budgetary ControlandPerformance

• 97.The Committeeheard that the statement of comparisonof budgetand actuai amountshad an approved finalincome budget of Kshs.40,917,524,668against actualreceipts of Kshs.8,702,000,710resulting in an under-receipt ofKshs.32,215,523,958 or 79%of the approvedbudget.Similarly,outofthe approvedfinalexpenditurebudgetof Kshs. 7,498,213,976,theFundrealizedan actualexpenditureofKshs.7,466,114,440leading to an under-expenditureofKshs.32,099,536approvedbudget.
• 98.Theunder-utilisation of approvedbudget andunder-receipt ofrevenue mayhavenegatively affected service delivery.

Managementresponse

Revenue

• 99.Themanagementinformed theCommittee that theperformanceunderreview fortheFund, likeall other entities,wasgenerally affectedbythe COVIDpandemic,aseconomicrecovery onlycameintorealisationpost2022.
• 100.The underperformance in total incomeismainly onaccount of contributions,realisedlosses, andFairvalue losses oninvestments.The Contributions underperformed thebudget dueto thedelayedimplementation of theNSSFAct,whichhadfactored in highercontributionrates. Theunderperformanceofinvestmentincomewasonaccountofthepoorperformanceof investments ingovernment bonds and quoted equities,resulting in realised losses.

Expenditure

• 101.The Fund budgeted to spend a total ofKshs.7,498,213,976in the same period,and actual expenditurewasKshs.7,466,114,440,or0.43%belowtarget.

Committeeobservation

TheCommitteeobservedthat-

• i.Theunder-performance of 79%inincome against the approved budgetindicated unrealisticor over-optimisticrevenueprojections.TheFund based itsprojections of revenue and expenditure onweakassumptions and hence substantiallymissed the budgetarytargets.
• ii. The under-expenditure on some budget itemsaffected theplanned activities and negativelyimpacted the service delivery to the public/beneficiaries.

CommitteeRecommendations

The Committeerecommendsthat-

The Committeerecommends that theAccountingOfficer shouldensureat all times that the budgets arerealistic,achievable,and always adhereto annualworkplans,procurement plans, andrevenuecollectionschedulesincompliancewithRegulation44(2)ofthePFM(National Government)Regulations,2015

2.0UnresolvedPriorYearMatters

• 102.The Committee was informed that in theaudit reportof theprevious year,anumber of yearmattersasprovided by thePublicSectorAccountingStandardsBoard(PASSB)reporting templates.Management hasnotprovideda satisfactory explanationfor the delayin resolving theissues.

Managementresponse

• 103.Themanagementinformed theCommitteethat theFundisin theprocessofaddressing the issuesraisedinprevious audits.Resolved andoutstandingissues havebeen disclosed in the revisedfinancialstatementsinaccordancewiththePublicSectorAccountingStandards

Committeeobservation

The Committee observed that thefinancial statementswereincomplete since theunresolved prioryearissueswerenotdisclosedintheprogressonfollow-upofauditors'recommendations section ofthe financial statements,asrequiredbythePublicSector AccountingStandards Boardreportingtemplate.

CommitteeRecommendations

Thecommitteereprimands the thenAccountingOfficerforbreachofsection81(3)ofthe PFMAct CAP412A,whichprovides thattheAccountingOfficershallprepare thefinancia! statementsin aform thatcomplieswith therelevantaccountingstandardsprescribedand publishedbytheAccountingStandardsBoardfromtimetotime.

1.0Non-Compliancewith theNationalSocialSecurityFundAct,2013

• 104.The Committeeheard thatthestatementofnet assets availableforbenefitsreflectsinvestment management expensesofKshs.615,789,515andoperating costsofKshs.6,850,324,926all totalling toKshs.7,466,114,441or2.6%of the Fund's net assetsofKshs.285,722,864,940 as at30June2022.
• 105.TheFund'stotalExpensesexceededtheallowablelimitofKshs.5,714,457,299(2%ofFund assets)byanamount ofKshs.1,751,657,142or0.6%.This wascontrary to section50(1)of

theNational Social SecurityFundAct,2013,which stipulatesthat thetotal expensesfor the administrationoftheFund shouldnotexceedtwopercentof theFund's assets.

106.In the circumstances,theFundwasinbreachof thelaw.

Managementresponse

• 107.ThemanagementinformedtheCommitteethat thecostratiowaspremisedonthefact that newratesunderNSSFActNo.45of2013weretotakeeffectin2014andgrowtherevenue, thereby growing theFund'snetassets.Immediately after2014,some sectionswere taken to court,stoppingimplementation.
• 108.Thelawrequired theFund administration expenses tobeatbelow2%of theFundvalue at theendof1yearofimplementation and thenprogressivelygodown to1.5%attheendof the5year.Newrates came into effect inFebruary 2023,and theFund projects that by FY 2023/24,which is the1yearofimplementation,theFundwillhave achieved the target of 2%.

Committeeobservation

The CommitteeobservedthattheissueonNon-CompliancewiththeNationalSocialSecurity FundAct,2013wasdeliberatedinitsReportforthefinancialyearending30June,2021and upholdstheobservations andrecommendationsthereinasfollows;

Committeeobservation

• a.TheNSSFAct2013 thatcommencedin2014oranycourtrulingdoesnot provide for suspension of the rate ofexpenditure of (1.5%)theFund's net assetsin thesixthyearfollowingthecommencementdate.
• b.Theaccounting officer's statement that therewerenewrates that came toeffect inFebruary2023andtheFundprojected thatbyFY2023/2204whichwasthe 1year ofimplementation,it will have achievedher targetof 2%was an invalidexplanationforbreachofthelawintheyear2021/2022asthenew rateswerenotapplicablethen.
• c.NSSF exceeded the allowed rate of expenditure of 1.5%by Kshs, 2,831,002,450intheyearofaudit2021/2022.

CommitteeRecommendations

Thecommitteerecommended that-

The Committeereprimands the thenAccounting OfficerforbreachofSection50of the NationalSocialSecurityFundAct,2013whichstipulates those expensespaidoutoftheFund shallnot exceed twoper cent(2%)of the total Fund assets in the firstyear from the commencement date and thereafterbereduced andcapped at one and ahalf percent(1.5%) in thesixthyearfollowingthe commencementdate.

2.0Actingpositionsbeyond the allowableperiod

• 109.TheCommitteeheard thatthestatementofchangesinnet assetsavailableforbenefitsreflects anexpenditureofKshs.3,839,298,069relatingtostaffcostandasdisclosedinNote13tothe financial statements.Includedin the expenditure is an acting allowance ofKshs.10,733,021 incurred on Officersinvarious actingpositionswithin theFund.However,itwasnoted that some of the staff,includingSeniorManagement,holding the actingappointments,hadserved formore thanoneyear.ThisiscontrarytotheprovisionsofSection34(3)ofthePublicService CommissionAct,2017,whichstatesthatanOfficermaybe appointedinan actingcapacity for a period of at least thirty(30)days but not exceeding a period of sixmonths.
• 110.In thecircumstances,theManagement wasin breach of the law.

Managementresponse

• 111.Themanagement informed the Committee that theFund acknowledgestheconcernregarding actingappointmentsbeyond the stipulated timeframeunder Section34(3)ofthePublic Service CommissionAct,2017.TheFundpreviouslyundertookrecruitment effortsin2014 and 2021 tofill theaffectedpositions.However,bothprocesses were halted due to court injunctions,preventing the finalization of appointments.In compliance with the court directive,the Fund submittedall HumanResource Instruments to the Public Service Commission(PSC),whichapprovedtheminSeptember2022

• 112.Following this approval,the Boardinitiated therecruitment process,successfullyhiring a substantiveManagingTrustee/CEO,all GeneralManagers,Managersandstaffatentrylevels, andis at an advancedstageininternal upwardpromotions tofullyregularizestaffing.

Committeeobservation

TheCommitteeobservedthat-

The then Accounting Officer was in breach of section 34 (3)of the Public Service Commission Act,CAP185,whichrequires that an officer may be appointed in an acting capacityforaperiodnotexceedingsixmonths.

CommitteeRecommendations

TheCommitteerecommendedthat-

• i)The committeereprimands the thenAccountingOfficersforbreachof section34(3)of thePublicServiceCommissionAct,CAP185.
• i)Within three months upon adoption of this report,the Inspector General of State Corporations to surcharge and recoverfrom the thenAccounting Officer(s)and Board members,the moniespaid as actingallowances beyond the stipulatedperiod of six months.

3.0Non-compliancewith theUnclaimed Financial AssetsAct,2011

• 113.The Committee heard that the statement ofnet assets availableforbenefitsreflectspayables andaccruals balance ofKshs3,592,512,207andas disclosed inNote 32 to the financial statements.Thebalance includes returnedbenefits totalingKshs.166,826,982representing unclaimedmemberbenefitsthathavebeenoutstandingforalongperiodoftime,which ought tohavebeenreportedandsubmitted totheUnclaimedFinancialAssetsAuthority.
• 114.Thiswas contrarySection 20(2)of theUnclaimedFinancialAssets Act,2011 that requires a personholding assetspresumed abandoned andsubjectto the custodyof theAuthority as unclaimed assets under thisAct shouldmake areport and at the time offilling thereport pay ordeliver to,orhold tothe orderoftheAuthority allabandoned assets.In the circumstances, theFundwasinbreachofthelaw.

Management response.

• 115.The amountofKES166,826,982relatestopaymentsmade toclaimantsbefore2012,which bouncedbackduetovariousreasons.Overtime,beneficiarieshavecontinuedtoclaimand receivetheirrightfulbenefits,progressivelyreducingthe outstandingbalance.
• 116.TheFundholdstheseamountsintrust,governedundertheNSSFAct Cap258,whichdoes not allowthetransferofmemberfundstoanotherentity.

Committeeobservation

TheCommitteeobservedthat-

TheFundfailedtoreportandremitunclaimedmemberbenefitsamountingtoKshs. 166,826,982totheUnclaimedFinancialAssetsAuthority(UFAA)contrarytoSection20of theUnclaimedFinancial AssetsAct,CAP494.

CommitteeRecommendations TheCommitteerecommendedthat--

• i.TheAccounting Officershould atall times complywith theprovisions ofSection 20oftheUnclaimedFinancialAssetsAct,2011.
• ii. Within threemonths upon adoptionof thisreport,theAccountingOfficershould submittotheNationalAssemblyand theAuditor-Generalareportonthecurrent statusofunclaimedmemberbenefitsthathavebeenoutstandingforalongperiod buthavenotbeensubmittedtotheUnclaimedFinancialAssetsAuthority.
• ii. Within threemonths upon adoption of thisreport,theAccounting Officer should takeappropriatemeasurestomatchthecontributionstotherespectivemembers afteremployersremittances.
• iv. Within threemonthsupon adoptionof thisreport,theNationalAssembly should amend theUnclaimedFinancialAssetsAct,CAP494and theNSSFAct,Cap.258 toexempttheFundfromremmitancebutrequirethattheFundsbeinvested separatelyandreturns beallocatedevenly to therespectivemembers upon identification.

3.0IrregularBoardAllowances

• 117.The Committeewasinformed that thestatementof changesinnet assets availableforbenefits andNote14 tothefinancialstatementsreflectgeneraladministrative costsofKshs

2,639,450,386,whichincludestrusteeemolumentsofKshs.29,241,145.However,areview ofsupportingdocumentsrevealed that theBoard ofTrusteeswerebeingpaidKshs.50,0o0 as sitting allowance and Kshs.50,000 per month as Director retainer fees,which was recommendedon1November20l1bythethenMinisterforLabour.However,therewasno approvaloftheStateCorporationAdvisoryCommittee(SCAC),PublicServiceCommission (PSC),theNational Treasury,and theSalariesandRemunerationCommission

• 118.In the circumstances,the regularity of theboard expenses of Kshs.29,241,145could not be confirmed.

Managementresponses

• 119.Themanagementinformed the Committee thatsection13(2)oftheNSSFActNo.45of2013 providesthatremunerationandallowancespayabletotheBoardoranyCommitteeofthe Boardshallbesubjecttothe approvaloftheCabinetSecretary.
• 120.The Ministry ofLabourvide theirletterRef.No.MLHRD/20A dated5December,2012, approved the Board's sitting allowances toKshs.50,000 Trustees'fees,excluding the Chairman,atKshs.50,000effective1"November,2011.
• 121.Beforethis,SCACvide their letterRefNo.OP.SCAC.9/161dated30hNovember2012 notified theFundofthedeterminationof ChairmanandBoardallowances.

Committeeobservation

TheCommitteeobserved that-

TheAccounting Officerirregularlypaid theBoardofTrustees'emoluments amountingto Kshs.29,241,145 without approval from the Salaries and Remuneration Commission as requiredbylaw.

CommitteeRecommendations TheCommitteerecommendedthat-

Withinthreemonthsupon adoptionofthisreport,theInspector General ofStateCorporations tosurchargeandrecoverfromthethenAccountingOfficerandBoardofDirectors,monies paidastrusteeemolumentsamountingtoKshs.29,241.145without theapprovalfrom the SalariesandRemunerationCommission.

1.0 Understaffing

• 122.The Committeeheardthatreviewofhumanresourcesdocumentsrevealedthat,theFundhas a totalofone thousand one hundred andforty-five(1,145)employeesinpost,which was belowtheapproved staffestablishmentofonethousandfourhundredandforty-five(1,445) posts,leading toa shortage of three hundred(300) staffmembers.Further,itwasnoted that fifty-eight (58)positions did not have permanent employees,including some in critical business functions.
• 123.In the circumstances,the effectiveness ofinternalcontrols and risk management,and governancecouldnotbeconfirmed.

Managementresponses

• 124.Themanagement informed theCommittee that theFund acknowledgesthepreviousstaffing shortages due tocourtinjunctionsin 2014and2021,whichhaltedrecruitment efforts.To address this,the Board conducted an organizational review to determine optimal staffing requirements.Subsequently,the Public Service Commission (PSC)approved the establishment of1,405positionsvia aletter dated23rdSeptember,2022.
• 125.Following this approval,theFund hassuccessfullyfilledvacantpositions,includingSenior managementroles(MT/CEOandal!GeneralManagers),Managers,andentry-levelstafffor critical business function positions,ensuring strengthened internal controls and risk management

Committeeobservation

TheCommitteeobservedthat-

Theshortfallof300staffmembers andvacanciesin criticalbusinessfunctionpositionsmay have compromised the Fund's capacity to efficiently deliver services,enforce internal controls,and uphold itsgovernance structures.Thisexposed the Fund to operationalrisk, regulatorynon-compliance,andreputationalharm.

CommitteeRecommendations TheCommitteerecommended that-

TheAccounting Officershould at all timesadheretothePublicService CommissionHuman ResourcePoliciesandProceduresManual on staffing andensurefillingofvacanciespromptly asper the approvedstaffestablishment structure toeffectivelydeliverservices to thepublic.

2.0DelaysinProcessingofMembers'Benefits

• 126.The Committeeheard that areviewof thebenefitsprocessingsystemrevealed that18,025 benefit claims were pending asat the close of the financialyear,with 7,113(40%)of the claims.Further,12,511claims were rejected andreferredbackto thebranches as a result of errors andomissionsin thebeneficiary'spersonalinformationandineligiblebankaccount details.In addition,pensioners and dependents couldnot access their moneyin time to cater for their basic and other needs due to the delay in claims processing.
• 127.In the circumstances,the effectiveness of the internal control system in processing members benefitscould not be confirmed.

Managementresponse

• 128.TheFundpaid a totalofKshs.15.8billionin the3years affected bytheCOVID-19pandemic period.i.e.,Kshs.4,433,548,756in2019/2020,Kshs.5,896,203,691in2019/2020 andKshs. 5,430,388,800in2021/2022
• 129.Despite thegoodeffort tosupport ourmembers during thehard times,theFundwasleftwith measuresput inplace,which negatively affected service delivery.Thisiscoupledwith other challenges such as a shortage of staffin the benefit processing chain themanualidentification ofmembers/claimants,andthelongstepsinvolvedin theprocessing ofbenefits
• 130.TheFundiscurrently undertakinga benefit payment processimprovement geared towards improvingtheturnaround time.Theturnaroundtimehassincebeenreduced tolessthan10 days from the average of54daysin the recentpast and the Fund expects to improve the turnaround timesfurtherin thecomingyears.

Committeeobservation

TheCommitteeobservedthat;

• i.Theissue of delays in processing members'benefits was deliberated in the PIC 24th Report,and it was observed that Management's interventions had yielded commendableresults.However,reconciliation of thereturned benefits was ongoing, but due tooutdated data onbeneficiaries,itwashard tolocatebeneficiaries.The committeethenrecommendedthattheAccountingOfficerfortheNSSFshouldensure dataofitsbeneficiariesisalwaysupdated toensureeasierlocationandidentification ofbeneficiaries.
• ii. Further,the committeeobserved that themanagement didnotadequately state how thefollowingissuesraised inthe audit querieswere addressed;
• a.The delaysarising froma shortage offingerprint technicians who match fingerprintstoauthenticate the claims.
• b.Rejected andreferralsofbeneficiaries to thebranches asaresult oferrors and omissions in the beneficiary'spersonalinformation andineligiblebank accountdetails.Thiscouldhavebeenaddressed throughproper automationof beneficiariesearlyenoughbeforeretirement.
• c.Thepensioners and dependentswere not able to access their moneyin time to caterfor theirbasicand otherneeds due to the delayinclaims processing.

CommitteeRecommendations

The Committeerecommended that-

Within three months upon adoption of this report,the Accounting Officer-NSSF should prepareandsubmitareport totheNationalAssemblyonthestatusofdelayedbenefitsand un-accounted for benefits (in Transit).The report should also include measures taken to addressthedelaysarisingfrom shortageoffingerprint technicians,automationofregistration ofbeneficiariestominimizerejections andreferrals ofbeneficiariestothebranches asaresult oferrors andomissionsinthebeneficiaryspersonalinformation andineligiblebankaccount details.

3.0UnremittedMemberContributions

• 131.TheCommitteeheard that,reviewoftheremittancesofmembers'contributionsrevealedthat contributionsreceivableestimatedatKshs.8,635,342,199hadbeenincludedinthefinancial statements under contingent assets.This comprised mandatory contributions of Kshs.l, 959,029,448andoutstandingpenalties ofKshs.6,676,312,751.Although Management has indicated that recoveryeffortsthrough alternative dispute resolution,court action,and the IntergovernmentalRelationsTechnical CommitteeforcasesinvolvingCountyGovernments are in progress,theprocesswasnotsuccessful.
• 132.In the circumstances,the effectiveness of the internal control systems with regard to debt recovery andmanagementcouldnotbeconfirmed.

Managementresponse

• 133.The management informed the Committee that the Fund,through its Registration & ComplianceDepartment,hasimplementedaRelationshipManagementModel strategywhich entails engagingleadership at theDepartmental,Regional,andBranch/Sub-branch level and Debt Collection Officers toenhancerecoveryofcontribution debtsfromprofiled defaulting
• 134.ThemodelalsoincorporatesDebtCollectionofficersatthebranchtofollowuponthe remainingbranch/sub-branch contribution debts.Provisionhasalsobeenmadein thesame modelforaDebtManagementUnitbasedattheheadofficetocoordinaterecoveryefforts from all branchoffices

Committeeobservation

TheCommitteeobserved that-

Thematterofunremittedmembercontributionswas addressedinthePIC22ndReport,where theCommitteerecommended thattheFund shouldputinplacerobust collection strategies, includinglegal mechanismstoavoidunder-collection andresultantlosses.

Further,theCommitteeobservedthat;

• i.The then Accounting Officer failed to strictly enforce therequirements of section 27 oftheNational SocialSecurityFundAct,2013,whichstipulatesthepenaltyfordefault inpayment ofmembers'contributionsbyemployers.

• ii.Thewithholding of member statutory deductionsisillegal since the amountisutilized tofinance therespective entity's operations at the expense of the contributor.

CommitteeRecommendations

TheCommitteerecommendedthat;

• i.The Committeereprimands the thenAccountingOfficerforfailing tostrictlyenforce therequirements of section27of theNational Social SecurityFundAct,CAP258.
• ii. TheCommitteeonImplementationshouldfollowupontheimplementationofpast PICsrecommendations.
• iii. Within three months upon adoption of this report,the Accounting Officer of the NationalSocialSecurityFund toestablishaDebtRecoveryPolicytohelpinfasttrackingtherecoveryofthecontributionsreceivableand theoutstandingpenalties amountingtoKshs.8,635,342,199andKshs.6,676,312,751respectively.
• iV. Within three months upon adoption of this report,the Accounting Officer should prepareareportonUnremittedMemberContributionsandsubmitit totheNational Assembly,theNationalTreasury,and theAttorneyGeneralforreviewandaction.Th Accounting Officer (NSSF),in collaboration with the National Treasury and the Attorney General,should come upwithmodalities ofenforcingremittance,including financial sanctionsforgovernment entities or holding thedirectorsofnon-compliant private companies personallyliable for the principal sums,penalties,and interest at the CBKratesforunremittedcontributions.

4.0 ContributionsinSuspenseAccount

• 135.The Committee heard that,review of members'contributions revealed that,the Fund employersforthecreditofmembers'accountsforbenefitspaymentuponqualification asper the National Social Security Act,2013.However,contributions in transit representing contributionswhichhadnotbeenposted toindividualmembers'accounts stoodatKshs. 741,518,106.These arisefromlack of integration between employers bank accounts and the

Fund'scollection system,leading tolackof prompt updatingof members accountswith their deposits.

• 136.Nosufficient explanation wasprovidedfortheinabilitytoreconcile andpostthesuspense balance ofKshs.741,518,106 to therespective member's accounts which had accumulated over theyears.
• 137.ln thecircumstances,the effectiveness oftheinternal controls system on prompt updating of memberscontributionscouldnotbeconfirmed.

Management response

• 138.The management informed the Committee that the contribution in transit isachallenge experienced by the Fund occasioned by the failure of employers,including the National Government,the County Government,and TSC to submit completereturns forall their registered and contributionspaid for employees.
• 139.The amount of contributions in transit as at 30June 2022 stood at Kshs.741,518,105.51. Thisrepresented0.39%ofthe cumulative mandatory contributions collected.Continuous efforts in branch offices are in place to reduce and manage contributions in transit.
• 140.Thefollowing are thekey strategiesManagement hasput in place tohalt andreduce the growthoftheContributionsin
• i.Automated theMember registration process,where Members are able toregister via theirmobilephones andchecktheirprovisional contributionsstatements.
• ii. Reduction of the ContributionsinTransitby30%by30June 2023isakey performanceindicatorforthefinancialyear2022/2023in theperformancecontracts.
• ili. Enhanceusage ofthee-service and mobile application(M-Pesa)in theprocessing and management ofmemberreturns and contributions toreducedata errors andenhance efficiencyin contributionsprocessingandreturnsmanagement.

CommitteeObservations

TheCommitteeobserved that-

Thematter on Contributionsin SuspenseAccountwas addressedin thePIC19hand 22nd Reports,where the Committeerecommended the following;

• i.TheFundinstitutesmeasures to ensure all contributionsreceived frommembers have the requisite data.
• ii.TheFund identifies the contributors and clears the suspense account

Further,the Committeeobserved that;

• ii.The management has put on strategies by automating the member registration process, whichenablesmemberstoregistervia theirmobilephones andchecktheirprovisional contributions statements.However,not all members are acquainted with the knowledge and thetechnical capacityfor theservice,andinternet connectivitymay bea challenge for uncovered areas.
• iV. The figures on members'contributions in the suspense account have been reducing overtheyears.However,therewasnoevidencetolinkthereductionstoefficiencyin identifying members orweremerebookentries.

CommitteeRecommendation

The Committeerecommendsthat;

• i.Within six months upon adoption of thisreport,the Accounting Officer,National SocialSecurityFundtoliaisewithemployerstoidentifythecontributors/beneficiaries in ordertobringthemattertoitslogical conclusion.
• ii. TheCommitteeonImplementationshouldfollowupontheimplementationofpast PICsrecommendations.
• iii. Within three months upon adoption of thisreport,theAccounting Officer should prepareareporton ContributionsinSuspenseAccountand submit it totheNational Assembly andAuditor-Generalforreview.Thereportshouldincludethemodalities forensuringcontributionsmadearematchedtothecontributorandemployerforall governmententitiesorprivatecompanies,and theledgershowingtheflowof the balancesfrom the financialyears 2015/2016to thecurrentbalance.TheAuditorGeneralshouldreviewthereportandtheflowofthebalancesandreportinthe subsequent audit cycle.

FINANCIALYEAR2022/2023

1.0Non-PerformingInvestment in Unquoted Equities

• 141.The Committeeheard that the statementofnetassets available forbenefitsreflects the unquotedstocks balance ofKshs.787,911,498 asdisclosed in Note 27tothe financial statements.Reviewof documentsrevealed that theFundheld sharesworthKshs.38,428,500 in Consolidated Bank of Kenya,whose performance declined by Kshs.209,256.764 as detailedbelow:
• 142.The fund continues to hold investments with no return bywayof dividend or capital appreciation.
• 143.In the circumstances,thevalueformoney andfairvaluation of theunquoted stocks could not be confirmed.

| Company | No.of shares | Value as at30 June,2023 (Kshs.) | Value as at 30June,2022 (Kshs.) | Decline in value (Kshs.) | |---------------------------------------------|----------------|-----------------------------------|-----------------------------------|----------------------------| | Consolidated Bank Ord Shares | 2,225,000 | 8,321,500 | 86,694,264 | (78,372,764) | | Consolidated4% cumulative preference shares | 8,050,000 | 30,107,000 | 161,000,000 | (130,893,000) | | Total | 10,275,000 | 38,428,500 | 247,694,264 | (209,265,764) |

Managementresponse

• 144.Themanagementinformed theCommittee thatNSSFcontinues tomonitor thebank's performancewithastrategicintenttodivest.ConsolidatedBankhaspresented a turnaround strategytoshareholders,emphasisingrecapitalisationasapathway toprofitability.Thebank has confirmed that discussions will be held with shareholders,and NSSF,alongside its appointedFundManagers,isactively evaluatingoptimal exit strategies.
• 145.Additionally,Consolidated Bank has undergone a valuation,with a fairprice assessment of Kshs3.74per share,forming part of ongoing deliberations concerningNSSF's investment outlook.

• 146.Further, the National Treasury,which is the majority shareholder,recently indicated intentions toprivatisethebankthroughlistingorsellingthebanktoa strategicinvestor.The BoardofTrusteesiskeenlyfollowinguponthedevelopmentwiththeintentionofexitingat theearliestopportunity.

CommitteeObservationsandRecommendations

TheCommitteeobserved that theissueof Non-PerformingInvestmentinUnquotedEquitieswas deliberatedinitsReportfor the financial yearending30hJune,2022,andupholds the observationsandrecommendationstherein.

2.0InvestmentinNon-PerformingQuotedShares

• 147.The Committee heard that the statement ofnet assets available forbenefitsreflectsquoted stocks of Kshs.52,986,064,443 as disclosed in Note 28 to the financial statements.The balance includes shares held in three(3)companies valuedatKshs.170,708,881 as at 30June 2023,whosevalue decreasedbyKshs.50,892,593or(23%)fromKshs.221,601,474as at30 June2022,asfollows:
• 148.Asreportedpreviously,reviewofthestatusofinvestmentinquotedstocksconfirmed thatthe Fundentered intoa contractualagreementwith six(6)Fund Managers.TheFundManagers weretohavefullcontrolandunrestrictedpowers toinvesttheFund'smoneyasper the investmentpolicyformaximumreturns.However,theFundhascontinuedholdingon tothe non-performing investments in the three(3) companies.

| Company | Number of Shares | SharPriceas at30 June 2023 (Kshs.) | Share Price as at30 June, 2022 (Kshs.) | in Price Per Share (Kshs.) | DeclineDeclineValue (Kshs.) | | |-----------------------------|--------------------|--------------------------------------|------------------------------------------|------------------------------|-------------------------------|--------------| | East Africa Portland Cement | 24,300,000 | 6.04 | 8.00 | (1.96) | (47,628,000) | | | Sameer Africa | 2,838,776 | 2.65 | 3.80 | (1.15) | (3,264,592) | | | Athi River Mining | 2,957500 | 5.55 | 5.55 | | | | | Total | (50,892,592) | (50,892,592) | (50,892,592) | (50,892,592) | (50,892,592) | (50,892,592) |

• 170,708,881in three(3) companies could not be confirmed.

Managementresponse

EastAfricanPortlandPLC(EAPC)

• 150.The management informed the Committee that theFund acknowledgesthe audit observation. Thisis aprioryear auditquery,and thebackground hasbeencomprehensively coveredin the 2021/2022financialyearauditreport.
• 151.EastAfrican Portland share Price hasbeenon therise fromalowof 7.82per share on 31.08.2024 toKshs.40.25per share on31.03.2025.The Company'sperformance currently hasbeenpromising,and itis makingprofits
• 152.EastAfricaPortland declareditsfirstdividendofKshs.Ipershare in13yearson28thApril, 2024,whereNSSFearnedKshs.24,300,000.
• 153.ARM Mining Ltd went into liquidation,and the liquidators advised that the chance for ordinary shareholderstobepaidisremote.Managementwill considermakingfull provision inthe2023/2024.

SameerAfricaLimited

• 154.TheFundheld an investment inSameer valued at Kshs.2.8million as at 30June,2024.Over thelast3years,SameerGrouphasrestructureditsoperations toshut down tyremanufacturing andconcentrate onPropertyletting.InFY2024,GrossProfitgrewby4.8%toKes373million whileNetProfit increased byover100%fromKshs.42.4million toKshs.22.9million.
• 155.TheFund hasasked theFundManagerstocloselymonitor theperformanceof thecompany with aview toprofitable divestingfromtheinvestment

Committee Observations andRecommendations

TheCommitteeobserved that theissueonInvestment inNon-PerformingQuotedShareswas deliberatedin its Report for the financialyear ending 30hJune,2022andupholds the observations andrecommendationstherein.

3.0LongOutstandingTaxReceivables

• 156.The Committeeheard that thestatementofnetassets availableforbenefitsreflectsreceivables andprepayments balance ofKshs.6,580,672,946,which as disclosed in Note 23 to the financialstatementswhichincludestaxreceivables amountofKshs.938,003,638relatingto taxrefund comprisingofoverpaid taxofKshs.493,257,328andKshs.411,646,389totaling toKshs.904,903,717inadvertentlypaid to theKenyaRevenueAuthority(KRA)in1997afler theFund becameincome taxexempt in1996.However,thetaxrefund due fromKRAwas not supported by an acknowledgement from the Authority.Further,the tax receivables balance ofKshs.938,003,638includes anamountofKshs.26,605,051relating to taxon interestearnedfrombankbalancesandlow-interest taxofKshs.6,494,870credit,whichhas notbeenexplained.
• 157.In the circumstances,therecoverability of the tax receivables balance ofKshs.904,903,717 couldnotbeconfirmed.

Managementresponse

• 158.Themanagementinformed the Committee that,theFund has along-standing taxreceivable amountingtoKshs.904,903,717,whichremains due from theKenyaRevenue Authority (KRA) as anunresolvedrefund.This outstanding amount hasbeen the subjectcf an audit query from prior financial years,in which the Public Investments Comnittee (PIC) recommended thatKRA settle therefund within sixmonths.Despite these directives,the refundremainsunsettled.
• 159.Kenya Revenue Authority,togetherwith theFund,iscurrently carryingoutreconciliation on items(credits)appearing onITAX,whichincludewithholding taxoninterest earned onKshs 26,605,051,with aviewtoestablishingthe correctposition.

CommitteeObservationsandRecommendations

TheCommitteeobserved that theissue onLongOutstandingTaxReceivableswasdeliberated initsReport for the financialyearending30thJune,2022and upholds the observations and recommendationstherein.

4.0UnremittedandUndisclosedMember Contributions

• 160.The Committeeheard that thestatement ofchangesinnetassetsavailableforbenefitsreflects thecontributions receivable balanceofKshs.26,873,595,651asdisclosedinNote 6tothe financial statements.Reviewofmembers'contributions statusrevealed thatan amount of Kshs.9545,509225inrespectoflongoutstandingcontributionsreceivable,whichcomprised mandatory contributionsof Kshs.1,933,630,444 and outstanding penaltiesof Kshs. 7,611,878,781hadnotbeenincluded in thestatementsofnetassets availableforbenefits as at30June2023.
• 161.In the circumstances,the accuracy and completeness of the contributionsreceivable balance ofKshs.26,873,595,651couldnotbeconfirmed.

Managementresponse

• 162.The Fund receivedKshs.26,873,595,651inactualcontributions during the yearunder review,as disclosed in Note 6.Inline with Fund policy,only received contributions are included in theStatements of Net AssetsAvailable forBenefits,as they serve as thebasisfor interest distribution.
• 163.Contributionyet tobereceived is excluded from net assets,as theydo notform part of the amounts available for distribution.However,for transparency,such contributions are disclosed separately in the notes,specifically under Note 36.As at 30th June 2023, outstandingcontributiondebtsstoodatKES9,545,509225,consistingofcontributionarrears andpenalties.
• 164.TheFundremains committed toproactivelyrecoveringoutstanding contributions through structuredlegal,administrative,andintergovernmentalprocesses.Ongoingcollaborationwith key stakeholders,enforcement mechanisms,andpolicy adjustmentswill further strengthen compliance andfinancialsustainability.

CommitteeObservationsandRecommendations

TheCommitteeobservedthat theissueon Unremitted andUndisclosedMember Contributionswas deliberated initsReport for thefinancialyearending30tJune,2022and upholdstheobservations andrecommendationstherein.

Budgetary ControlandPerformance

• 165.The Committee heard that thestatement of comparison ofbudget and actual amountsreflects the final incomebudget and actual amounts ona comparablebasisofKshs.40,683,613,228 and Kshs.33,727,938,396,respectively,resulting in an under-collection of Kshs. 6,955,674,832 or 17% of the approved budget.Similarly,the Fund incurred Kshs. 7,328,971,740againstanapprovedfinalexpenditurebudgetofKshs.7,001,625,222,resulting in an over-utilisation ofKshs.327,346,518or5%of thebudget.
• 166.Theunder-collection andover-utilisationaffected theplanned activitiesof theFund andmay havenegatively affected service delivery to thepublic.

Managementresponse

| Revenue/incomeitem | Actual | Budget | Var | |----------------------------|------------------|-----------------|--------| | Contribution | 26,873,595,651 | 19,568,043,228 | 37% | | Dividend income | 4,351,638,109 | 2,500,000,000 | 74% | | Interestincome | 25,087,013,240 | 21,785,000,000 | 1.5% | | Rent income | 1,171,281,393 | 1,487,186,000 | (21%) | | TPSinterest income | 292,295,254 | 350,000,000 | (16%) | | Realizedgain oninvestments | 457,177,114 | 150,000,000 | 205% | | OtherInvestmentIncome | 65,926,054 | 50,000,000 | 32% | | Otherincome | 540,655,817 | 79,500,000 | 580% | | Benefits | (6,675,201,681) | (8,143,450,000) | 28% | | FV Loss | (18,436,442,556) | 2,857,334,000 | (745%) | | Netrevenue | 33,727,938,397 | 40,683,613,228 | (17%) |

• 167.The Fund outperformed the budget in contributionsreceived,dividend income,interest income andotherincome.Thecontributions exceeded thebudgeton account ofyear1 NSSF contributions,which cameintoeffectinFebruary 2023.Theoverperformancein dividend income and interest income was on account ofequitymarketrecovery andimproved fixed incomeyieldsduringtheyearunderreview.

• 168.The overall underperformanceof totalincome wasmainly on account of Fairvaluelosses on investmentsin government bonds due totheriseininterestrates,which resulted inlower valuations.

OperatingCostPerformance andBudgetUtilisation

• 169.The Fund exceeded its budgeted operating costs byKES327,346,518(5% above budget), with over-expenditure primarily driven by depreciation,amortisation,andprovisions for doubtful debts.

| Expense item | Budget | Actual | Var | |-----------------------------|---------------|---------------|--------| | Managementinvestmentexpense | 735,000,000 | 653,178,520 | 11% | | Compensation of employees | 4,418,547,222 | 4,074,790,734 | 8% | | Trustee'Emoluments | 48,000,000 | 55,757,130 | (16%) | | Generaladministration cost | 1,643,211,070 | 1,543,261,312 | 6% | | Finance expense | 40,000,000 | 39,212,361 | 2% | | Sub total | 6,884,758,292 | 6,366,200,057 | 8% | | Depreciation&amortization | 116,866,930 | 496,622,081 | (325%) | | Provision | | 466,149,601 | (100) | | Total | 7,001,625,222 | 7,328,971,740 | (5%) |

Committeeobservation

The Committeeobservedthat-

• i. TheFund incurredKshs.7,328,971,740against anapprovedfinalexpenditurebudget ofKshs.7,001,625,222,resultinginanover-utilisationofKshs.327,346,518or5%of the budget.However,the explanation that the over-expenditure wasprimarilydriven bydepreciation,amortization,andprovisions for doubtful debts had no basis since provisions arenotreflectedin thebudget.
• ii. The Fund under-collected by Kshs.6,955,674,832or 17% against the approved budget.TheFund,therefore,based itsprojection of Revenue onweak assumptions.

CommitteeRecommendations

TheCommitteerecommendsthat-

TheAccounting Officermust at all times ensure that the budgets arerealistic,achievable,and alwaysadhereto annualworkplans andrevenuecollection schedules.

UnresolvedPriorYearMatters

• 170.TheCommittee wasinformed that,as disclosedunder theprogress onfollow-up on the auditor'srecommendationssectionofthefinancialstatements,variousprioryear auditissues remainedunresolved as at30June2023.Managementhasnotprovidedreasonsforthedelay inresolving theprioryear's audit issues asrequired bytheNational Treasuryguidelines.

Managementresponse

• 171.TheFund had the following outstanding audit issues,which are at different stages of resolution

a)Non-Compliancewith theUnclaimedFinancialAssetsAct,2011

• 172.The managementinformed the Committee that,the issue ofnon-compliance arises from legislativediscrepanciesbetweentheUnclaimedFinancialAssetsAct,2011andtheNational Social SecurityFund(NSSF)Act.WhiletheUnclaimed FinancialAssetsAuthority(UFAA) requires the transfer ofunclaimed financial assets,the NSSF Act,expressly prohibits the transferofmemberfunds to anotherentity,creatingalegalconflict.Specifically,section30 ofNSSFACTCAP258prohibits theFund from transferringanybenefitstoanother institution.The Fund remains committed to working collaboratively with relevant stakeholders tofindaviable solutionwhile ensuringadherence togoverninglaws and safeguardingmemberinterest.

b)Unconfirmed TaxReceivables

• 173.Themanagement informed theCommittee that the taxreceivableofKshs.904,903,717is a long-standingtaxrefund duefromKRA.PICinits22ndreportrecommended thatKRAsettle withinsix(6)months.Thematterwasalsothe subjectofacourt matter,which theHigh Court ruled in favor of NSSFin 2016.However,KRA isyet to settle the reason why the issue remains outstanding.

Committee ObservationsandRecommendations

The Committeeobserved that theprioryearmatterslistedabovehadbeendeliberatedonin itsReport for the financialyear ending30June,2022andupholds the observations and recommendationstherein

1.0Delayin CompletionofAssetsunder Construction

1.1Construction of BoundaryWall at Plot inBamburi

• 174.The Committeeheard that the statement ofnet assets availableforbenefitsreflects the assets underconstructionbalanceofKshs.39,978.685asdisclosedinNote30tothefinancial statements,whichincludesKshs.8,624,178relatingto theconstructionofaboundarywall ofaplotinBamburiatcontractpriceofKshs.16,563,900thatwastobecompletedwithin eight(8)weeksfrom12March,2017.Theworks were suspended due toencroachmentbya waterpipelineonthe landand undergroundcablespassingthrough the land,anindication that theFundhadnot conducted a surveybeforecontractaward.Thesuspensionwasliftedon21 March 2018,but thecontractor was unable tocomplete the work,leading tocontract terminationafter81%oftheworkshadbeencompleted.However,theterminationletterwas notprovidedfortheaudit.
• 175.TheFundenteredintoanewcontractwith anothercontractoron28September,2020 for completion of theremainingworks at a contractprice ofKshs.6,233,094whichwas to be completed within eight(8)weeks.Documents provided for audit revealed that Kshs. 1,881,464hadbeenpaid to thecontractor.However,asat thetimeof theauditinFebruary 2024,theconstructionof thewall hadnotbeen completed,yetManagement hasnot taken any measuresto compel the contractor tocomplete theworks or terminate the contract.Thiswas contrarytoSection9ofthecontract document,whichrequiresthat theprocuringentitymay, without prejudice toany otherremedyaccruing toit forbreach of contract,terminate this agreementinwritinginwholeorinpartif thetendererfailstoperform anyotherobligation underthis agreement.

176.In thecircumstances,thevalueformoney spent on the boundarywall couldnot be confirmed.

Managementresponse

• 177.Themanagementinformed theCommittee that the Fundis awaitingcompletion of the upgradingoftheMombasa/MalindiHighway,whichimpacted theareawithaninterchange underconstruction atthesite,toresumeconstructionandfinalisationoftheboundarywallof theBamburiparcel.

Committeeobservation

The Committeeobservedthat-

• i.Theworks for the construction ofa boundarywall of aplot in Bamburi,which was awardedtotwocontractorsbetween2017and2020,remainincompletedespitetheFund making payments to the contractors amounting toKshs.8,624.178 andKshs.1,881,464 to theformerand thenewcontractorsrespectively.
• ii.Thefirstcontractwas suspended due to encroachmentby awater pipelineland and undergroundcablespassingthroughthelandanindicationthattheFundhadnot conductedproperfeasibility surveybeforecontractawardandthereforethevaluefor moneyspent ontheboundarywall couldnotbeconfirmed.

CommitteeRecommendation

TheCommitteerecommendsthat-

Within three monthsupon adoption of thisreport,theAccounting Officer should submit a reportto theNationalAssemblyand theAuditor-Generalon thestatusoftheproject,the amountspaid tothecontractorsontheprojectand thepenaltiesleviedforthedelays.The reportshould alsoincludeasurveyandfeasibilitystudiescarriedoutbeforeinitiatingprojects toavoid delaysinprojectcompletion andlosses.

1.2 Otherassetsunderconstruction

• 178.TheCommitteeheard thatthestatementofnetassetsavailableforbenefitsreflects assets under construction,abalanceofKshs.39,978,685asdisclosedinNote30 to thefinancial statements,whichincludesKshs.31,354,506relating to the constructionof theSSH Gym CentreandBulkfilers atacostofKshs.6,995,968andKshs.24,358,538,8,538respectively However,thestatusreportoncompletionwasnotprovidedforaudit.

• 179.In the circumstances,the value for moneyfor the expenditure on the projects could not be confirmed.

Managementresponse

• 180.The Management informed the Committee that the bulk filershave been delivered,fully installed,and are currently in operational use within the designated premises.There is, however,a case in court.
• 181.TheSSH Gymprojectinvolvedrenovations and installationofgym equipment,whichhave beencompleted.Aninspectionreport,confirmingcompletionandcompliancewithrequired standards,hasbeenprovided.Allcostsrelated tothisprojecthavebeencapitalised to ensure properaccountingtreatment.

Committeeobservation

TheCommitteeobserved that-

• 182.Themanagement failed toprovidestatusreportsandthe completion certificatesfor theSSH Gym Centre andBulkFillers projects totalingKshs.31,354,506andwas therefore in breach ofsection 154(a)of the PublicProcurementandAssetDisposalAct,CAP412Cwhich requirestheAccountingOfficertoissuecertificate ofcompletiontothecontractorconfirming completion of theworks.

CommitteeRecommendation

TheCommitteerecommendsthat-

The Committeereprimands thethenAccountingOfficerforfailing to adhere totheprovisions ofsection154(a)ofthePublicProcurementandAsset DisposalAct,CAP412C.

2.0LackofContractfortheProvisionofTravelServices

• 183.TheCommitteeheard thatareviewofdocumentsprovidedrevealed thattheFundentered intoacontractwitha supplierfortheprovisionof travelserviceson10June2021,renewable foroneyear,subject to a maximum oftwoyears andsubjectto annualappraisalwithgood performancescores.Duringtheyearunderreview,thecontractwasrenewedforthefirstyear,

whichstartedon10April2022andendedon10April2023.However,theFundpaidKshs. 12,555,265betweenMayandJune2023afterthe expiryof thecontract.

• 184.In thecircumstances,theregularityofthepayments ofKshs.12,555,265madewithoutavalid contractcouldnotbeconfirmed.

Managementresponse

• 185.TheFund initiated the contractrenewal process in March 2023,but due to administrative delays,finalapprovalwasgrantedin October2023.Acompetitive procurementprocesswas conducted,andcontractswere awardedtothreevendors,ensuringcompliance andcontinuity ofservices.To prevent future delays,the Fund has implemented measures to streamline contractrenewal timelines.TheFund hassincesignedacontractwith theserviceproviders

Committeeobservation

TheCommitteeobservedthat-

• i.TheFund paidKshs.12,555,265about threemonths after theexpiry of the contract. TheAccountingOfficerwasthereforeinbreachofArticle227(1)of the Constitution whichrequiresthatwhenastateorganoranyotherpublicentitycontractsforgoodsor services,it shall dosoin accordance witha system thatisfair,equitable,transparent competitive andcost-effective.
• i.The failure bymanagement tomonitor the expiry and ensure timely renewalof the contractindicatedweakinternal controlsin contractmonitoring and administration

CommitteeRecommendation

The Committeereprimands the thenAccountingOfficer tofailing to adhere to theprovisions ofArticle227(1)oftheConstitution.

• 186.TheCommitteewasinformedthatareviewofthedocumentsprovidedforauditrevealedthat theFundpaidKshs.215,540,774advancepaymentstoacontractorfortheconstructionofthe EmbakasiPhaseVI project.Theproject stalled due toalackofapprovalfor the change of

userbytheNairobi City County Government.However,asat thetime of the auditinFebruary 2024,theFundhadnotrecovered theadvancepaymentfrom thecontractor.

• 187.In the circumstances,Management was in breach of thelaw,and the recovery of the advance payment appears doubtful.

Management response

• 188.TheManagement informed the Committee that this isa prioryear audit query,and the background hasbeen comprehensivelycoveredin the2021/2022financialyear.TheFundis considering engagingthe contractor andrelevant approving authoritieswitha view to exploringpossibilities ofreviving theprojectandrecoveringtheadvancepaidtothe contractor.

CommitteeObservationsandRecommendations

The Committee observed that the issue on Long Outstanding AdvancePayment on Stalled Embakasi SchemeProjectwas deliberatedinitsReport for thefinancialyear ending3oJune, 2021andupholdsthe observations andrecommendations therein.

4.0LackofLeaseAgreement

• 189.The Committee heard that thestatement of changesinnetassets availableforbenefitsreflects general administrative costs,a balance ofKshs.2,134,852,885as disclosed inNote14 to the financialstatements,whichincludesKshs.300,718,391relatingtorentexpenses,outofwhich Kshs.206,712was paid asparking feesfor theFund'sKisumu offices.However,a lease or
• 190.In the circumstances,the regularity of the rent expense of Kshs.206,712 could not be confirmed.

Managementresponse

• 191.Themanagementinformed the Committeethat theFund acknowledgesthequeryregarding the parkingfees ofKES206,712paidaspart ofrent expenses for the Kisumu offices,as disclosedinNote14tothefinancial statements.Toconfirm theregularity of this expense,the

leaseagreementbetweenNSSFandKCBBankLtd(thelandlord)isherebyprovidedforaudit verification.

Committeeobservation

• i.The Committee observed that the Fund paid Kshs.206,712 asparking fees for its Kisumuoffices.However,theFund didnotprovidea lease orcontractagreemcntfor audit reviewas at the time of theaudit,contrary toSection 62of thePublicAuditAct CAP412B.
• i.Thelease agreement providedwas invalid since it didnothave the signature of the lessor(KCB bank)

CommitteeRecommendations

Thecommitteerecommendedthat-

• i.TheAccounting Officer should at all times submitrelevant documents to theAuditorGeneral duringthe audit processtoconfirm theregularity of the expenses and toensure compliancewith therelevantlaws.
• ii. Within three months upon adoption of this report,the Accounting Officer (NSSF) shouldprovide areport totheNationalAssemblyand theAuditor-Generalforreviewof all itsleased property,lease chargesper annum,lease agreements,and the respective staff occupancy.

5.0Hire ofKisumuInvestmentProperty

• 192.TheCommitteeheardthatthe statementofnetassetsavailable forbenefitsreflects the investment property balance ofKshs.35,535,225,456as disclosed inNote29 to thefinancial statements,whichincludesKshs.220,000,000 forKisumuEstateLand.However,physical verification carried outinSeptember2023revealedthatanindividualwas operatingagarage on theparcel ofland.However,alease or tenancy agreement indicatingtherentpayableand durationoftheleasewasnotprovidedforauditverification.Further,anupdatedlistoftenants indicatingthespecificperiod theytookpossession of,themonthlyrentpayable and tenancy agreementswasnotprovidedforaudit

• 193.Further,rent payments by tenants occupying the land are remitted to the Fund by some tenants,whileotherspay the CountyGovernmentofKisumu.Thishas denied theFund from receivingoptimal revenue on theproperty.In thecircumstances,theFund'sfailuretogain full controlofthelanddeniestheFundrevenue

Managementresponse

• 194.TheFund acquired theKisumupropertyforredevelopment.The structures on the sitearenot suitable forrentalpurposesas they are dilapidated,and thus,theFund hasno intention of makingthemgoodtoallowforformal leasing.Further,theFundhasinitscustodyownership documentsfor theproperty and pays land rates toKisumu County.

Committee observation

TheCommitteeobservedthat-

• i.The Fund does not have full control of its Kisumu estate land valued at Kshs. 220,0oo,000.Further,some tenants occupying thelandremit therent to theFund,while others pay the County Government of Kisumu,thus denying the Fund its optimal revenue.
• ii.TheFundresponse that the structures on theKisumu estateland site are dilapidated and thusnot suitableforrentalpurposes implies that the then AccountingOfficer wasin breachof section 72(l)of the PublicFinance ManagementAct,CAP412A which requires andAccounting Officer tomanage assets in awaywhich ensures that the national government entity achievesvalue for moneyin acquiring,usingand disposing ofassetsand section 160(1)of thePublicProcurement and AssetDisposalAct,CAP 412C which requires an Accounting Officer tomanage assets for the purpose of preventingwastageandloss.
• ili. Themanagementindicated thattheFundhadnointentionofrenovatingthedilapidated structureson thesitetobehabitableforrentalpurposes.Thepurposeof theacquisition is therefore not clear.

CommitteeRecommendations

The Committeerecommends that-

TheCommitteereprimandsthethenAccountingOfficerforbreachofsection72(1)ofthe PublicFinanceManagementAct,CAP412A,and section160(1)of thePublicProcurement andAssetDisposalAct,CAP412C.

1.0 CourtInjunctionsonRentand TenantswithoutLeaseAgreement

• 195.The Committeeheard thatareviewoftherecordsprovidedrevealed thateight(8)tenants in Social SecurityHouse,Mombasa,hadobtainedinjunctions against thelandlordand theFund management due to court cases.Further,seven (7) other tenants were occupying the premises without lease agreements.In addition,despite theFund's efforts to have these tenants sign newleaseagreements,theyhaverefusedtodoso,resultingintheFund beingdeniedrentfor theuse ofitspremises.In thecircumstances,theeffectiveness ofcontrolsoverrevenue could notbeconfirmed.

Managementresponse

• 196.Themanagementinformed thecommittee that theFund maintains a robustrent collection tochallengeinjunctions obtained by certain tenants,with themattercurrentlyunder court review.Despite efforts toregularize tenancyagreements,some occupants have declined to formalizeleases,affectingrevenue collection.However,the delayed executionofleases does notindicatedeficienciesinrevenuecontrol.
• administrativesolutionstoresolvetheseconcerns.

Committeeobservation

TheCommitteeobserved that-

Thecourtinjunctionsobtainedbyeight tenantshavedisrupted theFund'sabilitytoenforceits tenancypolicies andcollectrent.Thishas createduncertainties overassetuse andundermines thegeneration ofrevenuefrominvestmentproperty.

CommitteeRecommendation

The Committeerecommendsthat-

• i.The Accounting Officer National SocialSecurityFund should pursue Alternative disputeresolutionmechanismsin theresolution of the cases.
• ii. Within three monthsupon adoption of this report,the Accounting Officer(NSSF) shouldprovideareporttotheNationalAssemblyand theAuditor-Generalforreviewof all itsleased property,lease chargesper annum,lease agreements and the respective staffoccupancy.

2.0 ContributionsinSuspenseAccount

• 198.The Committee heard that,review ofmembers'contributions revealed that the Fund maintains employercontribution clearing accountswhere total contributionsarepostedfrom employersforthecreditofmembers'accountsforbenefitspaymentoncetheyqualifyasper theNational SocialSecurityAct,2013.However,as previously reported,contributions in transit,representing contributions which hadnotbeen posted toindividual members accounts,stoodatKshs.942,000,000(2022-Kshs.720,000,000 asdisclosedinNote34to the financial statements.These arise from alackof integrationbetween theemployer'sbank accounts and theFund'scollection system,leading todelays in updatingmembers'accounts with theirdeposits.No sufficient explanationwasprovidedfor theinability toreconcile and post the suspense balanceofKshs.942,000,000 to therespectivemembers'accounts,which had accumulated overtheyears.
• 199.In the circumstances,the effectiveness of theinternal control system on theprompt updating ofmembers'contributionscouldnotbeconfirmed.

Managementresponse

• 200.The management informed the Committee that,National Government,the County Governments,and theTeachersService Commission are thethreeentitiesthathold thebulk of Contributions in transit.These are alsoemployeeswhowerepreviously exempted under therepealed NSSFAct,Cap.258.Themajorityof the employeeshaveyet tosubmit their NSSFMember Registration Numbers to their employers.TheFund hasprioritised the registrationandupdatingofthesememberaccountsacrossthebranchnetworks.
• 201.In the financial year 2021/2022,clearance of Kshs.258,080,592.60 was resolved,Kshs 245,882,722.35wasresolvedintheFY2022/2023,andKshs.527,482,706.92resolvedinthe financialyear2023/2024andposted tomemberaccounts.Inthecurrent financialyear 2024/2025,Kshs.568,703,398.21has been cleared,and management initiatives are ongoing andmonitoredperiodically

202.

CommitteeObservationsandRecommendations

Thematter on ContributionsinSuspenseAccountwasaddressedin thecommitteereport for the financialyear 2021/2022andupholdstheobservations andrecommendationsmade therein.

FINANCIALYEAR2023/2024

1.BudgetaryControlandPerformance

• 203.TheCommitteeheardthat thecomparisonofbudgetandactualamountsreflectsthenet revenuebudget and actual ona comparable basis of Kshs.78,942,917,020andKshs. 105,290,393,953,resulting in an overperformance ofKshs.26,347,476,933,or33%of the budget.Therevenue overperformanceis attributed to theupwardrevision of themandatory contribution to theFund by the employers and the employees.However,this factwasnot consideredinformulatingtherevenuebudgetingoftheFund.
• 204.Similarly,the capital budget absorption fortheyear underreviewreflects thefinal capital expenditurebudgetand actualexpenditureonacomparablebasisofKshs.4,062,000,000and Kshs.206,328,431resultingin anunderutilization ofKshs.3,855,671569or95%of the budget.

• 205.Theunderutilization of the developmentbudget affected theFund'splanned activities and projects,whichmay havenegatively impacted members'returns by way ofinvestment income.

Managementresponse

• 206.TheCommitteewasshown the tablethatprovidesa comparisonbetweenbudgeted andactual performancefor theyear and thevariance thereof.

| Revenue | Budget | Actual | Variance | % | |--------------------------------|----------------|-----------------|-----------------|--------| | Contribution | 38,584,905,720 | 62,288,402,382 | 23,703496,662 | 61 | | Dividend Income | 6,000,000,000 | 4,198,497,148 | (1,801,502,852) | (30) | | Interest Income | 28,850,000,000 | 34,871,715,164 | 6,021,715,164 | 21 | | Rent Income | 1,340,640,300 | 1,230,183,008 | (110,457,292) | (8) | | TPS Interest income | 422,000,000 | 272,943,048 | (149,056,952) | (35) | | Realised Gain on Investments | 150,000,000 | (215,684,206) | (365,684,206) | (244) | | Unrealised gain on investments | 3,495,371,000 | 2,988,668,249 | (506,702,751) | (14) | | Other Investment Income | 50,000,000 | (955,849,185) | (1,005,849,185) | (2012) | | Other Income | 50,000,000 | 611,518,345 | 561,518,345 | 1123 | | | 78,942,917,020 | 105,290,393,953 | 26,347,476,933 | 35 |

CapitalExpenditure

| Items | Budget | Actual | Variance | % | |----------------------------------------------------------|---------------|-------------|-----------------|-----| | Operational capital items (equipment, Furniture, IT etc) | 610,000,000 | 206,328,431 | (403,671,569) | 66 | | Development Projects | 3,452,000,000 | 0 | (3,452,000,000) | 100 | | Total | 4,062,000,000 | 206,328,431 | (3,855,671,569) | 95 |

• 207.The variance of Kshs.26.3billion in totalrevenue can be explained mainly by overperformanceincontributionsandInvestmentIncome.Totalcontributionsoutperformed thebudgetbyKshs.23billion,mainly on accountof theyear2contributionratesrolloutas pertheNSSFActand the onboardingof thePublicServiceemployeesin themonthofAugust 2023.
• 208.Inthepreviousyear,2022/2023,theFundcollectedKshs.26billionand budgetedcollections ofKshs.38billion in the2023/2024financialyear,whichwas agrowthof46%.
• 209.TheInvestment Income outperformed the budget byKshs.6billion,mainly on account of positive equitymarketperformance andrisinginterestrates.
• 210.The Fund's Capital budget absorption was significantly lower than expected,mainly on account of delayedbudget approval andfreezingof newcapital budgets through theNational January 2024.

CommitteeObservations

TheCommitteenotedthat;

• i.The Fund achieved an overperformance of Kshs.26,347,476,933,or 33%of the budget,wasattributedtotheupwardrevision ofthemandatorycontribution tothe Fund by theemployers and the employees.However,theFund did not consider the factwhileformulatingtherevenuebudget thusunrealisticsincetheFundwas already awareoftherevisedcontributions.
• Theunderutilizationof thedevelopmentbudgetbyKshs.3,855,671,569or95%of the budget impactednegativelyonmembers'returnsbywayof investment income.
• ii. The submission by theFund management that the Capital budget was under-absorbed onaccountofdelayedbudgetapprovalandfreezingofnewcapitalbudgetsthrough theNational TreasuryBudgetdatedMarch2024isinvalid since the corebusinessof theFundistoinvestavailablefundsforthebenefitofthecontributorsandshouldnot belimited.

CommitteeRecommendations

• i.The Accounting Officer must at all times ensure that the budgets are realistic, achievable and always adhere to annualwork plans and revenue collection schedules.
• i. TheAccountingOfficermust atall times ensure thatpublicinvestments arebeing managed in accordance with sound financial or businessprinciples andprudent commercialpractices asstipulatedinArticle201of theConstitutionofKenya2010.

2.LongOutstandingTaxReceivables

• 211.The Committee heard that theFinancial Statementsreflect a taxrecoverablebalanceofKshs. 940,336,114comprising taxrefundduefromKRA(1996-1997),taxoninterest earnedfrom bankbalances.Andalowinterest taxofKshs.904,903,717,Kshs.8,937,527respectively The tax refund due from KRA(1996,1997)relates to 1996-and 1997-income taxreturn amountsofKshs.493,257,328andKshs.411,646,389thatwereinadvertentlypaidtothe Kenya Revenue Authority(KRA)after the Fund had become tax-exempt.Thebalance of Kshs.35,432,397relatesto2019/2020withholding,Income taxwithheldbyvariousbanks However,Management didnotprovideforauditreviewevidence ofprogressmadeinthe refund of the overpaid taxes.

• 212.Inthecircumstances,theFund hasnot beengetting any returns on thelongoutstandingtax receivablebalance ofKshs.940,336,114.

Managementresponse

• 213.The committeewasinformed that the taxreceivableofKshs.904,903,717isalong-standing taxrefund duefromKRA.Therefundis asubjectofaprioryear auditquery,wherePIC recommended thatKRAsettleitwithinsix(6)months,andaHigh Courtrulingissuedin 2016.TheFund has continuedengagingKRAovertheperiod.

CommitteeObservationsandRecommendations

• 214.The Committee observed that thematteronLongOutstandingTaxReceivables had been deliberatedoninthePIC19hand24Reportsandinthecommitteereportforthefinancial yearended30June2022.The Committeeupholdstheobservationsandrecommendations therein that theKenya RevenueAuthority shouldrefundNSSF theoverpaid taxofKshs. 904,903,717.

3.Revocation ofIrregularlyIssuedLand TitleDeeds

• 215.The Committeeheard that thenetassets availableforbenefitand asdisclosedinNote24to thefinancial statements,reflect aninvestment propertybalanceofKshs.35,389,483,481net ofprovisionsfor the cost ofundeveloped land locatedinUpperHill,Nairobi.Theland was purchasedby theFundfrom aprivate developer forKshs.115,000,000.However,thetitle deedwasrevoked throughKenyaGazetteNoticeNo.3460of1April2010on thegrounds that though thetitlewasallocated andissued toaprivate developer theparcelwasreserved forpublicpurposesunder therelevantprovisions of the Constitution,GovernmentLandAct (Cap280)and the TrustLand Act(Cap.288).TheFund filed the case incourt andiscurrently awaitingadetermination.

Managementresponse

• 216.TheCommitteewasinformed thattheTitlebeingheldbytheFundwasdegazettedand the possession ofthepropertygiventothePSNationalTreasurytoholdfortheJudiciary.
• 217.Thematter has been outstandingin Court awaiting allocation of a hearing date,which has nowbeen allocated for1ith June2025.Further investigations bytheEthics andAnti-

Corruption Commission are ongoingonthemanner inwhich thelandwas acquired and the Fund'stitlerevoked andpossessiongiven totheJudiciary.

Committeeobservation

The Committeeobserved that-

ThematteronRevocationofirregularlyissuedland titledeedswasaddressed inthePIC22d Report,inwhich theCommitteemade thefollowingobservations;

1. TheNational Lands Commissionrevoked thetitleheld byNSSFviaagazettenotice onlstApril2010and didnot directlyinform theFund about therevocation.The reasonsforrevocationwerenotgiventoeithertheNSSFortheCommitteeatthetime ofallocation.

• ii. Theallocationof theland totheJudiciarypredatedtherevocationof the titleheld by NSSFwhichmeant thattwovalid titlesexistedforthesamepieceoflandbefore revocationofNSSF'stitle.

The Committeefurther observed that;

• i.The matter is still pending in the court

CommitteeRecommendation

TheCommitteerecommendsthat-

• i.NSSFshould continue to engage theNational Land Commission and theMinistry of Landstoascertain theownership of theland.
• ii. Theimplementationcommitteeshouldfast-tracktheimplementationoftheNational Assemblyrecommendations.

UnresolvedPriorYearMatters

• 218.The Committeeheard that the auditreport ofthepreviousyear,severalissuesundertheReport onFinancial Statements,Report onLawfulnessandEffectivenessinUse of PublicResources, and Reporton Effectiveness ofInternalControls,Risk Managementand Governance. However,theManagement had not fullyresolved the issues asat 30June,2024.

Managementresponse

• 219.TheCommitteewasinformed thatthe audit reportofthe2022/2023financialyearraised the followingissues,and the action taken bymanagement toresolve theissuesissetoutbelow.

i.Non-PerformingInvestment inUnquoted Equities

• 220.Decline in the value ofinvestment in Consolidated Bankof Kenya by Kshs.Kshs. 209,265,764,and thattheFundcontinuestoholdtheinvestmentwithnoreturnbyway of dividendorcapital appreciation.

ManagementAction toResolvetheIssue

• 221.The Committeewasinformed thattheNationalTreasury,whichisthemajorityshareholder, recentlyindicated intentions toprivatizethebankthroughlistingor sellingthebanktoa strategicinvestor.TheBoardofTrusteesiskeenlyfollowingup on the developmentwith the intention of exitingat the earliest opportunity.

ii. InvestmentinNon-PerformingQuotedShares

• 222.The Committee wasinformed that thebalanceincludessharesheldin three(3)companies valued atKshs.170,708,881as at30June2023,whosevalue decreasedbyKshs.50,892,593 0r(23%)fromKshs.221,601,474as at30June2022.

ManagementActiontoResolvetheIssueof EastAfricanPortland Cement

• 223.The companyiscurrently onarecovery trajectory,whichisevidentfro theriseofits share pricefromKshs.4.99 as at30June2024 toKshs.35.95as at 13thDecember2024.Further, theFund hasreceivedin thecurrentfinancialyeara dividendcheque ofKES24.3million, signallingperformancerecoveryof theinvestmentinquestion.

SameerAfrica

• 224.TheCommitteeheard thattheFundheld aninvestmentinSameervalued atKshs.2.8million asat30thJune2024.

Over thelast3 years,Sameer Group has restructured its operations to shut down tyre manufacturingand concentrateonPropertyletting.InFY2024,GrossProfitgrewby4.8%to Ksh.373MwhileNetProfitincreasedbyover100%fromKes.42.4MntoKes262.9Mn.

• 225.TheFund has asked theFundManagers to closelymonitor theperformance of the company withaviewtoprofitabledivestingfrom theinvestment.

Athi RiverMining

• 226.TheCommitteeheard that the Companywentintoliquidation,andtheliquidatorsadvised that thechancefor ordinaryshareholderstobepaid isremote and thereforeManagement hasmade afullprovisionfortheKshs.16millioninvestmentsinthe2023/2024financial statements.

ii.LongOutstanding TaxReceivables

• 227.The Committeeheard that the recoverability of the tax receivables balanceofKshs. 904,903,717is a long outstanding tax refund due fromKRA.Therefundis the subject of a prioryearaudit query,wherePICrecommended thatKRA settlewithin six(6)months,and a High Court ruling issued in 2016.NSSF is alsoin possession of letters from KRA acknowledgingthedebt;however,todate,KRAhasyettosettle

iv. UnremittedandUndisclosedMemberContributions

• 228.Failure toincludelong outstanding contribution arrears in the financial statements as at 30 June 2023.

ManagementActiontoResolvetheIssue

• 229.Previously,managementusedtoreport contribution arrears asa disclosure,butin theyear under review,contribution arrearshave been included in the contribution receivable,and mechanismstotrackandcollectthearrearshavebeenreinforced

V. Delay in Construction ofBoundaryWall atPlotinBamburi

ManagementActiontoResolvetheIssue

• 230.ManagementisawaitingcompletionoftheupgradingoftheMombasa/MalindiHighway, which impacted the area with an interchange under construction at the site,toresume constructionandfinalisationof theboundarywalloftheBamburiparcel.

vi. OtherAssetsUnderConstruction

• 231.Status of construction ofSSH Gym Centre andBulkfilers at a cost ofKshs.6,995,968and Kshs.24,358,538respectively

ManagementAction toResolvetheIssue

• 232.The SSH Gymproject was completed and deployedforuse in theyear 2023.The asset has been capitalised,seenote25 to the financial statements underfittings.

Thebulkfilershavebeendeliveredfullyinstalledandarecurrentlyinoperationalusewithin thedesignatedpremises.TheFund haspaid50%of the total cost pending theoutcome of a case currentlyin court.

vii.Lackof Contractfor theProvision ofTravel Services

Payment for travel services without avalidcontractforthemonthsofMay andJune2023

ManagementActiontoResolvetheIssue

• 233.Thedelayedprocurementprocessfor Travelservices was concludedin the 2023/2024 financialyear,thusresolving thematter.

CommitteeObservationsandRecommendations

• 234.TheCommitteeobserved thatthemattersonunresolvedprior yearmattershadbeen deliberatedon in the Committee report for thefinancialyear ended30 June 2022.The Committeeupholdstheobservations andrecommendationstherein.

UnachievedPerformanceTargets

• 235.The Committee heard that statement ofperformance against pre-determined objectives revealed a targetreturn of15%formembers;however,only8%was achieved,resulting in underperformanceby7%.Further,the targetfornewmemberregistrationswas650,030,but only556,304was achieved,resultinginanunderperformanceof93,696or14%belowthe target.Further,the performance targets foreight(8)items were not reflected in specific and

measurableterms,contrarytotherequirementofthereportingtemplate,which states thatthe management should outline the strategicpillars,activitiesaimed at achieving them,and outputsundereachstrategicpillar.

• 236.Inthe circumstances,Management didnot achieve thepre-determinedperformance targets for the year.

Management response

• 237.The Committeewasinformed that themanagement acknowledgesthe audit observation.
• 238.By the timeoftheaudit,thereturn to the members had not been declared,asthis is done duringtheAnnual General Meeting(AGM).TheAGMhas since been held(25thApril 2025), andareturnof11%wasdeclaredforthemembersbenefit.
• 239.TheFund targeted theinformal sector,which constitutesover80%of thenewjobsthatwere createdin the year 2023.This resultedin556,304members comingonboard,an 85% performance.
• 240.The Fund has provided alternative member registration platforms,for example,USSD (*303#),to enhance the ease ofregistrationformembers and increase memberregistration numbers.A totalof86,509memberswereregisteredonthisplatform duringtheperiodfrom July2024toFebruary2025,accountingfor26%of totalmemberregistrations duringthe period.
• 241.Regarding the eight performance indicators noted as lacking specificity,Management has taken corrective action to ensure compliance with thereporting template.A capacitybuildingworkshopfor theofficers chargedwith theresponsibility ofreportinghasbeen conductedinwithadditionalcontrolsintroducedintheinternalperformancereviewsystem toensure all targets are SMART(Specific,Measurable,Achievable,Relevant,and Timebound).

CommitteeObservations

TheCommitteenotedthat;

• i.TheFund targeted new memberregistrations of 650,030,but only556,304 were achieved,resultinginunderperformanceof93,696or14%belowthetarget.

• ii.The performance targets for eight(8) items were not reflected in specific and measurableterms,contrary totherequirementofthereportingtemplate,whichstates that themanagement should outline thestrategicpillars,activities aimed at achieving themandoutputsundereachstrategicpillar.

CommitteeRecommendations

Withinthreemonthsupon adoptionof thisreport,theAccountingOfficershouldprepareand submitareporttotheNationalAssemblyand OfficeoftheAuditor-Generalonthecorrective actions taken toensure compliance with thereporting template and additional controls introducedin the internal performancereview system to ensure all targets are SMART (Specific,Measurable,Achievable,Relevant,andTime-bound).The Auditor-General should review andreportin thesubsequentaudit Cycle.

1.Non-PerformingInvestmentsinQuotedEquities

• 242.TheCommitteeheard thatthestatementofnet assets availableforbenefits and asdisclosed inNote23 to the financial statementsreflectsquoted equitiesofKshs.61,185,359,124.The investmentsinclude shares held in two(2)companies valued atKshs.127,076,491 asof30 June2024,whosevaluedecreasedbyKshs27,218,265or17.64%fromKshs.154,294,756as at30June2023.
• 243.In the circumstances,the value for money from the continuedholding of the quoted investment ofKshs.127,076,491in two(2) companies couldnot be confirmed.

Managementresponse

• 244.The Committeewasinformed that themanagement acknowledges the audit observation.

EastAfricanPortland Cement

• 245.TheCommitteewasinformed that the companyis currentlyon arecovery trajectory,which isevidentfrom theriseofits sharepricefromKshs.4.99asat30June2024 toKshs.35.95 asat 13thDecember2024.Further,the Fundhasreceivedin the current financialyeara dividendchequeofKES24.3millionsignalingperformancerecoveryoftheinvestmentin question.

SameerAfrica

• 246.The Committeewasinformed that theFund held aninvestmentinSameervalued atKshs.2.8 million asat30thJune2024.
• 247.Over thelast 3yearsSameer Group hasrestructured itsoperations to shut down tyre manufacturingandconcentrate on Propertyletting.In FY2024,GrossProfitgrew by 4.8% toKes373MnwhileNetProfitincreasedbyover100%fromKes42.4Mn toKes262.9Mn.
• The Fund has asked theFund Managers to closely monitor the performance of thecompany withaviewtoprofitabledivestingfrom theinvestment.

CommitteeObservationsandRecommendations

• 248.The Committee observed that theissue onNon-PerformingInvestment inUnquoted Equities was deliberatedinitsReportfor the financialyearending30June,2022,andupholds the observationsandrecommendationstherein.

2.Non-PerformingInvestmentinUnquotedEquities

• 249.TheCommitteeheard that the statement ofnet assets availableforbenefits andasdisclosed inNote 22 to the financial statements,reflects aprivate equity and other unlisted securities balance ofKshs.5,498,131,920,which includes thevalueof shares held at alocal bank of Kshs.38,428,500.However,the performance of thebank hasbeen declining over theyears, andnoreturn bywayof dividendorcapital appreciationhasbeenearned.

In the circumstances,thevalue for money from the shares held at a local bank ofKshs. 38,428,500couldnotbeconfirmed.

Managementresponse

• 250.The Committeewasinformed that themanagement acknowledges theaudit observation.This isaprior year audit query,and thebackground hasbeen comprehensivelycoveredin the 2021/2022financialyearauditreport.
• 251.The National Treasury,which is themajority shareholder,recentlyindicatedintentions to privatise thebankthroughlistingor selling thebank to a strategicinvestor.TheBoard of

Trusteesiskeenlyfollowing uponthe developmentwith the intentionofexiting at the earliest opportunity.

CommitteeObservationsandRecommendations

The Committeeobservedthat theissueonNon-PerformingInvestmentinUnquotedEquities was deliberatedinitsReportforthefinancialyearending30June,2022,andupholds the observationsandrecommendationstherein.

3.LossonRealization ofInvestments

• 252.The Committee heard that the statementofchangesinnetassets availableforbenefits as disclosedinNote10tothefinancialstatementsreflectslossonrealizationofinvestmentof Kshs.215,684,206whichincludeslossofKshs.233,083,273onrealizationoftreasurybonds whichisanincreasefromlossofKshs.77,927,393reportedin2022/2023financialyear.This is contrary toSection 2.1of theFund's Investment PolicyStatement,2020,which states that theBoard has aresponsibility toinvest theNSSFAssets inaresponsible and prudent manner. In the circumstances,Management wasinbreach of thelaw.

Managementresponse

• 253.TheCommitteewasinformed thattheinvestmentdecisionsinvolvebuyingandsellingof investmentsin awaythat optimizesreturns aswell as achievingaportfoliothatsuits/meets set objectives and that balancesrisk andreturns with a long-termview.The disposalof investments during theperiodunder reviewwasmainlycarriedout toachieve these objectives.During theyearunderreview,thefundmanagers strategically disposed of bonds thatwerelow-yieldingandinvestedtheproceeds inhigh-yieldingbonds,given therising interestratesexperienced during theperiod.Part of thesedecisions contributed to the high unrealisedgainreportedintheperiod.
• 254.Thefinancialyear2023/2024experiencedrisinginterestratesboth onthe short endandlong endoftheyieldcurvewhichresultedintodeclineinthevalueofthegovernmentbondsheld by theFund.Rise in interest ratesresults intodeclineinvalue of thebondswhilereduction in interestratesresultsintogrowthinvalueofbonds.WhethertheFunddecided tosalethelow yieldingbondsornotitwouldrecordalossinvalueofthebonds;realizedlossifsoldthe

bonds orunrealized lossif didnot sale thebonds.Bothrealized and unrealized losses affect theperformanceof thefund and arereportedin theprofit andlossof theFund.

• 255.Tominimize unrealized capital losses,theFund through its contractedfund managers sold low-yield bonds(average of12.38%)and reinvested theproceedsintohigher-yieldingbonds (average of 17.47%).TheFund made aprudent decision to sale thelowyielding bonds and reinvestinhighyieldingbonds astheseguaranteeshigherincomeinto thefuture.

Committee Observations

The Committeenotedthat;

• i.The Fund through its contracted fundmanagers sold low-yield bonds(average of 12.38%)andreinvested theproceeds intohigher-yieldingbonds(average of17.47%).
• ii.The Fund outsourced the process of Investment toFund managers who have a discretionaryinvestmentmandate

CommitteeRecommendations

Thecommitteerecommendedthat;

Within threemonths of adoption of thisreport,theFund should develop andsubmit to the NationalAssemblyaprudentinvestmentpolicythatis anchored onaproperlydiversified portfolio spreadingitsinvestments across different asset classes,sectors,and geographies using differentinvestment stylestoguideittoinvestitsfundswhich arenotfor thetime beingrequired tobe appliedforthepurposesof theFundinaccordancewith theprovisions ofSection37oftheRetirementBenefitsAct,CAP197.

4.Fund'sPremisesRented OutwithoutValid LeaseAgreements

• 256.The Committeeheard that the statement of changes in net assets availablefor benefits and as disclosedinNote8tothefinancial statementsreflectsaninvestmentincome amount ofKshs. 39,617,489,184,whichincludesrentincomeofKshs.979,78,168.Reviewofrecordsprovided revealed thateight(8) tenants owed theFundKshs.13,973,012and have obtained court

injunctions.Among these,two clientshavebeen underpayingtheirrent andnot paying on a regularbasis,resultinginan accumulatedbalance ofKshs.5,183,306.Further,five(5)other tenantswereoccupyingthepremiseswithoutleaseagreementsdespitetheFund'seffortsto have these tenants signnewlease agreements.This has denied theFundrentduefortheuse ofitspremises.

• 257.Inthecircumstances,theFund hasnotrealisedvalueformoneyfrom the continuedoccupancy oftheofficespacebynon-payingtenants.

Managementresponse

• 258.TheCommitteewasinformedthattheFundacknowledges theconcernsregarding tenants occupyingitspremiseswithoutvalidlease agreementsandinstances ofnon-payment.Efforts tohavethetenantssignnewleaseshavebeenputbutthefactthattheyareprotectedtenants hasposed a challengein execution.

The evictionand leaseregularisation processes are actively underway,and theFundremains committedtoensuringfullcompliance,optimisingrevenuecollection,andsecuringvaluefor itsinvestmentproperties.A statusreport ofeach caseisprovided.

Committeeobservation

TheCommitteeobservedthat-

• i.TheFund's premises were occupied by eight(8) tenants who owed itKshs.13,973,012 but had obtained court injunctions.The court injunctions obtained by eight tenants have disrupted theFund's ability toenforceits tenancypolicies andcollectrent.Thishas createduncertaintiesoverassetuseandundermines thegenerationofrevenuefrom investmentproperty.
• ii.Two clients have been underpaying on an irregular basis the rent due,resulting in the accumulatedbalanceofKshs.5,183,306.
• iii. Five(5) other tenantswere occupying thepremiseswithout lease agreementsdespite the Fund's effortsto have these tenants signnewleaseagreements.This implies that theFund hasnocontroloveritsassets.

CommitteeRecommendation TheCommitteerecommendsthat-

• i.The Accounting OfficerNational Social Security Fund should pursue Alternative dispute resolution mechanisms in theresolution of thecases.
• ii. Within three months upon adoption of this report,the Accounting Officer (NSSF) shouldprovideareport totheNationalAssemblyandtheAuditor-General forreview ofallitsleasedproperty,leasechargesperannum,lease agreements and therespective staffoccupancy.

5.Payables and Accruals

• 259.The Committeeheard that thestatementofnetassets available forbenefits,as disclosed in Note 34 to the financial statements,reflects a payables and accruals balance of Kshs. 2,027,774,170.The followingunsatisfactorymatterswere,however,noted:-

5.1LongOutstandingTaxPayables

• 260.The Committee heard that thepayables and accrualsbalanceinclude taxespayable to the KenyaRevenue Authority ofKshs.59,714,401,whose ageing analysis indicated thatKshs. 48,642,267relate to theyear2020and prior years.Thiswas contrary toSection 19(1)and (2) ofVAT Act,2013,Regulation 23(2)(a)of Public Finance Management (National Government)Regulations,2015and Section74(4)ofPublicFinanceManagementAct,2012 whichrequirepaymentVATandothertaxesduetobemadepromptly

Managementresponse

• 261.TheCommitteewasinformed thattheFundacknowledgestheobservationonlong-standing tax.Thetaxesrelate toVATonrent,whichissubjecttoreconciliation thathasbeengoingon toestablish thecorrectposition.KRAisalsoon thegroundwhere thereconciliationisjointly beingundertakeninviewofpossibleoffsetting of the amounts owingwithwhatisduefrom KRA.

Committee Observations

The Committeeobserved that;

• i.Thefund has a long outstandingVATpayable onrent relating to theyear2020 and prior years.
• ii. Therewas an ongoingreconciliationjointlybeingundertakenbetweenKRAand the Fundwith aviewtopossibleoffsettingoftheamountsowingwithwhatisduefrom KRA.

CommitteeRecommendations

The Committeerecommendsthat;

Withinthreemonthsuponadoptionofthisreport,theAccountingOfficerofNSSFistosubmit a report to theNationalAssemblyon theoutcome of thereconciliationprocessbetween the FundandKRA,detailingthe amountsowingfromeachentityand themodalitiesofsettlement cfthedues.Subsequently,theFund tosubmit thereport totheAuditor-Generalforaudit and reportinginthesubsequentauditcycle

5.2Long OutstandingTradePayables

• 262.TheCommitteeheard thatthepayablesandaccrualsincludepayablesamountingtoKshs. 8,979,159 thathadbeen outstandingforperiods exceeding twoyears.This was contrary to theNationalTreasurycirculars dated24June2023and16June2020,whichrequirepublic entitiestopaytheircreditorsinatimelymanner.

In the circumstances,Management was in breach of thelaw.

Managementresponse

• 263.TheCommitteewasinformed thattheFund acknowledgestheobservationonlong-standing tax.ThetaxesrelatetoVATonrent,whichissubject toreconciliation thathasbeengoingon toestablishthecorrectposition.KRAisalsoonthegroundwherethereconciliationisjointly beingundertakeninviewof possibleoffsettingof theamounts owingwithwhatisduefrom KRA.

CommitteeObservations

Thecommitteeobservedthattheauditissuewasnotrespondedto.TheFunddidnotprovide reasons why the payables were still outstanding,yetthere was a budget to cater for the expenditure.This implied thattheFund managementover-committed funds thatwere not availablefor use inits operations.

CommitteeRecommendations

TheCommitteerecommendsthat,

Within threemonthsupon adoptionofthisreport,theAccountingOfficerofNSSFistosubmit areport to theNationalAssembly and theAuditor-General onthemodalitiesof settlement of thedues.

• 6.Staff overestablishment andemployees in acting capacitybeyond stipulatedperiod.
• 264.The Committeeheard that thestatementof changesinnet assetsavailableforbenefitsand as disclosedreflects the administration costofKshs.6,950,213,769,whichincludesstaffcosts ofKshs.4,585,675,718.However,areviewof theFund staffestablishmentrevealed that someofthecadreshadexceededthe approvedstaffestablishment.Seven(7)jobcadreshad establishment for sixty-six(66)positions while staffinpost was eighty(80),resultingin an overestablishment by fourteen(14).Further,areview of thepayrollandhumanresources recordsrevealed that six(6)employees had been appointed in an actingcapacity forperiods exceeding six (6)months.This was contrary to Section 34(3)of the Public Service CommissionAct,2017,which states that anofficermaybe appointed in an actingcapacity for aperiod of atleast thirty days butnot exceeding a periodof sixmonths.The affected staff wereon acting appointment up until the time of audit inSeptember2024.

In the circumstances,Management was in breach of the law.

Managementresponse

The Committeewas informed asfollows by management that;

• i.TheFundcarried out ajob evaluation and came upwith anew structure,and also developednewhumanresourceinstruments,whichreceived approvalintheyear underreview,andimplementationisunderway.
• ii. Recruitmenttofill thevacancies andsubstantivelyfill thevacantpositionswas successfully undertaken,and themajority ofvacancies werefilledbyMarch2025.
• iii. Theinternalrecruitment/promotions processis ongoing,with the process expected tobeconcluded inApril 2025.Attached areadvertsfor thevacancies.

• iv. Acting appointments are intervening measures instituted to ensure business continuityand minimiseservice deliveryinterruptions.With the above recruitments,actingappointmentshavebeenconsiderablyreduced.

Committee observations

TheCommitteeobserved that-

• i.The approved staff establishment for seven (7)job cadres was sixty-six (66) positions.However,the staff inpost was eighty(80),exceeding the establishment byfourteen (14).This exposed the Fund toregulatory non-compliance and reputationalharm.
• ii.S six(6)months,contrary toSection34(3)of thePublicService CommissionAct, 2017,which states that an officer maybeappointedin an acting capacity fora

CommitteeRecommendations

• i.Within threemonths upon adoption of thisreport,Board of theFund and the State CorporationsAdvisoryCouncil shouldreview andsubmitareport theNational AssemblyandtheAuditor-Generalonthemeasurestakentoenforcecompliancewith approvedHumanResourceinstruments.
• ii. Within threemonths upon adoption of thisreport,theAccounting Officer should providea detailedreportonthereasonsforfailingtoobservetheapprovedHuman resourceinstruments.In addition ensure adhere atall times to the PublicService CommissionHumanResourcePoliciesandProceduresManualonstaffingandensure fillingofvacanciespromptlyaspertheapprovedstaffestablishmentstructureto effectivelydeliverservicestothepublic.

7.AdministrativeCosts

• 265.TheCommitteeheardthatthestatementofchangesinassetsavailableforbenefitsand as disclosed in Notes to the financial statements,reflects administrative costs of Kshs. 6,950,213,769.Thefollowingunsatisfactorymatterswere,however,noted:

7.1IrregularProcurementof ConferenceFacilities

• 266.The administrative costs amount includes meetings,travelling,and subsistence amount of Kshs.317,586,319outofwhichKshs.11,312,400relatestoconferencefacilities.Thefacilities were,however,procured throughrequestsforquotationsfrom non-registeredSuppliers.This wascontrarytoSection105(a)ofthePublicProcurementandAssetDisposalAct,2015which statesthataprocuringentitymayuse arequestforquotationsfromtheregisterofsuppliers forprocurementof the estimatedvalueof thegoods,works ornon-consultancyservicesbeing procuredislessthanor equal to theprescribedmaximumofKshs.3,000,000forusingrequests for quotations as prescribed in Regulations.
• 267.Further,an amount of Kshs.3,337,000 was paid toa local hotel,which exceeded the contractedvalue in the LocalPurchase Order (LPO)ofKshs.1,000,000resultingin over expenditure ofKshs.2,337,000.Management indicated that the over expenditurewas due to the extended durationin thehotel.However,therewasnopre-approval toengage theHotel for the extra service that was paid.

In thecircumstances,Management was inbreach of the law.

Managementresponse

• 268.The Committeewasinformed that themanagementhasnoted andacknowledges theauditor's concerns.
• 269.TheLocalPurchase Order(LPO)valued atKES 1,000,000was issued tocover theinitial conferencepackagefor a plannedeventinvolvinganestimated 200participants,covering venueandbreakfast.
• 270.TheadditionalcostofKES2,337,000wasincurredduetounanticipatedchangesinthescope ofthe event,specifically,provisionoflunchinadditiontobreakfast thathadbeencateredfor, anincreaseinthenumberofparticipants and theneedforaholdingroomforthechiefguest
• 271.Managementhasimplemented correctivemeasurestoensure strict adherence toprocurement suppliers,infull compliancewith applicablelegal provisions.

Committee Observations

The Committeenoted that;

• i.The conference facilities with the totalamount ofKshs.11,312,400wereprocured throughrequests for quotatiors from non-registered Suppliers contrary toSection 105(a)of thePublicProcurement andAssetDisposalAct,2015whichstates thata procuringentitymayusearequestfor quotationsfrom theregister ofsuppliersfor procurementoftheestimatedvalueofthegoods,worksornon-consultancy services being procured isless than or equal to theprescribed maximum of Kshs.3,0oo,000for usingrequestsforquotations asprescribed inRegulations.
• ii. LocalPurchase Order (LPO)ofKshs.1,o0o,000 was paid a total amount ofKsh. 3,337,000,resultinginover expenditureofKshs.2,337,000without therequiredpreapproval.

CommitteeRecommendations

TheCommitteerecommended that;

• i.The Committee reprimands the then Accounting Officer for contravening Section 105(a)ofthePublicProcurement and AssetDisposalAct,CAP412C.
• ii. Within three months upon adoption of this report,theInspector-General to surcharge the then Accounting Officer and theHead ofprocurement theover-expenditure of Kshs.2,337,000and any penalties prescribed inboth thePFMAct CAP412A and PublicProcurement andAssetDisposalAct CAP412Candprovideevidenceofthis surchargetothePIC-SSAA.

7.2IrregularProcurementofFuelthroughCash

• 272.TheCommitteewas alsoinformed that the administrativecostsalsoincludemotorvehicle runningexpenditureofKshs.51,026,216.However,areview of thefuelledgerrevealed a cashpurchase offuel amounting toKshs.3,205,688made through standingimprest.Thiswas contrary to theSecondSchedule of thePublicProcurement andAssetDisposal Regulations, 2020,which sets themaximum valueforlow-value procurement undergoodsatKshs.50,000 whohada FrameworkAgreementfrom theMinistryofLands,PublicWorksandUrban

Development,the dealerdidnothavefuel stationscountrywide.However,auditverifications revealed thatimprestsissuedwereforhighamounts,andtheFundshould haveprocuredother fuel supplierscompetitively tocomplywith thelaw.

Managementresponse

• 273.TheCommitteewasinformed that theFund previouslyprocured fuel throughNational Oil Co.the designated government supplier,in linewitha government directive.However,due tounforeseeninternal challenges,National Oil was unable tosustainsupply,necessitatinga temporarycashpurchasetoensurecontinuityofFundoperations while thegovernment finalized the onboardingofanewsupplier.To ensure smooth operations,a standingimprest wasissuedforfuellingall19vehiclesattheheadoffice,which totalled toan amountofKshs 3,205,688for the9monthsit tookustoget anewgovernment contracted supplier.
• 274.Throughout thisperiod,strict controls were implemented toprevent misuse of funds.Once thenew government-contracted supplierwas in place,the cash purchase arrangementwas immediately discontinued,and theFund transitioned tothe approvedserviceprovider.

CommitteeObservations The Committee observed that;

TheFundpurchasedfuelforKsh.3,205,688through standingimprest contrary to theSecond Scheduleof thePublicProcurement and Asset Disposal Regulations,2020,which sets the maximumvalueforlow-valueprocurementundergoodsatKshs.50,000peritemperfinancial year.This was reportedlydue to theinabilityofthe NationalOilCompany(contracted supplier)tosustainthefuelsupply.

The Committeenoted that; CommitteeRecommendation

• i.The Committee reprimands the then Accounting Officer and the then Head of procurementforcontravening theSecondScheduleof thePublicProcurementand AssetDisposalRegulations,2020

• ii.Within three months upon adoption of this report,the Inspector-General to surcharge the then AccountingOfficer and theHead ofprocurementand anypenalties prescribed inboth thePFMAct CAP412A andPublicprocurement andDisposal Act Cap412CforbreachofthePublicProcurement andAssetDisposalActCAP412C andprovideevidenceofthissurchargetothePIC-SSAA.

7.3IrregularitiesintheProcurementofRenovationWorks

• 275.The Committeeheard that the administrativecosts amountincludes repairs andgeneral maintenanceofKshs.410,888,300outofwhichKshs.14.438,945wasspentonrenovation worksprocured through arequestforquotations.However,a single committeewas appointed ofPublicProcurement andAssetDisposal Regulations,2020,which states that Accounting Officerorsuch otherpersondelegatedinwritingbythatAccountingOfficershall,andforthe purposes of the procurement process,appoint an ad hoc opening committee in accordance withSection78oftheAct.andtheadhocevaluationcommitteeinaccordancewithSection 46of theAct andRegulation39of theseRegulations,in addition,there was noevidence ofa preliminaryand technicalevaluation of thesubmittedquotations.Reviewof thequotationand the openingminutes revealed several gaps in the process,such as unsignedminutesbyall the committeemembers andworkthatwas eithernotinspectedornot acceptedbythecommittee immediatelyaftercompletion.

276.Inthecircumstances,Managementwasinbreachof thelaw.

Managementresponse

• 277.TheCommitteewasinformed that theFundacknowledgestheproceduralgapsidentifiedin theprocurementofrenovationworks,whichwereprimarilyduetounderstaffingatthetime hencetheestablishmentofasinglecommittee
• 278.Thisissuehas sincebeenresolved throughstaffrecruitmentconductedearlierin theyear, Regulations,2020.Themanagement has ensured the separation ofthe observedfunctions by establishing distinct committees(opening and evaluationcommittees)for each quotation or tender.

Committee Observations

TheCommitteeobserved that;

TheFundprocuredRenovationworksworthKshs.14.438,945procured througharequestfor quotations.However,a single committee was appointed to both open and evaluate the quotations contrary toRegulation 91(2)(a)and(b),(3)and(4)ofthePublicProcurement and AssetDisposal Regulations,2020.

The Committeenoted that;

CommitteeRecommendations;

TheCommitteereprimandsthethenAccountingOfficer andHeadofprocurementforbreach ofSection30ofthePFMActCAP412Awhichrequiresthatallprocurementofgoodsand servicesrequiredforthepurposesofthenationalgovernmentoranationalgovernmententity becarriedoutinaccordancewithArticle227oftheConstitution andtherelevantlegislation onprocurement anddisposalofassets.

8.0InvestmentinGovernmentBonds

• 279.TheCommitteeheard thatthestatementofnetassetsavailableforbenefitsandasdisclosed inNotes to the financial statements reflects Government Securities,treasury bonds and corporatebondsbalancesofKshs.253,804,875,051andKshs.1,723,248,494respectively The following unsatisfactory matters were,however,noted:-

8.1PurchaseofBondsataPremium

• 280.TheCommitteeheard thatthereviewoftheFund'sbankstatementsrevealedthatbondswhich Kshs.500711,695without satisfactory explanations.Further,there was no analysis provided foran audit comparing thepremiumpaid,whichin someinstanceswashigher than the coupon ratesearned for theperiod before purchase.This contravenes Section 2.1of the Fund InvestmentPolicyStatement,2020,which statesthat theBoardhasaresponsibility toinvest theNSSFAssetsinaresponsibleandprudentmanner.

In the circumstances,theFund's assets investment maynot have been undertaken prudently

Managementresponse

• 281.The Committee was informed that themanagement acknowledged theAuditors'query regarding the National SocialSecurity Fund's(NSSF)purchase and sale of government treasurybondsatapremiumordiscount,ratherthanattheirnominalvalues.
• 282.The Fund has outsourced the process of Investment toFundmanagerswhohavea discretionaryinvestment mandate butwithinthe Fund'sapprovedInvestment Policy Statement (IPS).
• 283.Thebondspurchasedinquestionweremainlythroughthesecondarymarket,and thepremium above thenominalvalueison thebasisoffull price,whichcapturesboththe actualprice and accrued interest,whichis tothebenefit of thebuyerin thiscase,theFund.
• 284.It'sworthnotingthat thepurchase andsaleofgovernmenttreasurybondsin thesecondary market are subjecttomarketforces,includingprevailinginterestrates,demand,andsupply dynamics.Consequently,thepricesatwhich thesebonds are traded oftendeviate from their nominal(face)values.Thekey driver topurchasebondsisInterestRateMovements and the Accruedinterestcomponent:
• interestratesfluctuate,theprice ofexisting bonds adjusts accordingly.Analysis showing the withthecouponevenforthedatesbeforethesamehadbeenboughtby thefundand this explains why thepurchaseprice arehigher than thenominalvalue besides the impact of supply and demandwhichalsoimpactsthepurchaseprice.
• 286.Themanagementalsoinformed theCommittee that they alsowish tostatethatevenin governmentprimaryauctions,there areinstanceswherebonds aresoldataprenium,mainly drivenbymarketdynamics.BelowisalistofbondsissuedbythegovernmentofKenya in the primary auction that have beenissued at a premium,demonstrating that bondprices are market-driven.

| Bond IssueNumber | Date | Price | Subscriptionratio | |--------------------|------------|----------|---------------------| | IFB1/2023/6.5 | 9/8/2024 | 103.7373 | 131% | | FXD1/2024/010 | 22/07/2024 | 102.3524 | 105% | | FXD1/2023/005 | 7/6/2024 | 103.3867 | 141% |

• 287.As can be seenbelowoutof the totalpremiumofKshs500million,thefundgained accrued interestofKshs255millionthusleading toanetpremiumofKshs245.7millionoutofwhich Kshs159.5millionwaspremiumpaid toCentralBankofKenyaforthebondspurchased in theprimary market.
• 288.With this analysis,the actual premium isKshs86millionwhichis on account ofprevailing marketconditions andhigheryieldstothelong-termbenefitof thefund.

Summaryofbondspurchasedatpremium

| | NOMINALVALUECONSIDERATION | | PREMIUM | ACCRUEDINTEREST NETPREMIUM | | |-------------------------------------|-----------------------------|----------------|---------------|------------------------------|---------------| | Purchase in the primary market(CBK) | 6,485,000,000 | 6,644,453,980 | (159,453,980) | | (159,453,980) | | Purchasein the secondary market | 5,515,300,000 | 5,856,561,104 | (341,261,104) | 255,044,707 | (86,216,397) | | Total | 12,000,300,000 | 12,501,015,084 | (500,715,084) | 255,044,707 | (245,670,377) |

Committee Observations

The Committeenoted that;

• TheFundoutsourced the process ofInvestment to Fund managers whohavea discretionaryinvestmentmandate.
• ii. Thepurchase andsaleofgovernment treasurybondsin thesecondarymarketare subject to market forces,including prevailing interest rates,demand and supply dynamics.
• ili. Outofthetotalpremium ofKshs500million,thefundgained accruedinterestofKshs 255million thusleadingtoanetpremiumofKshs245.7million outofwhichKshs 159.5millionwaspremiumpaid toCentralBankof Kenyaforthe bondspurchased in the primarymarket.

CommitteeRecommendations

Thecommitteerecommendedthat;

TheCommitteeupholdstherecommendationmadeinparagraph252onInvestments.

8.2TradinginBonds

8.2.1SaleofBondsatDiscountPrice

• 289.TheCommitteeheardthatthescheduleoftreasurybondpurchases,sales,andredemption and bankstatementsreflectbondspurchasedatanominalvalueofKshs.5,108,450,000weresold forKshs.4,319,290,919below thebond'sparvaluebyKshs.789,159,081.Thiswas contrary toSection2.1oftheFundInvestmentPolicyStatement,2020,whichstatesthat theBoardhas aresponsibility toinvest theNSSFAssetsin aresponsible andprudent manner.Itwasnoted that some bonds recorded high capital losses,and the yield rate was minimal,and Management did notcompare thehighcapital losseswith theyield rateforeachbond.

Managementresponse

• 290.TheCommitteewasinformedthattheFundhasoutsourcedtheprocessofInvestmenttofund managers whohavea discretionaryinvestmentmandate,butwithintheFund'sapproved InvestmentPolicy Statement(IPS).
• Bondsaregenerallysold atadiscountifthecouponrateislower than thecurrent marketrate, asinvestors will onlypurchase thebondatapricebelowitsnominalvalue(discount)to compensateforthelowerreturn.
• 291.Thefundmanagerssoldbondswhichhadloweryieldswith theobjectiveofdeploying proceedsintohigher-yielding bondsso as toimprove thereturnsfortheFund,whichhasbeen a challengefor anumber ofyears.
• 292.Ascanbeseenfrom thetablebelow,allbondswhichweresold atadiscounthadsignificantly soldatnominalpricesorpricesabovenominal,asthese aretruemarket dynamics

| Bond Issue No | Nominal Amt | Sale Price | Discount | Coupon. rate | Market yield | |---------------------------|---------------|---------------|-----------------------------|----------------|----------------| | FXD1/2018/15YR | 555,500,000 | 466,853,044 | 88,646,956 | 12.6500% | 14.9685% | | FXD1/2019/10Yr | 1,500,000 | 1,321,808 | 178,193 | 12.4380% | 17.4642% | | FXD1/2021/25YR | 440,000,000 | 390,923,910 | 49,076,090 | 13.9240% | 15.4500% | | FXD1/2022/10YR | 8,000,000 | 7,117,672 | 882,328 | 13.4900% | 14.9825% | | FXD2/2018/20YR | 1,500,000 | 1,435,190 | 64,811 | 13.2000% | 14.9539% | | FXD1/2011/20Yr(Re-0pened) | 255,000,000 | 185,792,975 | 69,207,026 | 10.0000% | 15.1276% | | FXD1/2012/20Yr | 1,448,850,000 | 1,179,593,264 | 269,256,736 | 12.0000% | 15.0383% | | FXD1/2021/020YR | 1,100,000,000 | 986,386,057 | 113,613,944 | 13.4440% | 15.0075% | | FXD1/2022/25YR | 300,000,000 | 272,435,115 | 27,564,885 | 14.1880% | 16.000% | | FXD2/2013/15Yr | 220,300,000 | 187,792,871 | 32,507,12912.0000%17.5583% | | | | IFB1/2018/20Yr | 850,000,000 | 721,429,514 | 128,570,48611.9500%12.4250% | | |

• 293.TheInvestmentdecisionsundertakenby theFundManagersgeneratedareturn of13.5% from the assetsmanaged bythefundmanagers whichwasmuchhigher compared toprevious yearswhen thefundhasgeneratedreturnslower than4%.
• 294.The discount ofKshs 789,159,081atwhich thefundsbondswere sold doesnot necessarily reflect the actual loss.A lossin abond transaction is determinedby thebookvalueof the bond at thepoint sale and the actual saleproceedsreceived.Bonds are alwaysrevalued on regularbasis to determine their actualvaluewhichis alwaysinfluenced by theprevailing interest rates.

Committee Observations The Committee noted that;

• i. The Fund outsourced theprocess ofInvestment toFund managers who havea discretionaryinvestmentmandate.
• ii. Thepurchase andsaleofgovernmenttreasurybondsinthe secondarymarketare subject to market forces,including prevailing interest rates,demand and supply dynamics.
• iii. TheInvestment decisionsundertaken by the Fund Managersgeneratedareturn of 13.5%from the assetsmanagedby the fund managers whichwasmuchhigher compared topreviousyearswhenthefundhasgeneratedreturnslowerthan4%.

CommitteeRecommendations

TheCommitteerecommendedthat;

TheCommitteeupholdstherecommendationmadeinparagraph252onInvestments.

8.2.2BondsPurchasedatPremiumbutSoldatDiscount,

• 295.TheCommitteeheardthattheauditverificationscarriedoutrevealedthatsimilarbonds than thenominal price,amounting toKshs.79,077,296and sold at discountedprices,amount toKshs.192,967,771,resulting in a capital loss of Kshs.272,045,067.No satisfactory explanationwasprovidedfor the decision topurchase thebonds at a premium andsell at a discountwithin thesameperiod.This contravenesSection2.8oftheFundInvestmentPolicy Statement,2020,whichrequires thatinvestments shall bemadewithproper judgment and care under thecircumstancesprevailing,which pursue prudence,discretion and intelligence exercise consideringprobablesafetyofthecapitalaswellastheprobableincome tobe derived.
• 296.In the circumstances,the assets of theFund might not have been investedprudently and safeguardedfromthedeclineinvalue.

Managementresponse

• 297.TheCommitteewasinformedthat theFundhasoutsourced theinvestment decisionsto6fund managersfortheperiodunderreview,andeachfundmanagerindependentlyundertakes their investment decisions without reference to the other.Therefore,you will find one fund managerdoingpurchaseswhile another oneissellinginlinewith theirrespectiveinvestment strategies.
• 298.TheFundmanagershavethediscretionarymandateandjustificationoftheirinvestment actionsinrespectofthesaleandpurchaseofbondsasarecontainedintheFundInvestment Policy.
• 299.TheInvestmentdecisionsmadebytheFundin theyear2023/2024resultedintobetter performanceresultinginaninvestmentreturnof12%assummarizedinthetablebelow.

| Year | 2018/19 | 2019/20 | 2020/21 | 2021/22 | 2022/23 | 2023/24 | |---------------------|-----------|-----------|-----------|-----------|-----------|-----------| | Returnon Investment | 1.4% | 1.8% | 10.4% | (3.2)% | 2.1% | 12.0% |

300.Intheyear2024/2025thefundisexpected toreturn evenahigherinvestmentreturnresulting from investment decisionsbeingundertaken by theFund.

Committee Observations The Committeenoted that;

• i. The Fund outsourced theprocessof Investment to Fund managerswho havea discretionaryinvestmentmandate.
• ii. Thepurchase and sale ofgovernment treasurybonds in the secondarymarket are subject tomarket forces,including prevailing interestrates,demand and supply dynamics.
• iii. TheInvestment decisionsmadeby theFundduring thefinancialyear 2023/2024 resultedintobetterperformanceresultingin aninvestmentreturnof12%

CommitteeRecommendations Thecommitteerecommendedthat;

TheCommitteeupholdstherecommendationmadeinparagraph252onInvestments.

6 InvestmentProperty

• 301.The statementofnet assetsavailable forbenefits as disclosed inNote 24 to thefinancial statementsreflects aninvestmentpropertybalance ofKshs.35,389,483,481.The following inconsistencieswere,however,noted:-

9.1Irregular Operations atKisumuInvestmentProperty

• 302.Included in the investment property balanceisKisumu EstateLand ofKshs.220,000,000. KisumuMunicipal CouncilowedNSSFstatutory deductions amountingtoKshs228,769.145 asat6October2011,forwhich theCouncilpaidKshs.69,500,000,leavingabalanceofKshs

159,269,145.During theFundBoardofTrusteesmeetingon16December2011,a debt swap was approvedwith thedefunct Council,whichwassubsequently adopted by thefull Council in theirmeetingof19December 2011.Aspreviouslyreported,therehavebeen some interferencesfrom theCounty Government ofKisumu.Further,physicalverification carried outrevealed there was an Occupant on the landoperatingagarage.However,tenancy agreementsforthe occupancywerenotprovidedforauditreviewcontrarytoSection51(l)of NationalSocialSecurityFundAct,2013whichstatesthattheBoardofTrusteesshallcause tobekept allproperbooksofaccount andotherbooksandrecordsinrelationtotheFundand toall theundertakings,funds,investments,activities andpropertyof theFund as theBoard of Trusteesmay deemnecessary.

• 303.In the circumstances,Managementwasinbreachofthelawwhilebeneficial ownership of the propertycouldnotbeconfirmed.

Managementresponse

• 304.Management acknowledges the audit observation.Thisis aprioryear audit query,and the backgroundhasbeencomprehensively coveredinthe2021/2022financialyearauditreport.
• 305.TheFundhasinits custody ownershipdocumentsfortheproperty andpayslandrates to Kisumu County.TheFund hasplans to develop theproperty andhas commenced theprocess ofprocuringacontractor todeveloptheproperty.

CommitteeObservationsandRecommendations

TheCommitteeobserved thattheissueonKisumuInvestmentPropertywasdeliberated inits Report for the financialyear ending30th June,2023andupholds the observations and recommendationstherein.

9.2IdlePropertiesinNairobi CentralBusinessDistrict.

• 306.TheCommitteeheard that thebalanceincludesthevalueoffive(5)propertieslocated at NairobiCentralBusinessDistrictvaluedatKshs.4,022,000,000asat30June2024,which remainedidleduringtheyearunderreview.ThiswascontrarytoSection1.5.2oftheFund InvestmentPolicy statement,2020,which statesthat theBoardhadadopted theInvestment

PolicyStatement toensure that assets arestructured andinvestedinaprudentmanner at all times.

• 307.Inthecircumstances,Managementwasinbreachof thelawwhilebeneficial ownershipof the propertiescouldnotbeconfirmed

Managementresponse

• 308.TheCommitteewasinformed that theparceloflandhasbeenused asacarparkin thepast to generateadditionalreturns.However,theimmediatepastoperatorofthecarparkwent tocourt severallyblocking theFundfromprocuringa new operatorfor thesite.

The stalemate has sincebeen unlocked and the Fund is in the processof sourcing an engineering,procurement,construction and financing contractor to develop theproperty.

CommitteeObservations

The Committee observed that theFund has five(5)properties located at Nairobi Central BusinessDistrictvalued atKshs.4,022,000,000 thatrernainedidle during theyearunder review.However,althoughlandvalue appreciateswith time,theidlepropertymightattract grabbers,and thepublicwasnot gettingvalue formoneywith respect to therevenue that would accruefromthepropertyhad theFundutilisedit.

CommitteeRecommendations

Within threemonthsuponadoption of thisreport,theAccounting Officer-NSSFshould take stockof itsproperties,prepare areport,and submit it to thenationalAssemblyandAuditorGeneral forauditreviewandreportingin the subsequent audit cycle.Thereport shouldgive details of theproperty,size,location,any encumbrances,investments set upin the property, documented evidenceofplannedutilizationofidleland,landratespaid over theyears and if therearethirdpartiesclaimingownership

8Property,Plant andEquipment

• 309.TheCommitteeheard that thestatementofassetsavailableforbenefitandasdisclosed in Note25 to thefinancial statement reflects aproperty,plant and equipment balance ofKshs. 433,365,273.The followingunsatisfactorymatterswere,however,noted:-

10.1ManagementFailuretoDispose Obsolete

• 310.TheCommitteeheardthat assetsreviewofthe2023/2024annualprocurementplanandannual operatingplanrevealed theFundholds obsoleteproperty,plantandequipmentwithareserve priceofKshs.5,843,000whichwereearmarked fordisposalandadisposalcommittee constituted but thedisposalwasnot donecontrarytoRegulation180(1)ofPublicProcurement andAssetDisposalRegulation,2020providesthatanAccountingOfficershall beprimarily responsibleforensuringthattheprocuringentityfulfilsits assetdisposalobligations

Managementresponse

• 311.TheCommitteewasinformedthattheFundacknowledgesthe observationregardingthe
• 312.ThedisposalplanundertheFY2024/2025frameworkhassincebeenapprovedandtheFund hasinitiated the disposalprocessinfull compliancewith thePublicProcurement andAsset DisposalAct,2020.TheFund hasfurtherwrittentoPPRAforguidanceon theuseoflicensed agents.

CommitteeObservations

The Committeenoted that theFundheldobsoleteproperty,plantandequipmentwithareserve price ofKshs.5,843,000.However,despite earmarking them for disposal and a disposal committee constituted,the disposal was not done,subjecting the property to further deterioration,occasioningundetermined loss to theFund.Thiswas inbreach of Regulation 180(1)ofthePublicProcurementandAssetDisposalRegulation,2020

CommitteeRecommendations

Within three months of theadoption of thisreport,theFund should initiatethe disposal processin accordancewith thelawspertaining totheprocessofdisposalfor therespective assets.

10.2ProceduralProcurementofFurniture

10.2.1ProceduralProcurementofDesktopReception

• 313.Included in the property,plant,and equipment balance are furniture additions ofKshs. 36,340,392,whichincludedKshs.2080,000paidforquotationnumberNSSF/RFQ-44/20232024.Theprocurementrelated tothesupplyofareceptiondeskwas awardedtoasupplierat aquoted sumofKshs.2,0so,ooo.However,reviewofthequotationopeningminutesrevealed that thequotationwereopenedandevaluated by the samecommittee on5December,2023 andtherewerenoquotationevaluationminutesprovidedforauditreviewwhichcontravenes Section 78(1)of thePublicProcurement andAssetDisposalAct2015which states that an Accounting Officer ofa procuringentity shall appoint a tender opening committee specificallyfortheprocurementin accordancewiththefollowingrequirementsandsuchother requirements asmaybeprescribedwhich includesarequirement that thecommitteeshall haveatleastthreemembersand at leastoneofthemembersshall notbedirectlyinvolvedin theprocessing or evaluation of the tenders.

Managementresponse

• 314.TheCommitteewasinformed that themanagement acknowledges thatduring theyear under review,therewasaprocedural lapseinhavinga combined committeeforboth openingand evaluation ofquotations.Correctivemeasureshavebeentaken byappointing separate committeesfor theopeningand evaluation ofquotations or tenders.A sample of an ad hoc committee appointedduring the current financialyearis attached.

CommitteeObservations

The Committee noted that the Fundpurchased a reception deskfor an amount ofKshs. 2,080,000.However,the tenderswere opened and evaluated by the samecommitteewhichis contrarySection78(1)ofthePublicProcurementandAssetDisposalAct CAP412Cwhich states thatanAccounting Officer ofaprocuring entity shallappointa tender opening committeespecificallyfortheprocurementinaccordancewiththefollowingrequirements andsuchother requirementsasmaybeprescribedwhichincludes arequirementthatthe committeeshallhaveatleast threemembersandatleastoneofthemembersshallnotbe directlyinvolvedin theprocessingorevaluationof thetenders.

CommitteeRecommendations

TheCommitteereprimandsthethenAccountingOfficerandthethenheadofprocurement forcontraveningSection78(1)ofthePublicProcurementandAssetDisposalAct CAP412C.

10.2.2ProceduralProcurementof8BayBulkFiler

• 315.The Committee wasinformed that,included in the furniture additions balance ofKshs. 36,340,392isKshs.1,046,777relatingtoquotationnumberNSSF/RFQ-79/2023-2024,paid toasupplierfor thesupplyofone8-baybulkFiler.Reviewof theprocurement documents revealed that,asper thequotation analysisSheet,the committeerecommended the tender be awardedtothelowestbidderwhohadquotedanamountofKshs.980,000.However,audit reviewof theLPOrevealed thatthetenderwasirregularly awarded tothehighestevaluated bidderat a quotedsumofKshs.1,046,777which contravenesSection106(3)of thePublic ProcurementandAssetDisposalAct,2015whichstates that thesuccessful quotationshall be thequotationwith thelowestprice thatmeets therequirementssetoutin therequestfor quotations.Further,evaluation oftheprocurement documentsrevealed thatthequotationwere openedandevaluatedbythesamecommitteeon7February,2024andtherewerenoquotation evaluationminutesprovidedforauditreviewwhichcontravenesSection78(1)ofthePublic Procurement and AssetDisposal Act2015which states thatanAccounting Officerofa procuringentityshallappointatenderopeningcommitteespecificallyfortheprocurementin accordancewiththefollowingrequirements andsuch otherrequirementsasmaybeprescribed whichincludearequirementthatthecommitteeshallhaveatleastthreemembersandatleast oneofthemembersshallnotbedirectlyinvolvedintheprocessingorevaluationofthe tenders.

Managementresponse

• 316.TheCommitteewasinformed thatthemanagement acknowledgesthatduringtheyearunder review,therewasaprocedurallapseinhavingacombinedcommitteeforbothopeningand evaluation ofquotations.Correctivemeasureshave been taken by appointing separate committeesfor the openingandevaluationofquotationsor tenders.A sampleofan ad hoc committee appointedduringthecurrentfinancialyearis attached.

CommitteeObservations

TheCommitteenoted that theFundpurchased8BayBulkFilers at a costofKshs.1,046,777 while the evaluated lowest bidder had quoted a price ofKshs.980000 resulting in a loss of Kshs.66,700 in contravention of Section 106(3)of the Public Procurement and Asset DisposalAct,2015.Further,thetenderswere opened and evaluated by thesame committee, which is contrary toSection 78(1)of thePublicProcurement and Asset Disposal Act,CAP 412C

CommitteeRecommendations

TheCommitteereprimandsthethenAccountingOfficerandHeadofprocurementfor contraveningSections106(3)and 78(1)ofthePublicProcurementandAssetDisposalAct CAP412C

10.2.3ProceduralProcurementof4BayBulkFilers

• 317.TheCommitteeheard that,includedinthe additionsforfurniturebalanceofKshs.36,340,392 is anamountofKshs.1,572,876forquotationnumberNSSFIRFQ-7912023-2024forthe supplyofthree4-baybulkfilersawardedtoasupplierataquotedsumofKshs.524,292each. However,evaluationoftheprocurement documentsrevealed that thequotationwas opened andevaluatedbythe same committeeon7uhFebruary2024andtherewerenoquotation evaluationminutesprovidedforauditreviewwhichcontravenesSection78(1)ofthePublic ProcurementandAssetDisposalAct2015which states thatanAccounting Officer ofa procuringentity shall appoint a tenderopeningcommitteespecificallyfortheprocurement and thecommitteeshallhaveatleastthreemembersand atleastoneofthemembersshall not be directlyinvolved in theprocessingor evaluation of the tenders.
• 318.In addition,areviewofquotations analysis revealed that the evaluation committee recommendedawardofthecontracttothelowestbidderatacostofKshs520.000peritem, totallingKshs.1,560,000forthethree items.However,the tenderwasirregularly awarded to the highestbidderataquotedamountofKshs.524,292foreachitem totallingto Kshs.1,572,8776which contravenes Section106(3)of thePublicProcurement and Asset DisposalAct2015which states thatthesuccessfulquotationshallbethequotationwith the lowestprice that meets therequirements set out in therequest for quotations.Although the management'sresponse to themanagement letterindicates that a physicalvisit to furniture

storesofallbiddersrevealedthatfurniturefromthelowestbidderwasoflowquality,no evidence,such asphotos orreports from anyof the procurement committees,wasprovided to support this claim.

• 319.In thecircumstances,Managementwasinbreachof thelaw.

Managementresponse

• 320.TheCommitteewasinformed that,Physicalvisit tothefurniturestoresforall thebidderswho hadsubmitted theirbidsnotedthat thequalityof thefurniture quotedbythelowestbidder, Ms.MilosVentureatacostKshs.520,000peritemtotallingtoKshs.1,560,000for the three itemswerelowhence decisionwasmade to award the tender toMs.Kenrahmah Company Limitedata quotedamountofKshs.524,292,andwhosefurniturequalitywashigh

CommitteeObservations

TheCommitteenotedthat theFundpurchased three4-BayBulkFilersatatotal costofKshs. 1,572,876while theevaluatedlowestbidderhadquotedapriceofKshs.1,560,000resulting inalossofKshs.12,876in contraventionofSection106(3)ofthePublicProcurement and Asset DisposalAct,2015.Further,the tenders were openedand evaluated bythe same committee,whichis contrary toSection78(1)ofthePublicProcurement andAssetDisposal ActCAP412C.

CommitteeRecommendations

TheCommitteereprimandsthe thenAccountingOfficerandHeadofprocurementfor contraveningSections106(3)and78(1)ofthePublicProcurementandAssetDisposalAct CAP412C

9DelayedConstructionofBoundaryWallatPlotinBamburi

• 321.TheCommitteeheard that the statement ofnet assets availableforbenefits,as disclosed in Note 27to the financial statements,reflects assets under construction,a balance ofKshs 128,016,172,whichincludestheconstructionofaboundarywallofaplotinBamburiofKshs 10,152,732.Aspreviouslyreported,the constructionofaboundarywallofaplotinBamburi

• was awarded at a contractprice ofKshs.16,563,900whichwastobe completedwithineight (8)weeksfrom12March2017.Theworksweresuspendedduetoencroachmentbyawater pipeline on theland andundergroundcablespassingthroughtheland,anindicationthat the Fund hadnot conducted a survey before contract award.The suspensionwas lifted on 21st March,2018,but the contractor was unable tocomplete the work,leading to contract terminationafter81%of theworkshadbeencompleted.
• 322.Fundenteredintoanewcontractwithanothercontractor on 28September 2020 for completion of the remaining works at a contract price ofKshs.6,233,094which was to be completedwithin eight(8)weeks.However,as of the time of the audit in September,2024, theconstructionofthewallhadnotbeencompleted,sevenyears aftertheexpected completion period,contrarytoSection9of thecontract documentwhich WStheprocuringentity to terminatetheagreementinwritingifthecontractorfailstoformanyotherobligationunder the agreement.
• 323.Further,Management did notprovide for audit verification any site inspection reports meetingminutes between the Contractor,theFund'sManagement,and theProject manager, or theproject statusreport as at30hJune2024.Thevalueformoney spent on theboundary wall couldnotbeconfirmed.

ManagementResponse

• 324.The Committeewas informed that themanagement acknowledges the audit observation.This isaprioryear audit query,and thebackgroundhasbeen comprehensivelycoveredin the 2021/2022financialyearauditreport.
• 325.Management is awaitingcompletionof theupgrading of theMombasa/Malindi Highway, whichimpacted thearea with an interchangeunder construction atthe site,toresume constructionandfinalisationof theboundarywallof theBamburiparcel.

CommitteeObservationsandRecommendations

The Committeeobserved thattheissueontheDelayedConstructionoftheBoundaryWallat thePlot inBamburiwas deliberatedinitsReport forthefinancialyearending3othJune,2023, andupholdstheobservations andrecommendationstherein.

8Staff Mortgageand Loans

• 326.ThestatementofnetassetsavailableforbenefitandasdisclosedinNotes29and30tothe financial statements reflects staffmortgage scheme deposits andstaff loans ofKshs. 1,304,830,014andKshs.158,331,610respectively.Thefollowingunsatisfactorilymatters were,however,noted:-
• 12.1Non-PreparationandSubmission ofFinancialStatementsfor StaffMortgage Schemeand Staff CarLoan.
• 327.TheCommitteeheard thatfinancialstatementsfortheStaffMortgageSchemeandStaff Car Loanhavenotbeenpreparedand submitted totheAuditorGeneralforauditcontraryto Section 84(1)and(3)ofPublic Finance ManagementAct,2012 which states that The administratorofanationalpublicfundestablishedbytheConstitutionoranActofParliament shall preparefinancial statementsforthefundforeachfinancialyearinaformprescribed by theAccountingStandardsBoard andNotlaterthan threemonthsafter theendofeach financialyear,theadministratorofanationalpublicfundshallsubmit thefinancialstatements preparedunder thissection to theAuditor-General.

ManagementResponse

• 328.Managementpreviouslyunderstood thattheFund'sfinancial statements,whichincludedstaff mortgages,providedforaudit,weresufficient.However,followingclarification,theFundhas commencedpreparationofseparatefinancialstatementsforbothschemesincompliancewith theAct,andthiswillformpartofthe2024/2025financialyearauditschedules.

CommitteeObservations

TheCommitteeobservedthat,theinstitutedidnotsubmitforauditthefinancialstatementfor the yearending30hJune,2024 thereby contraveningSection24(10)ofPublicFinance ManagementActCAP412AwhichrequiresanAccountingOfficertosubmittheentity's financialstatementsfor auditnotlater than threemonthsafterendofeachfinancialyear.

CommitteeRecommendations

TheCommitteerecommendsthat,

Within threemonthsupon adoption of thisreport,theFundpreparesfinancial statementsfor theyearending 30th June,2024and submitsthem tothe Auditor-General for audit.

Subsequently,the Auditor-Generalshallaudit in the subsequent audit cycle and submit a report totheNationalAssembly.

12.2MaintenanceofSeparateStaffMortgageand CarLoanAccounts

• 329.Included inNote29is the staff mortgage scheme deposit ofKshs.1,304,830,014and included inNote30on the staffloansbalanceofKsh.158,331,610,which includes carloansofKshs. 153,421,544.Further,Note31onreceivables andprepayments disclosesstaffreceivables of Kshs.43,216,478,whichfurtherincludescarloan debtors andmortgageloan debtors ofKshs. 15,181,924andKshs.6,917,601respectively.However,norecoverywasmade on mortgage loandebtors andotherstaffloansbalanceofKshs.6,917,601whichremainedunchanged as at both 30 June,2024 and 30 June,2023.Despite the sufficient bank balances of Kshs.501,631,893heldinthreebanksforthestaffmortgage andcarloanschemefunds,itwas notclearwhystaffwereprovidedloansformortgageand carpurchasefromtheotherNSSF operations.Thisiscontrary toRegulation54(1)ofPublicFinanceManagement(National Government)Regulations,2015which states thatexcept as provided forin theActand these Regulations,anAccounting Officer ofan entitymaynotauthorizepayment tobemade out of funds earmarkedforspecificactivitiesfor purposes other than those activities.

ManagementResponse

• 330.The observation of the unchanged balance ofKshs6,917,601regardingmortgageloans is acknowledged.The figure is undergoingreconciliation,and out of it,Kshs 1,392,594is subject toacourt case,leavingabalanceofKshs5,579,006.Themanagement intendstoclose thisbytheend ofJune2025.
• 331.Mortgages and carloans are advanced throughbank accounts,which arefundedand operate asrevolving accounts.The interest earned is credited to the specific accounts.Therefore,there arenoloans advancedfromoperationsmoney.Samplestatementsfor theMortgage accounts areprovided.

CommitteeObservations

The Committeeobserved that theFund did notmaintain a separateStaffMortgageand Car LoanAccount from theoperationsoftheNational Social SecurityFund'smain operations Account.This was contrary toRegulation 54(1)ofPublicFinance Management(National Government)Regulations,2015whichstatesthatexcept asprovidedforin theAct andthese Regulations,anAccounting Officer ofanentitymaynot authorizepayment tobemade outof fundsearmarkedforspecific activitiesforpurposes other than those activities.

CommitteeRecommendations

TheCommitteerecommendsthat,

Withinthreemonthsuponadoptionofthisreport,theFundshouldseparatetheoperationsof theStaffMortgageand CarLoanAccountsfromtheoperationsoftheNationalSocialSecurity Fund's mainoperationsAccount in accordancewithRegulation54(1)of thePublicFinance Management(National Government)Regulations,2015.

12.3 OperationalisationofStaffMortgageand CarLoanFundwithoutRegulations

• 332.TheInformationprovided for auditreviewrevealed that theFund Administrator hasnot developedappropriateregulationstoguide theimplementation of thecarloan andmortgage schemesasrequiredby theSalariesandRemuneration Commission circularreferenceNo. SRC/ADM/CIR/1/13VOL.IIl(128)of17December,2014,andtheloanpolicyprovided, whichincludesstaffmortgageandcarloan amongotherforms ofloans,doesnotindicate approvedamounts.

ManagementResponse

• 333.Reviewof thecurrentStaffmortgage and carloanregulationsisunderway andwill be finalised alongwith therevisedmortgagescheme policybefore theend of the currentfinancial year.

CommitteeObservations

TheCommitteenoted thattheStaffMortgageand CarLoanFundwasoperatingwithoutthe appropriateregulationstoguidetheimplementationof thecarloan andmortgageschemesas requiredbythe SalariesandRemunerationCommissioncircularreference No. SRC/ADM/CIR/1/13VOL.IIl(128)of17December2014.

CommitteeRecommendations

Within threemonths upon adoption ofthis report,the Accounting Officer to develop requiredbytheSalariesandRemunerationCommission.TheRegulationsshouldbesubmitted totheNational Assembly and theAuditor-General forreview oncompliance.

12.4LapsedAgreementwithMortgageSchemeAdministrator

• 334.TheCommitteeheardthatNote29included long-termdepositsheldwithamortgagescheme administrator ofKshs.668,762,970.However,the agreement with the mortgage scheme administratorwassignedon17hDecember,2012,foraninitial durationoffive(5)yearswith anoption torenew.However,after thelapseofthefirst termon16December,2017,there wasnoevidenceofrenewal.Thiswas contrary to Section 68(2)of thePublicFinance Management Act 2012,which requires that an Accounting Officer shall ensure that all contractsentered intoby theentity arelawful andarecompliedwith.
• 335.In the circumstances,Management was in breach of the law.

ManagementResponse

• 336.Management hascommenced therenewalofthe agreements andwill have thisfinalized before endof2024/2025financialyear.

CommitteeObservations

The Committee observed that the agreementwith themortgage scheme administrator signed on17hDecember,2012foradurationof five(5)yearswith anoption torenewhadlapsedon 16December,2017withnoevidence ofrenewal.Thismeant that the administrator was irregularlyin the officeas thesubstantiveFund administrator.

CommitteeRecommendations

The Committeereprimands thethenAccountingOfficerforretainingtheadministratorwho wasirregularlyin theofficeasthesubstantiveFund administrator.

13.0ReceivablesandPrepayments

• 337.TheCommitteeheardthatthestatementofnetassetsavailableforbenefitsandas disclosed inNote 31to the financial statements reflects receivables and prepaymentsofKshs. 8,191,311,181.Thefollowingunsatisfactorymatterswere,however,noted.

13.1Unrecovered LongOutstandingStaffReceivables

• 338.The receivablesand prepayments balance includes staffadvances ofKshs.43,216,478 However,norecovery was made on three staffreceivables amounting toKshs.7,407,489 which includesmortgageloan debtors ofKshs.6.917,601,otherstaffloan debtors ofKshs. 434,749 andstaffvehicleinsurance advance ofKshs.55,139,allofwhichwereoutstanding as at 30th June,2023.Thiswas contrary to Regulation 64(1)(a)and(b)of Public Finance Management (National Government) Regulation,2015 which states that an Accounting Officer andareceiver ofrevenue arepersonallyresponsiblefor ensuring thatadequate safeguards existandareappliedfor thepromptcollection andproperaccountingfor,all nationalgovernmentrevenue and other publicmoneys relating totheir Ministries, departments oragencies and thatadequatemeasures,includinglegal actionwhere appropriate, aretakentoobtainpayment.
• 339.Further,Management did notexplainwhyithadnotrecoveredfromthepayroll of the affected staffforthelongoverduestaffreceivables.
• 340.In the circumstances,Management was inbreach of the law.

ManagementResponse

• 341.TheCommitteewasinformed that thefundhasarobustmechanismforcollectingallamounts advancedtostaff,includingrecoveryfrompayroll.The3balancesrelatetolegacybalances migratedfromtheoldERPtoSAP,whicharestillunderreconciliation.
• 342.Managementhascommittedtofinalisingreconciliationon thesebalanceswithaviewto finalising and taking appropriate actionbefore the close of the currentfinancialyear.

CommitteeObservations

The Committeenoted that;

• i.StaffReceivables amounting toKshs.7,407,489includedmortgage loan debtors of Kshs.6.917,601,otherstaffloandebtorsofKshs.434,749andstaffvehicleinsurance advanceofKshs.55,139,which have been outstandingasat30hJune,2023.However,

therewas no evidence ofrecovery despite the management indicating that it has a robustmechanism ofcollectingall amounts advanced tostaff,includingrecoveryfrom payroll.

• ii. The explanationgiven bytheFund managementfornon-recoverywasinvalidsince theeffectofmigrationfrom theoldERPtoSAPdonothold.

CommitteeRecommendations

Within threemonths upon adoptionof thisreport,theAccounting Officershould prepareand submita report to theNationalAssemblyandtheAuditor Generalonthestatusof the outstandingreceivablesinquestion,detailingthebalances and howit hasbeenrecovered.

13.2Long OutstandingAdvancePayment onStalledEmbakasiSchemeProject

• 343.The Committee heard that thebalance includes the deposits and prepaymentsbalanceofKsh. 275,193,480,which further includes advances and deposits to suppliers ofKshs.274,297, 180,which includes the deposit paid to a contractor of the Nyayo Estate Phase VI Construction Project,of the balance reflects Kshs.215,883,806.However,the schedule providedKshs.215,883,806differs fromthebalancereflectedin thepreviousyear'saudit report ofKshs.215,540,774resultingina differenceofKshs.343,032
• Further,aspreviouslyreported,theconstructionof324units atNyayoEmbakasi ata total cost of Kshs.2,155,407,742bya contractor had stalled.The construction works,which accordingto thecontractsignedon21February2013wereto take seventy-eight(78)weeks from2June2013to30November2014.AlthoughManagementexplained thattheproject stalleddue toa lackofapprovalfor the changeofuserbytheNairobi CityCounty Government,no evidence was provided for approval for construction by the County GovernmentofNairobi.
• 344.As at the time of audit inSeptember,2024,only forty-four(44)units hadbeen constructed. Further,theworkcertified thetotalamountofKshs.274,675,066,and thecontractorhadbeen paidKshs.227,900,500on topof themobilisationfeeofKshs.215,540,774.Management explainedthat thecontractorhadbeenrequested torefundKshs.168,766,208,and that the Fund was exploring alternative dispute resolution mechanisms,but the supporting

correspondenceswere not provided.As at the time of the audit in September 2024,theFund hadnotrecovered theadvancepaymentfrom thecontractorofKshs.168,766,208.

In the circumstances,Management wasinbreach ofthe law and therecovery of the advance payment appears doubtful.

ManagementResponse

• 345.TheCommitteewasinformed that themanagement acknowledgestheaudit observation.This isaprioryear audit query,and thebackground hasbeen comprehensively covered in the 2021/2022financialyearauditreport.

TheFundiscurrently engaging the contractor andrelevant approving authoritieswith aview toexploringpossibilities ofreviving theproject andrecovering theadvancepaidto the contractor.

CommitteeObservationsandRecommendations

The Committee observed that theissue onLong OutstandingAdvancePaymentonStalled Embakasi SchemeProjectwas deliberated inits5t(PIC-SSAA)Reportinrespect ofthe financialyearending30th June,2021 andupholds the observations andrecommendations therein.

13.3Un-SurrenderofImprest

• 346.The Committeeheard that,included in thebalance,are staff advances ofKshs.43,216,478 whichfurther includes staffimprests ofKshs.3,819,564being amounts un surrenderedby staff asat30tJune,2024.Imprest amounting toKshs.1,149,000hadnot been surrendered as at the timeof the audit on6hSeptember,2024.Thiswas contrary toRegulation93(5)of the PublicFinance Management (National Government)Regulations,2015,which states thata holderofatemporaryimprestshallaccountfororsurrendertheimprestwithin7working daysafterreturningto thedutystation.
• 347.In the circumstances,Managementwasinbreach of the law.

ManagementResponse

• 348.The Committeewasinformed that themanagement acknowledgestheobservation.Imprests wereadvanced tostaffwhoweretakingpartinaFundassignment thatwentpast thefinancial yearend,hence theinability to surrenderbefore theclose of thefinancialyear.Management confirmsthattheimprestamountshavesincebeenfullysurrendered.

Committeeobservations

The Committee observed that the AccountingOfficerwas in breachofSection 71of the Public Finance ManagementActCAP 412A and the attendantregulations thatrequire surrender of imprestswithin seven days uponconclusion of the assignmentforwhich thesaid imprestwasissued.

Committeerecommendations

TheCommitteerecommended that-

TheAccountingOfficersshould ensurethatimprestadvanced toofficersissurrenderedwithin the stipulatedperiod of seven(7)days after return to the work station in accordance with section93of thePublicFinanceManagement (National Government)Regulations,2015.

14.Operation ofIrregular Custodial BankAccounts

• 349.The Committeeheard that the statement ofnet assets available forbenefits,as disclosed in Note32 to thefinancial statements,reflects cash andbankbalances ofKshs.2,200,390,732. ReviewofcustodianbankstatementsrevealedthattheFundhastwobankaccountsheldin thename ofaCompany thatwasnot oneof thecurrentcontracted fundmanagers.Itwas also noted thatthetwobankaccountswereactiveandhadnumeroustransactionsandhadclosing bank balancesofin theyearunder review andKshs.1,024,819respectively as at30June, 2024.

Audit hadrevealed that the Company inwhosename the custodianbank accountwas held, had tradedwith theFundyears ago;however,a name change tookplace,and a certificate of change of name was approvedbytheRegistrar of Companieson14 October 2015.It was not clearwhythenames of the twobankaccounts hadnot beenupdated or closed,given that the Fund hadseveralotherbank accountsin thenewbusinessname,whichiscontrarytoSection 66(1)of the Companies Act,2015.The lawFurther,theManagement of theFund did not obtaintheapprovalofTheNationalTreasurytooperatethetwobankaccountscontraryto Section 28(1)ofPublic Finance ManagementAct,2012which states thatthe National Treasuryshallauthorizetheopening,operatingandclosingofbank accounts and subaccounts for allnationalgovernment entities.

350.In the circumstances,Management was in breach of the law.

ManagementResponse

• 351.The CommitteewasinformedthattheManagement acknowledgestheaudit observation. InvestmentManagementLtdchangeditsname to GenAfricaInvestmentManagementLtd.

Thebankaccount isin thename of theNSSFBoard ofTrustees.The CustodialBank accounts areusually assigned toafundmanagerwhois contracted by theFund,and the accounts in question were assigned to Genesis(K)Investment Management Ltd in2012.In2015,Genesis The Omission was in respect of changing the custodial bank account's name toread the changednameofthe assignedfundmanager.

• 352.Management has since engaged the appointed custodians andchanged thenames of the two bank accounts toreflect the current names ofthe appointed fundmanager-GenAfrica InvestmentManagementLtd.
• The bank accounts in question were openedin the year 201l,before the Public Finance ManagementAct2012cameintoforce.

CommitteeObservations

The Committeenoted that;

• i.TheFunddidnotobtain approvalfromtheNational Treasury tooperate the twobank which states that theNational Treasury shall authorise the opening,operatingand closingof bankaccounts andsub-accountsforall nationalgovernmententities.
• ii.The two bank accounts were active and hadnumerous transactions andhad closing bankbalances ofin theyearunderreview andKshs.1,024,819respectively asat30 June2024.

CommitteeRecommendations

Within threemonthsuponadoptionof thisreport,theAccounting Officershouldprovide approvalfromtheNationalTreasurytooperate thetwobank accounts,thecashbooksand the relateddocumentsofexpenditureforthetwobankaccountstotheAuditor Generalforaudit andreportinginthesubsequentauditcycle

15.BoardofTrustees

15.1IrregularCompositionoftheBoard Committees

• 353.Reviewof thecompositionoftheBoardcommitteesrevealedthatduringtheyearunder audit two(2)Board Membersservedin threecommitteeswithout approval bythe Cabinet Secretary in consultation with theState Corporations Advisory Council.This was contrary to the Presidency;Executive Office ofthePresident HeadofPublicService Circulardated11March 2020,which states thatboard members can onlysit in a maximum of two committees.

Management Response

• 354.The Committeewasinformed that theBoard Committees werereconstitutedduring the 194hBoardmeetingheldon16thApril2024tocorrectthe anomaly.Theonlyboardmembers servingin more than three committeesare Dr.Musa Nyandusi and Mr.Amos Cheptoo,who arealternates to the PermanentSecretaryfor Labour and SkillsDevelopment and the Permanent SecretaryforNational Treasury andEconomicPlanning,respectively

Committee Observations

The Committeenoted thattwo(2)BoardMemberswho servedinthreecommittees didnot have the requisite approval by the CabinetSecretary contrary toThePresidency;Executive OfficeofthePresidentHeadofPublicServiceCircularof11March2020.

CommitteeRecommendations

TheCommitteerecommendsthattheBoardmustatall timescomplywiththegoverninglaws procedures,regulations,aswell astheMwongozocodeof Governance

15.2IrregularBoardMeetings

• 355.The Committeeheard that thestatement of changesinnet assetsavailableforbenefitandas disclosed in Note 13to the financial statements,reflects the administrative cost of Kshs. 6,950,213,769,whichfurtherincludesKshs.68,782,807fortrustee'semoluments.However, review ofsupporting documents includingtrustees'minutesandcorporate governance statementrevealedNSSFBoardofTrusteesheldfourteen(14)full boardmeetingsandnine (9)Finance,Investments and Social Security committee meetings which exceeded the

maximum number ofsixmeetings approved inOffice of thePresident Circular Ref: OP/CAB.9/1AdatedMarch11,2020.Further,thesame circularstatesthatapprovalforany extraboard meetings(includingspecialmeetings)abovethemaximumnumberspecifiedshall require thatachangeofacompany'snamehaseffectfrom thedateonwhich thecertificate of change of name is issued.a justification by the Board as to the source of funds,and implicationsthereof,andreasonswhythesamecannotbe adjudicatedinregularmeetings whichrequest shall be submitted for approval by the relevant Cabinet Secretary,in consultationwiththeStateCorporationsAdvisoryCouncil(SCAC).

356.In thecircumstances,Managementwasinbreach of thelaw.

ManagementResponse

• 357.TheCommitteewasinformedthat thenumberofboardmeetingsisguidedbytheAlmanack whichwasapproved.
• 358.NSSF,duringtheperiodunderreview,hadanexistential threatoccasionedbyinvalidationof its establishing statute (NSSF Act),necessitating several meetings between the Board and stakeholders toensure thatNSSFcontinuestodischargeitsmandate.
• 359.In addition,theBoard undertook therecruitmentprocessforGMsandManagers,all ofwhich necessitatedadditionalmeetingsbeyond thoseapprovedintheAlmanackduringthefinancial yearunderreview.

Committeeobservation

TheCommitteeobserved that theinstitutesBoardhadmore thansix(6)meetingswithout the approvalof theCabinet Secretary,contrary toHeadof thePublicService CircularREF: OP/CAB.9/1AdatedMarch11,2020,whichcapped thenumberofmeetingstosix(6)

Committeerecommendations

TheAccountingOfficershouldat all times complywithHeadof thePublicServiceCircular REF:OP/CAB.9/1AdatedMarch11,2020,whichcapped thenumberofBoardmeetings to six(6).

1.Delays in Allocating Client Payments

• 360.The Committeeheard that thestatementofnet assets availableforbenefitsandas disclosed inNote 31 to the financial statements,reflects net receivables andprepayments balance of Kshs.8,191,311,181.Thebalanceincludes clearingbalancesofKshs.90,077,228.However, noexplanationwasprovidedforthedelaysinallocatingtheamountsintotherelevant accounts.Clearingaccountspose theriskofunauthorisedreallocation ofclientpayments.
• 361.In the circumstances,the controls over the receipting of client payments are weak.

ManagementResponse

• 362.TheCommitteewasinformedthattheFundacknowledgestheobservationregardingthe clearingbalancesofKES90,077,228.All transactions arebeinghandledinlinewith standard accountingpracticeswithintheSAPERPsystem.
• 363.The noted balance represents transactions that were still undergoing reconciliation,and allocations to the accounts are ongoing.

Committee Observations

The Committee observed that;

• i.There was a delayed clearing of balances amounting toKshs.90,077,228notallocated intotherelevantaccounts,whichposestheriskofunauthorisedreallocation ofclient payments
• ii. Although themanagement hadputinplace anERPsystem thathad automated the accountabilityprocessofcontributions,theproblem ofcontributionsinsuspensestill persists.

CommitteeRecommendation

The Committeerecommends that-

• i.Within six months upon adoption of thisreport,the Accounting Officer,National SocialSecurityFund toliaisewithemployerstoidentifythecontributors/beneficiaries inorder tobringthematter toitslogicalconclusion.
• ii. As recommended in this report on the issue ofcontributions in suspense,the committee upholds the same;within three months upon adoption of this report,the

AccountingOfficershouldprepare areport onthe ContributionsinSuspenseAccount andsubmitit totheNationalAssemblyandtheAuditor-Generalforreview.Thereport shouldincludethemodalitiesforensuringcontributionsmadearematchedto the contributor and employer for allgovernment entities orprivate companies,and the ledgershowingtheflowofthebalancesfromthefinancialyears2015/2016tothe currentbalance.TheAuditor-Generalshouldreviewthereportandtheflowofthe balances andreportinthesubsequentaudit cycle.

2.LackofAccountReceivablesManagementPolicy

• 364.The Committeeheard that thestatement ofnetassets availableforbenefitreflects and,as disclosedinNote31 to thefinancial statements,reflectsreceivables andprepayment ofKshs 8,191,311,181.Further,Note33to thefinancial statements reflects totalprovisionsonassets amountingtoKshs.2294791,266,outofwhichprovisions amountingtoKshs.946,600,881 relatetodoubtfulaccruedincomeandprovisionfordoubtfuldebts.However,reviewofthe Fund'sinternal control systemsandrecordsrevealed that theFund hadnot developed and approvedanaccountsreceivablepolicytoguidethecontrolsandmanagementofthe receivables.Thiswas contrary toRegulation43(1)(d)ofPublicFinance Management (National Government) Regulation,2015,which states that an Accounting Officer shall manage,control,and ensure thatpolicies are carried out efficiently andwastage ofpublic fundsiseliminated.
• 365.In the circumstances,theeffectivenessofinternalcontrols on themanagementof accounts receivablecouldnotbeconfirmed.

ManagementResponse

• 366.TheCommitteewasinformedthatthemanagementhasdevelopedabaddebtprovisionand write-offpolicyfor accountsreceivablemanagement,whichwas approvedon19tDecember 2024.

CommitteeObservations

TheCommitteenoted thattheFund hadnotdevelopedandapprovedan accountsreceivable policy to guide the controls andmanagement of the receivables.Themanagement has developedabaddebtprovisionandwrite-off policy,although theauditor has questioned the lackof an accountsreceivablemanagement policy,which takes care of credit period,credit limits,andactions thatmaybe taken against defaulters,amongothers andgoesbeyond debt provisionsandwrite-offs.

CommitteeRecommendations

The committee recommends thatwithin threemonthsupon adoption ofthis report,the AccountingOfficershould developand implementa comprehensive debt/accountsreceivable policy thatcovers credit period,credit limits and actions thatmaybe takenagainst defaulters, securityorguaranteesrequirementsandconditions.Theapprovedpolicyshouldbesubmitted totheNationalAssembly andAuditor Generalforreviewandreportingin the subsequent AuditCycle.

3.Long OutstandingReconciliationItems,Goods and Invoice Receipts Clearing

• 367.TheCommitteeheard thatnote34 to thefinancial statementsdiscloses thepayablesand accruals balanceofKshs.2,027,774,170,whichincludespayable due to vendors ofKshs. 252,281,676,which further includes Goods Receipt(GR)andInvoice Receipt(IR)clearing account balances ofKshs.82,490,511.However,the balances have been long outstanding with some dating back tothe 2012/2013 financial year.However,Management has not provided satisfactoryexplanationsfor the delayinclearing/settling thebalances.

Inthe circumstances,the effectiveness of theinternal controls over the goods and invoice receipts clearingprocess could notbe confirmed.

ManagementResponse

• 368.TheCommitteewasinformedthat themanagement acknowledgesthepresenceof thelongoutstandingbalancesinGRIRledgers;however,theFund hasmadedeliberateefforts to reconcile andresolve theitems over theperiod.The2012/2013itemsremain openin the system because ofa configurationissue that prevents clearance even with corresponding entries.The issue has beenraisedwith the consultant,whohasgiven asolution whichis under consideration andisexpected tobedeployedbytheend of thecurrentfinancialyear.

CommitteeObservations

The Committeenoted that;

The Fund had long-outstanding Reconciliation items,Goods Receipt (GR)and Invoice Receipt(IR),clearing account balances amounting toKshs.82,490,511,which dates back to the2012/2013financialyear.However,themanagement indicates thata configurationissue couldnotallowclearanceevenwithcorrespondingentries;theyhadconsultedwith asystem specialist,butcouldnotbeclearedeither.

CommitteeRecommendations

TheCommitteerecommendsthat;

Within threemonths upon adoption of thisreport,theAccountingOfficer is toprepareand submittotheNationalAssemblyand theAuditor-Generalareportwithdataas towhothe payees were,how the payables arose,and thereconciliation process initiated.TheAuditorGeneral shouldsubject that data to audit andreportin thesubsequent audit cycle.

4.IncompleteAssetsRegister andAssetsTagging

• 369.TheCommitteeheardthatthestatementofnetassetsavailableforbenefitandasdisclosed in Note 25reflects aproperty,plant and equipment balance ofKshs.433,365,273.However, most oftheassetswerenottaggedwithuniqueidentifiers.Further,the assetsregisterwasnot updated with details inrespect to theperson's responsible,the assets'location and cuurent marketvalues.
• 370.Inthecircumstances,theeffectivenessofinternal controls over assetsmanagement couldnot confirm.

ManagementResponse

• 371.The Committeewasinformed that theFundensures that all acquired assetsare taggedwithin threemonthsfromthe date ofprocurement,inlinewith establishedinternalprocedures. At the time ofthe audit,anasset taggingexercisewasactivelyunderwayfornewly acquired assets.Therefore,the assertion that"most assets arenot tagged"does not accuratelyreflect theongoingimplementationprocess.

CommitteeObservations

The Committeenotedthat;

The Corporation did not update thefixed assets register contrary toRegulation143(1)of the PublicFinance Management -National Government Regulations2015,whichrequires the Accounting Officer to be responsible for maintaining aregister of assets under his or her control orpossession asprescribedbytherelevantlaws.

Committeerecommendations

Within threemonthsupon adoptionofthisreport,theAccounting Officer,should submit to theNationalAssemblyand theAuditor-General theupdatedfixedassetregisterdetailingall the assets of the companywith therespective details that needs to be disclosed in the asset registerin accordancewith the disclosurerequirementssetbytheNationalTreasury and the AccountingstandardsBoard.

EXAMINATIONOFTHEAUDITOR'SGENERALREPORTONTHEAUDITED ACCOUNTSOFTHENATIONALCANCERINSTITUTEOFKENYAFORTHE FINANCIALYEARS2019/2020TO2023/2024

Dr.EliasMellyAg.CEO of National CancerInstitute of Kenyawas accompanied by Mr. Timothy Olweny(Chairperson-Boardof Directors),Mr.Geoffrey Mutai(Principal Accountant)and Ms.JoanNdirangu(PrincipalFinance Officer)appeared before the Committeetoadduceevidenceon theAuditedAccountsofNational CancerInstituteof KenyafortheFinancialYears2019/2020to2023/2024.

FINANCIALYEAR2019/2020

1.UnsupportedTravellingandSubsistence

• 372.TheCommitteewasinformed thatthestatementoffinancialpositionreflectsexpenditureof Kshs.20,057,084in respect to theuse of goods and services and as disclosed inNote 8 to the financialstatements.Includedin the amountisKshs.13,457,560onsubsistenceand travel allowance,outofwhichexpenditurerevealedKshs.2,557,800wasnot supportedbypayment

vouchers orany supporting documents.In the circumstances,the accuracy and completeness oftraveland subsistenceallowancesofKshs.2,557,800couldnotbeconfirmed.

Managementresponse

• 373.The Committee was informed thatmanagementregrets thisanomaly.The supporting vouchershavenowbeentracedandprovidedforverification.

CommitteeObservations

The Committee noted that;

expenditureofKshs.2,557,800duringthetimeofappearancebefore thecommittee,they failed toprovidethesameto the auditors during the audit,therefore,contraveningsection62 (1)(b)ofPublicAuditAct CAP412Bwhichstatesthatapersonshallnotwithoutjustification, fail toprovideinformationrequired underthisAct.

CommitteeRecommendations

• i.The Committeerecommends that themanagement shouldalways ensure adherence tosection62ofthePublicAuditActCAP412B.
• ii. Within threemonthsuponadoptionof thisreport,theDPP toreview thematter and, should it amount to an offence,take appropriatelegalaction in accordance with section62(2)ofthePublicAuditAct CAP412B.

2.Budgetary ControlandPerformance

• 374.TheCommitteeheard that thestatementof comparisonof budget andactualamountsreflects the expenditure budgetof Kshs.41,891,585and actual ona comparable basis ofKshs. underabsorptionaffectedtheplannedactivitiesandmayhavenegativelyimpactedservice delivery to the stakeholders.

Managementresponse.

• 375.Thecommittee heard that,managementacknowledgedthevariance between thebudgeted expenditureofKshs.41,891,585and the actualexpenditure ofKshs.27,919,044,resulting in anunder-absorptionofKshs.13,972,541(33%).

Theunderutilization of fundswasprimarily dueto thefollowingfactors:

• 1.DelayedDisbursement of Funds-Somefundswerereceived later thananticipated, affectingthetimelyexecutionofplanned activities.
• 2.Procurement and AdministrativeDelays-Certain procurement processes took longer than expected,leadingtopostponedexpenditures.
• 3.Cost Efficiencies and Adjustments-Some planned expenditures were optimized, reducingactual costs

CommitteeObservations

TheCommitteeobserved that theunderutilizationbyKshs.13,972,541derailed therealisation ofthe planned activities and public service delivery.The institute,therefore,based its projection of Revenue and expenditure on weak assumptions.

CommitteeRecommendations

Thecommitteerecommends thattheAccountingOfficershouldensureatall timesthat the budgetsarerealisticandachievable.

3.Latesubmissionof2019/2020FinancialStatements.

• 376.TheCommitteewasinformed thatthefinancial statementsoftheNational CancerInstitute of Kenya forthefinancialyearended30thJune,2020,were submitted totheAuditor-General on16thNovember,2021,fourteenmonthsafterthestatutorydeadlinetosubmit0f30th September,2020.

Management Response.

• 377.ThemanagementinformedtheCommittee thatthedelayinsubmissionofstatementswas occasioned by a lackofa designatedAccountant;themanagementhighlyregretsthisbreach Subsequently,managementhasprepared allfinancialstatements andsubmitted themtothe

Officeof the Auditor-Generalforaudit.Further,managementhasrecruiteda substantive officeholder.

CommitteeObservation

TheCommitteeobserved that,the financial statements for theyear ending30June,2020 weresubmittedtotheofficeoftheAuditor-Generalon16thNovember,2021contrarytothe provisions ofsection47(1)ofthePublicAuditAct,CAP412Bwhichrequires theinstitute to submitthefinancialstatementstotheAuditor-Generalwithin threemonthsaftertheendof thefinancialyeartowhich therespective accountsrelateto.

CommitteeRecommendation(s)

TheCommitteereprimandsthethenAccountingOfficerforfailuretocomplywithprovisions ofsection47(1)ofthePublicAuditAct,CAP412B.

4.Non-submissionof2018/2019FinancialStatements

• 378.The Committeeheard that,theInstitute'smanagement did notprepare and submit financial statementsfor theyearended30thJune,2019contrarytoSection81(1)ofPublicFinance ManagementActof2012whichstates that at theendof eachfinancialyear theAccounting OfficerforaNationalgovernmententityshall preparefinancialstatementsinrespect to the entity.Consequently,the Institute was in breach of the law.In the circumstances, ManagementisinbreachoftheLaw.

ManagementResponse.

• 379.Themanagementinformed thecommittee thatnon-submissionof statementswasoccasioned byalack of a designated Accountant;the management highly regrets this breach. Subsequently,managementhaspreparedallfinancial statementsandsubmitted themtothe OfficeoftheAuditor-Generalforaudit.Further,managementhasrecruitedsubstantiveoffice holders.

CommitteeObservations

TheCommitteeobserved that,theinstitute didnotsubmitfor audit thefinancialstatement fortheyearending30thJune,2019 thereby contraveningSection81(4)ofPublicFinance ManagementAct CAP412Awhichrequires anAccounting Officer tosubmit the entity's financialstatementsfor auditnotlaterthan threemonthsafterendofeachfinancialyear.

CommitteeRecommendations

• i.The Committeerecommends that,within threemonths uponadoption of this report,theinstitute preparefinancial statements for theyearending3OthJune, 2019,andsubmit themtotheAuditor-Generalforaudit.Subsequently,the Auditor-General toaudit inthe subsequent audit cycleand submit areport to the National Assembly.
• ii. The CommitteereprimandsthethenAccountingOfficerforfailingto adhere to Section81(1)ofthePublicFinanceManagementActofCAP412A.

5.LackofInternalAuditFunctionandAudit CommitteeoftheBoard

• 380.TheCommitteeheardthattheInstitutehadnotestablishedaninternalauditfunctionandan Audit CommitteeoftheBoard.This is contrary toSection 73of thePublic Finance ManagementAct,2012,whichprovidesfor theestablishment of the internal audit function andan Audit Committeeof the Board.Assuch,the Company didnotbenefit from the assuranceandadvisoryservicesfrom theinternalauditfunctionaswell asoversightfromthe Audit Committee.Consequently,theBureauwas inbreachoflaw.

Management Response.

• 381.The committeewasinformedthat,in theyearunderconsideration,theinstitute didnot have a deployedinternal auditor,whowaslaterdeployedfromthestatedepartmenton27hMarch 2023andhasbeenreviewingthestatementsandrecommendingwaysofstrengtheningthe Institute'sinternal control systems.Further,the auditcommitteewasinaugurated on21st March2023.

CommitteeObservations TheCommitteeObservedasfollows

TheCommitteeobserved that theInstitutefailed toestablishaninternalauditfunctionand an Audit Committeeofthe Boardasrequired under Section 73of thePublic Finance ManagementAct,CAP412A.Thisbreachof thelaw undermines theinstitute's ability to ensureeffectiveinternalcontrols

CommitteeRecommendations

The Committeereprimandsthe thenAccountingOfficer and thethenBODfor contravening Section73ofthePublicFinanceManagementAct,CAP412A.

6.Lackofriskmanagementpolicy andstrategy.

• 382.TheCommitteeheardthatInstituteManagementhadnotputinplaceariskmanagement policy,stratgies,rariskreistertomitgateagainstriskItwas,threforenotlearowh the Public Finance Management (National Government)Regulations,2015,which requires theAccounting Officer toensure thatthenationalgovernment entitydevelops risk management strategies.

ManagementResponse.

• 383.TheManagementinformed thecommittee that they deeplyregret thisnonconformance.The institute isin theprocess of developing a riskmanagement policy and strategy.

CommitteeObservations

The CommitteeObserved that;

TheManagementhadnotdevelopedorimplementedriskmanagementstrategies,which includefraudpreventionmechanismandasystemofriskmanagementandinternal control thatbuildsrobustbusiness operations,whichisin contravention ofRegulation 165(1)(a)and(b)ofthePublicFinance Management (National Government)Regulations, 2015.

CommitteeRecommendation

• i.The Committee reprimands the Accounting Officer for failing to adhere to the provisions of Regulation 165(1)(a)and (b)of the Public Finance Management (National Govermment)Regulations,2015
• ii. Withinthreemonthsuponadoptionofthisreport,theAccountingOfficertodevelop haveit approved,and implement a riskmanagement policy and strategy.The AccountingOfficershould submitacopywithin thesame timelinestotheNational Assembly andtheAuditor-General forreviewandreportinginthesubsequent audit cycle.

7.Deficiencies in the performance of functions under thelaw.

• 384.The Committeewasinformed thattheNational CancerInstituteofKenyawasestablishedby the Cancer Prevention and Control Act,2012,to coordinate and centralise all activities, resources,and informationrelatedtocancerprevention and controlinKenya.However,the instituteisnotfullyoperational,and thefollowingdeficiencieswerenoted;
• i.The institute was mandated to encourage and secure the cstablishment of hospitals, vocational treatmentandcarecenters,andotherinstitutionsforthewelfare,treatment ofpersonswithcancerinall counties.However,theinstitutehadmanagedtorollout the cancer notification Tool to twenty-one(21) facilities locatedin only thirteen(13) out of theforty-sevencountiesin the country.Implyingthattheremaining thirty-four (34)countiescannot utilize the tool.
• ii. Theinstitutewasmandated tocoordinateservicesprovided inKenyafor thewelfare andtreatmentofpersonswithcancer andtoimplementprogramsfor vocational guidanceand counselling.However,theinstitutedidnotconductanyprogramsgeared towardsvocationalguidance andcounselling tocancerpatients.
• ii. Theinstitute wasmandated toestablishand supportthelarge-scaleproduction or distributionofspecialized biologicalmaterials and other therapeutic substances for research and set standards for safety and care for persons using such materials. However,the institute did not conduct any programs geared towards vocational guidance andcounsellingtocancerpatients.
• Theinstitutewasmandated toestablish and support thelarge-scaleproduction or distribution of specializedbiological materials and other therapeutic substances for research and setstandards for safety and care for persons using such materials. However,theinstitutedidnotreport anysuchinitiativeundertakenwithin theyear of audit.
• V. Theinstitutewasmandatedtoencourage andsecurethecare ofpersonswithcancer within theircommunities and social environment.However,the institute had no indication ofsuchinitiatives.

Management response;

Themanagementinformed theCommittee that,the deficiency was occasioned byhuman resourcegapsattheInstitute,inJune2024theinstituterecruitedstaffwhohaveundertaken amongdifferentcadresinthehealthsector,cancerscreenings and treatmentinitiativesacross different counties inKenya,commemoration ofdifferent cancer days,offered technical assistancetocountygovernments on diagnosis ofcancer cases andparticipated in thereview ofseveralguidelines associatedwithmanagementofcancer.Theseactivitieswere allin alignmentwiththeinstitutesAnnualWorkPlanandPerformanceContractfortheFY20242025.

CommitteeObservations

TheCommitteeobserved thattheinstitutefailed tocoordinate anddecentraliseall activities, resources,and informationrelated to cancer preventionandcontrol inKenya as stipulated in theenablingAct,CancerPreventionandControlAct,2012,implyingthattheinstitutehasnot beenfully operational.

Committeerecommendation

The Committee recommends that,within threemonths upon adoption ofthis report,the institutefurnish thePIC-SSAAwith a statusreport onimplementation of the deficiencies.

FINANCIALYEAR2020/2021

1.Unsupported expenditure

• 385.TheCommitteeheardthatthestatementoffinancialperformancereflectstheuseofgoods andservicesofKshs.51,403,828.55asdisclosedinNotes7tothefinanciaistatements.The amountincludesprintingandstationeryofKshs.2,305,750outofwhichKshs.755,760was notsupported byquotations andevaluationreports.Also,use ofgoodsand servicesincludes travelling,accommodation,subsistence andotherallowancesofKshs.13,055,560outof whichKshs.3,081,290lackedprocurement support documentsofquotation andevaluation reports.
• 386.In the circumstances,the accuracyand completeness of the expenditure ofKshs.3,837,050in respect of theuseofgoods and servicescould not be confirmed.

Management response.

• 387.Management informed the committee that thiswasaresult ofoversightandmanagement has taken note andcommits tofurnishing comprehensiveinformation toauditorsingoodtime. The supporting documents for this,including request for quotation documents,evaluation analysisprofessionalopinionandstorereceipt,areherebyattached.

CommitteeObservations

The Committeenoted that;

Althoughthe management providedquotations andevaluation reports for thetotal expenditure of Kshs.3,837,050 for Printing,stationery,travelling,accommodation, subsistenceandother allowancesamountingduringthe timeofappearancebefore the committee,they failed to provide the same to the auditors during the audit,therefore, contraveningsection62(1)(b)ofPublicAuditActCAP412Bwhichstatesthatapersonshall notwithoutjustification,fail toprovideinformationrequiredunderthisAct.Themanagement wasalsoinbreachof section80(4)of thePublicProcurementandAssetDisposalAct,CAP 412C.

CommitteeRecommendations

• i.The Committee recommends that, themanagement to always ensure adherence to section62ofthePublicAudit ActCAP412Bandsection80(4)ofthePublic Procurement andAssetDisposalAct CAP412C.
• ii. Within threemonthsupon adoptionof thisreport,theDPPtoreviewthematter and shouldit amount toanoffencetake appropriatelegalactioninaccordancewiththe section62(2)ofthePublicAuditActCAP412B

2.Budgetary ControlandPerformance

• 388.TheCommitteeheard that the statement of comparison ofbudget andactual amountsreflects expenditurebudgetsofKshs81,500,000andactualonacomparablebasisofKshs60,170,549 resultingtoanunderabsorptionofKshs21,329,541(or26%)of thebudgetTheunder absorptionaffected theplanned activitiesandmayhavenegativelyimpactedonservice deliverytostakeholders.

Managementresponse

• 389.Management informed theCommittee that,under absorption was occasioned late disbursementof funds andmostactivitieswereaffectedby theCovid-19movement restrictions.Management hasput inplacemeasures toensure allfunds are absorbed,and the institutehasachieveditscoremandate.

CommitteeObservations

The Committee observed thattheunderutilizationbyKshs.Kshs 21,329,541derailedthe realizationofthelannedactivitiesandpublicservicedelivery.Theinstitute,thereforebased itsprojectionofRevenue andexpenditureonweakassumptions.

CommitteeRecommendations

ThecommitteerecommendsthattheAccountingOfficershouldensureatalltimesthebudgets arerealistic,achievable

4.Latesubmissionof2019/2020FinancialStatements.

• 390.TheCommitteeheard thatthefinancialstatementsfortheyearended30June,2021were submittedtotheAuditor-Generalon16November,2021,oneandahalfmonthsafter the statutory deadlinetosubmit of30September,2021.Thiswas contrarytoSection 47(1)of the PublicAuditAct,2015which states that thefinancialstatements required under the Constitution,thePublicFinanceManagementAct,2012,and anyotherlegislation,shall be submittedtotheAuditor-Generalwithinthreemonths aftertheendofthefiscalyeartowhich the accounts relate.Consequently,Management was inbreach of thelaw.

ManagementResponse

• 391.The Committeewasinformed that thedelayin submissionof statementswas occasionedby thelack ofa designatedAccountant.themanagement highlyregretsthisbreach.subsequently, managementhaspreparedallfinancial statementsand submitted them to the Officeofthe Auditor-General foraudit.Further,management hasrecruited substantiveofficeholders.

Committeeobservations andrecommendations

Thecommitteehaddeliberatedon theissueoflatesubmissionoffinancialstatementsinits reportfor theFY2019/2020,andupholds the observation andmakestherecommendations madetherein.

4.Non-submissionof2018/2019FinancialStatements

• 392.The Committeeheard that,aspreviouslyreported,theInstituteManagement didnotprepare andsubmit financialstatementsfortheyearended30June,2019,thiswascontrarytosection 81(1)of thePublicFinanceManagementAct,2012which states thatat theendofeach financialyear,theAccountingOfficerforanationalgovernmententityshall preparefinancial statementsinrespect of the entity.

ManagementResponse

• 393.Managementinformed the Committee that,thenon-submission of statementswas occasioned bylackofa designatedAccountant,themanagement highlyregrets thisbreach,subsequently, andmanagementhaspreparedall financialstatementsandsubmitted to theOfficeofthe Auditor-Generalfor audit.Further,management hasrecruited substantive office holders.

Committeeobservationsandrecommendations

Thecommitteehaddeliberatedon theissueofNon-submissionof2018/2019 Financial Statementsinits report for the FY 2019/2020,andupholds theobservationandmade recommendationsmadetherein.

5.LackofInternal AuditFunctionandAudit Committeeof theBoard

• 394.TheCommitteeheardthat,theInstitutehasnotestablishedaninternalauditfunction and an AuditCommittee ofthe Board.Thisiscontrary toSection 73ofthe Public Finance ManagementAct,2012whichprovidesfortheestablishment of theinternalaudit function andanAuditCommitteeoftheBoard.AssuchtheCompanydidnotbenefitfrom the assuranceand advisoryservicesfrom theinternal auditfunction aswell asoversightfromthe Audit Committee.Consequently,theBureau was inbreach of law.

ManagementResponse.

• 395.The Committeewasinformed that,asat theyear under consideration,theinstitute did not haveadeployedinternalauditor,laterdeployedfromthestatedepartmenton27ihMarch2023 andhas beenreviewingthestatementsandrecommendingwaysofstrengtheningthe Institute'sinternalcontrolsystems.Further,the audit committeewasinauguratedon 21st March2023.

Committeeobservationsandrecommendations

ThecommitteehaddeliberatedontheissueoftheLackofInternalAuditFunction andAudit CommitteeoftheBoardinitsreportfortheFY2019/2020,andupholds theobservationand maderecommendationstherein.

6.Lack ofriskmanagement policyand strategy.

• 396.The Committeeheard that theInstituteManagementhadnotputinplaceariskmanagement policy,strategies,andriskregistertomitigateagainstrisk.Itwas,therefore,notclearhowthe managementmanages riskexposures.Thiswas contrary toRegulation 165(1)(a)and (b) of thePublicFinanceManagement (National Government)Regulations,2015,whichrequires theAccounting Officer toensure that thenationalgovernment entity develops risk management strategies.

ManagementResponse.

• 397.The Committeewasinformed that the management deeplyregrets this nonconformance.The instituteisintheprocess of developingariskmanagement policyandstrategy

Committeeobservationsandrecommendations

Thecommitteehad deliberated on theissue of Lackofriskmanagementpolicyandstrategy initsreportfortheFY2019/2020,andupholdstheobservationandmakesrecommendations madetherein.

7.Deficienciesin theperformance of functionsunder thelaw.

• 398.TheCommitteeheard thattheNational CancerInstituteofKenya wasestablishedbythe CancerPreventionand ControlAct2012,tocoordinateandcentraliseallactivities,resources, andinformationrelatedto cancer prevention and control inKenya.However,theinstitute is not fully operational,and thefollowing deficiencieswere noted;

• i.Theinstitute was mandated toencourage and secure the establishment of hospitals, vocational treatmentandcarecentres,and otherinstitutionsforthewelfare,treatment ofpersonswith cancer in all counties.However,theinstitutehad managed to roll out the cancernotificationTool to twenty-one(21)facilitieslocated inonly thirteen(13) out of the forty-seven counties in the country.Implyingthat theremaining thirty-four (34)counties cannotutilise the tool.
• ii.The institute was mandated to coordinate servicesprovided inKenya for thewelfare andtreatmentofpersonswith cancer and toimplementprogramsfor vocational guidanceand counselling.However,theinstitute did notconduct anyprogramsgeared towardsvocationalguidanceand counsellingtocancerpatients.
• iii. Theinstitutewasmandated toestablish and support thelarge-scaleproduction or distribution ofspecializedbiologicalmaterials and other therapeutic substancesfor research and set standards for safety and care for persons using such materials. However,the institute did not conduct anyprograms geared towards vocational guidance andcounsellingforcancerpatients.
• iv.The institutewasmandated toestablish and support the large-scale production or distribution ofspecializedbiologicalmaterials andother therapeuticsubstancesfor However,theinstitute didnotreport any suchinitiativeundertakenwithin theyearof theaudit.
• v.Theinstitutewasmandated to encourage and secure thecare of persons with cancer within their communities and social environment.However,theinstitutehadno indication ofsuchinitiatives.

Committeeobservations andrecommendations

Thecommitteehad deliberatedontheissue of Deficienciesinperformanceoffunctionsunder the lawin its report for the FY2019/2020,andupholds the observation andmade recommendationstherein.

FINANCIALYEAR2021/2022

1.Unsupportedtrainingexpense

TheCommitteeheard thatthestatementoffinancialperformancereflectstheuseofgoods and services amountingtoKshs.159,053,688,which,as disclosed inNote8to thefinancial statements,includes trainingexpenses amounting toKshs.24,408,920 outofwhichKshs. 1,571,400was not supported by supplier quotations.Evaluationreports and attendance register.Inaddition,theamountofKshs.159,053,688undertheuseofgoodsandservices alsoincludesKshs.53,288,769incurredontravelling,accommodation,subsistence andother allowances,outofwhichKshs1,167,500lackedtravellingsupport.

In the circumstances,the accuracy,completeness and propriety of the use of goods and services amountingtoKshs.2,738,900 could not be confirmed.

Managementresponse.

• 399.Themanagement informed theCommittee that thesupportingdocumentscould notbetraced at thetime due tochallengesoffillingrecordkeepingsincemost of the activitiesweredone from the state department.However,these are attached for verification.Subsequently Managementhasstreamlineditsrecordkeepingtoensure thateveryaccountingdocumentis available on asking.

CommitteeObservations

The Committeenoted that;

Although themanagement provided supporting documentsfor the training expenses and subsistence allowancesofKshs.1,571,400andKshs1,167,500respectivelyduringthetime ofappearancebeforethe committee,theyfailedtoprovide the same totheauditors during theaudit,therefore,contraveningsection 62(1)(b)ofPublicAudit Act CAP412Bwhich statesthatapersonshallnotwithoutjustification,failtoprovideinformationrequiredunder thisAct.Themanagementwas alsoinbreachof section 80(4)of thePublicProcurement and AssetDisposalAct CAP412C.

CommitteeRecommendations

• i.The Committeerecommends that themanagement to always ensure adherence to section 62ofthePublicAuditActCAP412Bandsection80(4)ofthePublic Procurement andAssetDisposalAct CAP412C.
• i. Within threemonthsuponadoptionof thisreport,theDPPtoreviewthematter and, should it amount to an offence,take appropriatelegal action in accordance with section62(2)ofthePublicAuditActCAP412B.

2.Failure to update theAsset Register

• 400.TheCommitteeheard that thestatementof financialpositionreflectsaproperty,plant,and equipmentbalance ofKshs.10,634,744,which,asdisclosed in Note 12tothe financial statements,includes additions during the year ofKshs.8,332,471.However,as at30 June 2022,thefixed assetregister hadnot been updatedwith the details of the additionsrelating to:nature or type of asset,date ofpurchase,supplier,cost,location,user,accumulated depreciation andnetbookvalue.Thiswascontrary toRegulation143(1)ofthePublicFinance Management.

Managementresponse.

• 401.Thecommitteewasinformed thatit is true that thefixedassetsregisterwasnotcomplete as at the time ofthe audit.TheInstitute hasidentified all the assets,and an updated Fixed Assets Registerhasbeen providedforverification.

Committee Observations

The Committee Observedasfollows

• i.Property,Plant and Equipment amounting toKshs.8,332471 acquired during theyear underreviewhadnotbeenincorporatedinthefixedAssetRegistercontrarytoSection 143(1)and(2)ofPublicManagementRegulations(National Government) 2015, whichrequires that;
• a.TheAccounting Officer shall be responsible formaintaining a register ofassets under his or her control or possession as prescribedbytherelevantlaws.
• b.Theregister of land and buildingsshall record eachparcel ofland

andeachbuildingand thetermsonwhichitisheld,withreference to the conveyance,address,area,dates ofacquisition,disposal or major change in use,capitalexpenditure,lease hold terms, maintenancecontractsandotherpertinentmanagementdetails.

Althoughtheinstituteupdateditsassetregistertoincorporatetheadditionsthatlapse puts theInstitute at ariskof losingpart ofits assets.

CommitteeRecommendation

TheCommitteereprimands thethenAccountingOfficerforcontraveningRegulation143(1) and(2) ofPublicManagementRegulations(National Government)2015.

3.LackofInternalAuditFunctionandAudit CommitteeoftheBoard

• 402.TheCommitteeheard thattheInstitutewasestablishedbytheCancerPreventionandControl Act(No.15of2012)tocoordinate andcentraliseallactivities,resourcesandinformation related to cancerprevention and controlinKenya.However,during theyearunderreview, theInstitutedidnothaveanAudit CommitteeasrequiredbyRegulation166(2)ofthePublic Finance Management (National Government)Regulations,2015.TheInstitute also did not haveinplace an Internal Audit Unit asrequired byRegulation 166(1)of thePublicFinance Management (National Government) Regulations,2015.In the circumstances,effective internal controls,riskmanagement andgovernance couldnotbe confirmed.

ManagementResponse.

• 403.Managementinformed the Committee that,in theyearunder consideration,theinstitute did nothavea deployed internalauditor,laterdeployedfrom thestatedepartmenton27tMarch 2023andhasbeenreviewingthestatementsandrecommendingwaysofstrengtheningthe Institute'sinternal controlsystems.Further,the audit committee was inaugurated on 2lst March2023.

CommitteeObservationsandRecommendations

TheCommitteeobservedthattheissueontheLackofInternalAuditFunctionandAudit Committeeof theBoardwasdeliberatedinitsReportforthefinancialyearending30thJune 2022,andupholdstheobservationsandrecommendationstherein.

FINANCIALYEAR2022/2023

1.Inaccuraciesin the Financial Statements

1.1.Anomaliesin theFinancial Statements

• 404.The Committeewasinformed that thefinancialstatementssubmittedforauditcontained the following anomalies;
• i.Page i and ix erroneouslyrefer to the board of directors/council instead of the Board ofTrustees asperSection 6(1)of the CancerPrevention and Control Act,2012;
• ii. The chairman's statement on page xvi,report ofthe directors on page xxvii and implementationstatusofAuditor-General'srecommendationonpage31arenot signed and dated;and,
• ii.Page number 22 is repeated,hence distorting the entire page numbering.
• 405.In thecircumstances,the financial statementspresented for audit didnot comply with the reportingtemplateprescribedbythePublicSectorAccountingStandardsBoard.

Managementresponse.

• 406.Managementinformed theCommittee that managementagreedwith the auditor'sobservation andconcurred that theInstituteisunder theBoardof Trustees;thishasbeen correctedinthe subsequentannualreports.
• 407.Weacknowledge theauditor'sobservationregarding the Chairman'sstatementnotbeing signed.Thiswas an oversight;however,thesigned final financial statement hasbeen attached forverification.The anomalywasnoted,and an amendmentwasmadein thefinal financial statement

CommitteeObservations

The Committeenoted that,

• i.Somepagesreferred to theBoard ofDirectors/councilinsteadofBoardofTrustees as per Section 6(1)of the Cancer Prevention and Control Act,2012;Further,the chairman's statement,report of directors,andimplementation status of the AuditorGeneral'sreport werenot signed.In addition,page22wasrepeated,distorting the pagination of the financialstatement.Theseanomaliesimplythat the financial

• statementspresentedfor audit didnot complywith thereportingtemplateprescribed bythePublicSectorAccountingStandardsBoard.
• ii. That management'sclaim that theyamended thefinancial statement ismisleading since thiswasdone after theAuditor-Generalhad issued the audit report.

Committeerecommendations

The Committeereprimands the thenAccounting Officer forfailure to complywith the guidelinesoutlinedbythePublicSector AccountingStandardsBoard inaccordancewith section81(3)ofthePFMActCAP412A.

1.2Arithmetical ErrorsintheStatementof ComparisonofBudgetandActualAmounts

• 408.TheCommittee heard that,thestatement ofcomparisonofbudgetandactual amountsreflects actualon comparable basis receipts of Kshs.275,745,801whilerecasting revealed Kshs.275,542,897resulting to unexplainedvariance ofKshs.202,904.In the circumstances, theaccuracy and completeness of thestatement of comparisonof budget and actualamounts could notbeconfirmed.

Managementresponse.

• 409.The Committee wasinformed that the anomalyisacknowledgedand isregrettable;however, itdoesnotaffectthe entirefinancialstatement.

CommitteeObservations

The Committee observed that:

• i. Therewas a casting error resulting tounexplainedvariance ofKshs.202,904.
• ii. The errorcouldnotbecorrected later sinceBudgetary comparativeinformationisnot disclosed in thesubsequentfinancial statements,hasno cumulative effect,and thus is self-resolving.

Committeerecommendations

The Committee recommends thattheAccountingOfficer should always ensure accuracy whenpreparingfinancial statements.

2.Unsupported Expenses

• 410.TheCommitteeheardthatthefinancialstatementssubmittedforauditunderNote9reflect the use ofgoods and services ofKshs.163,526,082.However, seven (7) components with a totalamount ofKshs.161,775,258had their schedulesreflectingKshs.128,355,123resulting inan unexplained variance of Kshs.33,420,135.In the circumstances,the accuracy and completenessof therespectiveexpenditure amountscouldnotbeconfirmed.

Management response.

• 411.Managementinformed thecommittee that,asper the schedules[providedduringthe audit were161,775,258,thesamesupportingscheduleshavebeenprovidedforverification;hence, thereisnounexplainedvariance ofksh.33,420,135.

CommitteeObservations

TheCommitteenoted that;

• i.Although auditis aprocess,themanagement didnot provide the auditorswith accurate schedulesduring thetime ofauditand thuscontravened section 62(1)(b)ofPublic Audit Actwhich states thataperson shall notwithout justification,fail toprovide informationrequiredunderthisAct.
• ii. Managementclaim that thedocuments submittedbefore the committeewere similar to thoseprovided to the auditors duringthe auditdonotstandasauthenticsince the management disputes thereportof theAuditor-General.

Committeerecommendations

Committeerecommendations

• i.TheCommitteereprimands thethenAccountingOfficerand anyofficerwho failed tocomplywithsection62(1)(b)ofthePublicAuditActCAP412B.
• i. Within threemonthsupon adoption of thisreport,theInspector-General to surcharge thethenAccountingOfficerandanyofficerwhofailedtocomplywithsection 62(1)(b)ofthePublicAuditAct CAP412Bany penaltiesprescribedinPublicAudit ActCAP412B.

3.Unsupported Revenue

• 412.The Committeeheard that thestatementoffinancialperformancereflectspubliccontributions and donations ofKshs.29,603,994and renderingof services ofKshs.9,772,236as disclosed inNote7andNote8to thefinancial statements,respectively.However,these amountswere notsupported by schedules.In the circumstances,the accuracy andcompletenessof thetotal amountofpubliccontributions anddonations,andthe renderingof services of Kshs.39,376,230couldnotbeconfirmed.

Managementresponse

• 413.Managementinformed thecommitteethat,thisis attributed tocontributions and donationsof Kshs.29,603,994andrenderingofservices ofKshs.9,772,236whichwerereceived during the National CancerSummit as disclosed innote7and8to thefinancial statements.Supporting schedulesareavailableforexamination.

CommitteeObservations

The Committeenoted that,although audit isaprocess,themanagement ought tohavegiven theexplanation tothe auditorsduringthetimeofaudit andprovide accurateschedules then. Therefore,themanagement contravened section 62(1)(b)ofPublicAuditActwhich states that apersonshallnotwithoutjustification,fail toprovideinformationrequiredunderthis Act.

Committeerecommendations

TheCommitteereprimandsthethenAccountingOfficerforfailuretocomply withsection62(1)(b)ofthePublicAuditAct CAP412B.

4.UnsupportedTravelAccommodationandDailySubsistenceAllowances

• 414.TheCommitteeheard thatthestatementoffinancialperformancereflectsuseofgoodsand servicesamountingtoKshs.163,526,082asdisclosedinNote9tothefinancialstatements. Includedinthisamountistravelaccommodation anddailysubsistenceallowances amount of Kshs.80,931,996outofwhichKshs.24,468,072wasnotsupportedwithpaymentsvouchers and their respective supporting documents.In the circumstances,the accuracy and

completenessof travel accommodation anddaily subsistence allowances amounting toKshs 24,468,072couldnotbeconfirmed.

Managementresponse

• 415.Themanagement informed the committee that,the daily subsistence allowancespayment vouchers amounting toKshs.24,468,072are availablefor audit review.

CommitteeObservations

The Committee noted that,although audit is a process,the management ought to have provided thepaymentvouchersto theauditorsduring thetimeoftheauditandprovided accurate schedules then.Therefore,the management contravened section 62(1)(b)ofthe PublicAuditAct,which statesthat apersonshallnot,withoutjustification,fail toprovide informationrequiredunderthisAct.

Committeerecommendations

TheCommitteereprimandsthethenAccountingOfficerforfailuretocomply with section62(1)(b)ofthePublicAuditAct CAP412B.

5.Unsupported BankBalance

• 416.The Committeeheard that the statement of financial position reflects cash and cash equivalentsbalanceofKshs.27,372,282asdisclosedinNote12tothefinancialstatements. Thebalance includes current account amount ofKshs.16,915,180whichwasnot supported by cashbook,certificate of bank balance and bank reconciliation statements.In the circumstances,the accuracy and completeness of cash and cash cquivalents balance of Kshs.16,915,180could notbeconfirmed.

Managementresponse.

• 417.Managementinformed theCommittee that,theamount ofkshs16,915,180relates tothebank accountunderABCbankheldbytheinstitute.Thebankbalancecertificatehasbeenobtained monthly reconciliation done and anupdated cashbookhasbeenprovided for audit verification.

Committee Observations

The Committee observed that the monthly bank reconciliation,cashbook balance,and certificateofbankbalance to supportthe cash and cashequivalents balance ofKshs.. 16,915,180were notprepared andprovidedfor audit.This contravenesregulation90(1) of PublicFinance Management(National Government)Regulations2015which states that AccountingOfficersshallensurebankaccountsreconciliations arecompletedfor eachbank accountheldbythatAccountingOfficer,everymonth andsubmitabank reconciliationstatementnotlaterthanthe1othofthesubsequentmonthtothe NationalTreasurywithacopytotheAuditor-General.

Committeerecommendations

TheCommitteereprimandsthethenAccountingOfficerforfailuretocomply withregulation 90(l)ofthePublicFinanceManagement(NationalGovernment) Regulations2015.

6.Undisclosed OutstandingImprest

• 418.TheCommitteeheard that the statement offinancialpositionreflectsreceivablesfromnonexchange transactions of Kshs.124,500,000 asdisclosedin Note 13 tothe financial statements.However,the balance omitted outstanding Imprests amounting toKshs. 8,141,287.In the circumstances,the accuracy and completeness ofreceivables from nonexchangetransactionsofKshs.124,500,000couldnotbeconfirmed.

ManagementResponse

• 419.Managementinformed theCommitteethatanamountofKshs.8,141,287in outstanding imprestwasomittedfromtheFY 2022/2023financialstatements.As theauditofFY 2023/2024hasbeenconcludedandtheomissionwasnotfactored.Theomittedimprestshall be disclosed in theFY2024/2025as a priorperiod adjustment,in compliancewith applicable accountingstandards.

Committee Observations

• i.The Committeeobserved that the financial statementsprepared and submitted for audit were inaccurate by excluding outstanding imprests amounting to Kshs 8,141,287.Thisimplies that the receivableswere understated.
• ii. Theimprestholdersdidnotsurrender theimprestissuedwithinthestipulatedperiod, hence contravening section 93(5)of the Public FinanceManagement Regulation 2015,whichrequires that a holder of a temporary imprest shall account for or surrendertheinprestwithin 7workingdaysafter returning tothe duty station.Noevidence ofrecoveriesthrough the payrollor from the AccountingOfficerforfailingtorecoverwasadducedtothecommittee.

Committeerecommendations

The Committee recommends that,within three months upon adoption of thisreport,the Inspector-General state corporation to surcharge the thenAccountingOfficer the outstanding imprest ofKshs.8,141,287with interests at the prevailing Central Bankrates and submit evidenceofrecoverytotheNationalAssembly.

7.Budgetary Control andPerformance

• 420.TheCommitteeheard that,thestatement ofcomparisonofbudgetandactualamountsreflects finalbudgeted receiptsof Kshs.140,400000and actualoncomparable basisof Kshs.275,542,897resulting inover-collectionofreceipts ofKshs.135,142,897.Similarly,the Institute spentanamountofKshs.173,501,282outoftheapprovedexpenditurebudgetof Kshs.85,994,000resultingin an over-expenditure ofKshs.87,507,282.However,there was noevidenceof approval of theover-expenditure.The over-collection of receipts and over-

ManagementResponse:

• 421.Management informed the Committee that,theinitial budgeted amount was Kshs. 140,400,000,while the actual receipts amounted toKshs.275,542,897.The variance is primarilyduetoanadditional allocationofKshs.114,500,000from theMinistryofHealth, intended tosupport the construction ofregional cancer centresduring thefinancial year.This issupportedby theletter REF:MOH/PROC/GEN/MF/ADSCMS/VOL.referencedin

AppendixIIoftheFinancialReportas ofJune2023.Additionally,donationsandrevenue fromservicerenderingcontributedKshs.39,376,194tothetotalreceipts

CommitteeObservations

The Committeenoted that;

• i.The institute reported an over-collection ofKshs.135,142,897whichimplies that the projection of Revenue was based on weak assumptions
• ii.The institute spentKshs.173,501,282against a budget ofKshs.85,994,000resulting inanover-expenditureofKshs.87,507,282.However,Section43(2)ofthePFMAct Cap412AprovidesthatanAccountingOfficerforanationalgovernmententity,other than a state corporation,mayreallocate funds between programs,or between SubVotes,inthebudgetforafinancialyear,andsimilarly,noapprovalwassoughtforthe overexpenditure.
• ii.The management indicated that the over-collection of receipts ofKshs.135,142,897 wasasaresultofanadditionalallocationofKshs.114,500,000fromtheMinistryof Health,intended to support the construction ofregional cancer centres during the financialyear.However,thecertificate ofcompletionfor the cancer centre wasnot providedforreview.

Committeerecommendations

TheCommitteerecommendsthat;

• i.TheCommitteereprimands the thenAccountingOfficerforbreach of Section43(2)ofthePFMAct Cap412A.
• ii. Within threemonthsuponadoption ofthisreport,themanagementtosubmit to theNational Assemblya status report and completion certificates for the regional cancer center,approval for the over-expenditure,and the partners donation policy.

8.PendingAccountsPayable

• 422.TheCommitteewasinformedthatthestatementoffinancialpositionreflectstradeandother payables ofKshs.22,493943as disclosedinNote15to thefinancial statements asat30June 2023.Themanagementhas attributed thistounpaidsuppliesandunpaid auditfees.Failureto

settlebillsduringtheyeartowhich theyrelatedistortsthefinancialstatementsand adversely affects thebudgetaryprovisionsforthe subsequent year,astheyform afirstcharge.

Managementresponse.

• 423.Managementinformed the Committee that it is true that thependingbills'balancefor the financialyear2022/2023amounted toKsh 22,493,943.Theamount wasincurredon the purchase of goods andserviceswithin the budget and the procurement plan.TheInstitute was, however,notin aposition to settle the claims due to the delay of the submission of invoices fromtheserviceproviders.Thependingbill amountformed thefirstchargein thefinancial year2023/2024,ofwhichKsh 22,493,943waspaid.TheInstitute remainscommitted to clearingitshistorical,current,andfuture obligations

CommitteeObservations

TheCommitteeobservedthatthemanagementoftheinstituteclaimsthatthepayableamount ofKshs.22,493,943 formed the first charge during the subsequent year could not be confirmed.TheAccountingOfficer didnotprovidetheBudgetforthesubsequentfinancial yearreflectingthependingbills asanitem therein,bankstatement andpaymentvouchers werealsonotprovided asevidenceoffull settlement.

CommitteeRecommendation

Within threemonthsupon adoptionof thisreport,theAuditor-General toverifythepayment vouchersin the subsequent audit cycle andreport to theNational Assembly.

9.BudgetImbalance

• 424.TheCommitteeheard that the statement of comparison of budget and actualamountsreflects finalbudgeted receipts of Kshs.140,400,000 anda finalexpenditure budgetof Kshs.85,994,000resulting in a budget imbalance ofKshs.54,406,000.This was contrary to Regulation 33(c)ofthePublicFinanceManagement (National Government)Regulations, 2015,which states thatbudgetrevenue and expenditure appropriation shall bebalanced.In the circumstances,Management was inbreach of the Law.

Managementresponse

• 425.Managementinformed theCommittee that therewasanoversightwhiledisclosing the amountsinthestatementofcomparisonofbudgetandactual amountswhilepreparingthe
• financialstatement.This wasasa result ofthe non-inclusion ofthepersonalemolument budgeted amount ofKshs.45,000,000 and theuseofgoods ofKshs.9,406,000. TheInstitute will ensure that all expenditure is clearlyindicated in orderto account for the

utilizationoftheallocated amountbytheExchequer.

CommitteeObservations

The Committee observed that;

• i.The Management oftheinstitutehadafinalrevenuebudget of Kshs. Kshs.140,400,000 andfinal expensesbudget ofKshs.85,994,000resulting tobudget deficitof Kshs.54,406,000.This was asa resultofnon-inclusionofpersonal emolumentbudgeted amount ofKshs.45,000,000anduseofgoodsofKshs.9,406000. Public Finance Management (National Government)Regulations,2015on budget guidelines.
• ii. Thebudget aspresentedwasinaccurate and incompletewhichcouldhavebecn a strategy toconceal actualreceiptsfromothersources.

CommitteeRecommendations

The Committeerecommendsthat-

• i.The Committeereprimands the then Accounting Officer for breach of Regulation 33(c)of thePublicFinance Managerment (National Government)Regulations,2015 onbudgetguidelines.
• ii. The Accounting Officer shouldensure atall times that the budgets are realistic, achievableand always adhere toannualworkplans,procurement plans andrevenue collection schedulesin compliance with Regulation 44(2)ofthe PFM(National Government)Regulations,2015.
• iii. Within three months upon adoption of thisreport,the Accounting Officer should provideadetailedreportonhowtheinstituteintendedtofinance thedeficittothe

NationalAssemblyand totheAuditor-Generalforreviewandreportingin the subsequent audit cycle.

10.Long OutstandingAuditFces

• 426.The Committeeheard thatthe statementof financialposition reflects the trade and other payablesbalanceofKshs.22,493,943outofwhichKshs.1,392,000relates toauditfeeswhich havebeen outstandingformore than one(l)year.Management hasnotprovided a satisfactory explanationfor thefailure tosettle thelong overdue auditfees.Thisiscontrary tothePublic Audit Act,2015Section 41(c),which states that,the funds of the Office of the AuditorGeneral shall consist of auditfees charged at theratesprescribedby theAuditor-General.
• 427.In the circumstances,Management is in breach of theLaw.

Managementresponse

• 428.Managementinformed theCommitteethat theoutstandingauditfeehasbeenprovidedin the budget for theyear 2023-2024,and it has since been paid.

CommitteeObservations

TheCommitteeobservedthattheinstitutehadfailed tosettlelong-outstandingauditfees amountingtoKshs.1,392,000formore thanone(1)year,buteventuallypaid the amount in thefinancialyear2023/2024andprovidedthesupportingdocuments.

Committeerecommendations

TheCommitteerecommendsthat theinstituteensurethetimelypaymentofservicesoffered toavoid unnecessarypayment of penalties and fines.

11.Failure toWithholdandRemitTaxtotheKenyaRevenueAuthority

• 429.TheCommitteeheard thatthestatementoffinancialperformancereflectstheuseofgoods and services amounting toKshs.163,526,082.Review ofexpenditure records,including payment vouchers,revealed supplies of Kshs. 45,701,248,whose corresponding 2% withholdingVATamountingtoKshs.914,025wasnotwithheldandremittedtotheKenya Revenue Authority.This is contrary toSection 42A oftheTax Procedures Act,2015,which givespowersto theCommissioner to appoint aperson towithhold two(2)per centofthe

taxablevalueonpurchasingtaxablesuppliesatthetimeofpayingforthesupplies andremit the same directly to theCommissioner.In addition,theboardexpenses ofKshs.9,975,200 includesKshs.1,880,500beingwithheld taxdeductionsonboardpayments,buttherewasno evidence thatitwasremittedcontrarytoIncomeTaxAct CAP470Section37(5).In the circumstances,Management wasinbreach of thelaw.

ManagementResponse

• 430.ManagementinformedtheCommitteethattheinstitutedidnotwithholdtaxesforKRAsince theInstitute did not have a KRA PIN.In these circumstances,theinstitute hadnot been appointedasawithholdingtaxagent.However,theInstitutewasappointedasawithholding agent on20June2024andhasbeenwithholdingandremittingtaxessince then.

Committee Observations

The Committee Observed that;

• i. Theinstitutedidnot haveaKRAPINandwasnot appointed byKRA tobea taxagent in accordance with Section 42A of theTaxProcedures Act,2015.Therefore,the institutecouldnotdeductwithholdingtaxandremittoKRAfrom theuseofgoods and servicesofKshs.45,701,248at therateof2%,translatingtoKshs.914,025
• ii. The institutehad deductedKshs.1,880,500 as taxfrom Boardpayments.However, theevidenceofremittance totheKRAwasnotprovided during theaudit.However, during theCommittee deliberations,themanagementprovidedaKRAcertificate to confirmremittanceoftheamount.Thiswasabreachofsection62(1)(b)ofthePublic AuditAct,whichstates thatapersonshallnot,withoutjustification,failtoprovi informationrequiredunderthisAct.

Committeerecommendations

TheCommitteereprimandsthethenAccountingOfficerforfailuretocomply withsection62(1)(b)ofthePublicAuditActCAP412B.

12.ExcessBoard ofTrustees Composition

• 431.TheCommitteeheard thatthestatementoffinancialperformancereflectsboardexpensesof Kshs.9,975,200(2021/2022Kshs.1,042,400) resultingin an increase byKshs.8,932,800.In addition,areviewofboardrecordsrevealed that theInstitutehad ten(lo)boardmembers. Thiswas contrary to Chapter1(1.1.3)of theMwongozocodeofgovernance,whichrequires board membership of all state corporations tohavebetween seven(7)andnine(9) members. In the circumstances,Management was in breach of the law.

Management Response

• 432.ManagementinformedtheCommitteethattheBoard'sincreasedoperationalactivitiesduring theyearunderreviewweredue tothe strategicinitiatives undertaken to operationalizethe Institute and the planning of the Inaugural Cancer Summit.This necessitated additional engagements,including extra Board meetings,which contributed to the rise in Board expenses.
• 433.RegardingthecompositionoftheBoard,theInstitutesoughtguidancefromtheMinistryupon identifying the discrepancy in membership numbers. The appointing authorityis yet to officiallyretiretheextramember.Management acknowledgestheobservation andreaffirms itscommitment toadheringtostatutesandgovernancerequirementsinall operations.

CommitteeObservations

TheCommitteeobservedthat,

• i.The Board expenses increased byKshs.8,932,800 compared to the financial year ending30June,2022,becauseofstrategicinitiativesundertakentooperationalise the Institute and planning of the Inaugural Cancer Summit.However,it was not supportedbyanyevidence.
• ii. TheInstitutehad ten(10)boardmembers,whichexceeded themaximumlimitofnine (9)asprescribed under Chapter 1(1.1.3)of the MwongozoCode of Governance for State Corporations.
• iii. The increasewas also associatedtoincreasednumber ofmeetingswhichwas contrary toHeadofthePublicServiceCircularREF:OP/CAB.9/1AbydatedMarch11,2020 -on part A on board meeting which states that "For avoidance of doubt,the board

meetings shallberestricted toaminimumoffour(4)asprovidedin theState CorporationsActandcapped atamaximumofsix(6)foreach financialyear oras maybespecifiedintherespectiveenablinglegalinstruments.

Committeerecommendations

The Committeerecommends that,within three months upon adoption of thisreport,the Inspector-General state that corporations toinvestigate the circumstances under which the institutehad10BoardmemberswithincreasedmeetingsandsurchargethethenAccounting Officerand theBODfortheextraamountspaidtotheboardmembers.

13.HoldingofMultipleImprests

• 434.The Committeeheard that thereviewofimprestrecordsrevealed thatseven(7) staff held multiple Imprests amounting toKshs.8,141,287.Thiswas contrary toRegulation93(4)ofthe PublicFinance Management (National Government)Regulations,2015,which states that Beforeissuing temporaryImprests underparagraph(2),theAccounting Officershall ensure that-(b)the applicant hasnooutstandingImprests."In addition,theimprest had notbeen surrendered andwaslongoverdue.Thiswascontrary toRegulation93(5)of thePublic FinanceManagement National Government)Regulations,2015,which states that a holder ofa temporaryimprestshall accountfororsurrendertheimprestwithin7workingdays after returning to the duty station.In the circumstances,Management wasin breach of the law.

Managementresponse

• 435.Managementinformed theCommittee thatthiswasduetoaleanteam thathad toundertake anumberofactivities,whichmadeitunavoidabletoadvance themmultipleImprests.This imprestwas duly accountedfor.Upon therecruitment ofmore staff,managementmade sure thatnostaffmemberhadmultipleimprests andalsoensured thatimprestswereaccountedfor in theconstitutionallystipulated timelines.

Committee Observation;

The Committee observed that,

• i. Regulation 93(4)of the Public Finance Management (National Government)

• paragraph(2),the Accounting Officer shall ensure that-(b)the applicant has no outstandingImprests.
• ii. Thestaff didnotsurrenderImprestswithinthestipulatedperiod of7dayscontrary toRegulation93(5)ofthePublicFinance Management(National Government) Regulations,2015,whichstatesthataholderofa temporaryimprestshall account for or surrender theimprestwithin7workingdays afterreturningtothe duty station.

Committeerecommendation

TheCommitteereprimandsthethenAccountingOfficerforContraveningRegulation93(4) and93(5)of thePublicFinanceManagement(National Government)Regulations,2015.

14.ExcessBoardMeetings

• 436.The Committee wasinformed that theboard held seven(7)full board meetings,seven(7) finance and strategy committee meetings and seven(7) technical committee meetings.These meetings surpassed themaximum number of six(6) meetings allowedwithout approvalfrom the Cabinet Secretary.In addition,thehuman resources committee and the audit committee held only three(3)and two(2)meetings,respectively.This was contraryto Head of the Public ServiceCircularREF:OP/CAB.9/1AbydatedMarch11,2020-onpartAonboardmeeting which states thatForavoidanceof doubt,theboard meetingsshallberestricted toaminimum of four(4)asprovidedin theState Corporations Act and cappedat amaximumof six(6)for eachfinancialyear or asmaybe specified in therespective enablinglegal instruments.
• 437.In the circumstances,the overallgovernance of theInstitute couldnot be confirmed.

Managementresponse

• 438.TheManagementinformed theCommitteethattheBoard'sincreasedoperationalactivities duringtheyearunderreviewwere due tothestrategicinitiativesundertaken to operationalise theInstitute and theplanningof theInaugural CancerSummit.Thisnecessitated additional engagements,including extra Board meetings,which contributed to the rise in Board expenses.

Committeeobservation

The Committeeobservedthat theinstitute'sBoard hadmore than six(6)meetingswithout the approval of the Cabinet Secretary,contrary toHeadof thePublicService CircularREF: OP/CAB.9/1A datedMarch11,2020,which capped thenumberof meetings to six(6).

Committeerecommendations

The Committee recommends thatwithin three months upon adoption of this report,the Inspector-General of the States Corporation to surcharge the then Accounting Officer the moniespaidforboardmeetingsbeyond thestipulatednumber.

15.FailuretoProvide ConfirmedBoardMinutes

• 439.The Committeeheard that theboard held twenty-six(26)meetings,out ofwhich only twentyone(21)boardminuteswereprovidedforaudit,outofwhichseventeen(17)minuteswere notsigned,andtherewasnoevidenceofconfirmationoftheseminutes.Thisiscontraryto Annexure I-E(8)(e)of Mwongozo,which provides that,"Minutesmust be drawn up for everyboardandcommitteemeetingwithresolutionshighlightedtherein.Themeetingshould be circulated to all board members assoon aspossible afterthemeeting.Upon confirmation, theminutesshould besignedbythe Chairperson and added to therecordsof the organization.
• 440.Inthecircumstances,theoverallgovernanceoftheInstitutecouldnotbeconfirmed.

Managementresponse

• 441.Managementinformed theCommitteethat thiswasan oversight.Thesignedminutes arenow availedforverification.

CommitteeObservations

The committee observed that;

• i.The institute'sboard held a total of twenty-six(26) meetings and only provided 21 minutesduringthe audit.Inaddition,outof21minutesprovided,17werenotsigned. Thisis contrary toAnnexure I-E(8)(e)of theMwongozo code,which provides that Minutesmustbedrawnupforeveryboardandcommitteemeetingwithresolutions highlighted therein.Themeetingshould becirculated to all board members assoon as possible after themeeting.Uponconfirmation,theminutes should be signed bythe Chairpersonand added to therecordsof the organization."

• ii. The institute is therefore inbreach of section 62(1)(b)of thePublicAudit Act CAP 412Bforfailingtoprovidedocumentsduring theaudit.

Committeerecommendations

• i.The Committee reprimands the then Accounting Officer for contravening 62(1) (b) of thePublicAuditAct2015andAnnexure I-E(8)(e)of theMwongozocode.
• ii. Within threemonthsupon adoptionof thisreport,theInspector-General tosurcharge the thenAccountingOfficer and anyofficerwhofailed tocomplywithsection 62(1)(b)ofthePublicAuditActCAP412BanypenaltiesprescribedinPublicAudit ActCAP412B.

16.FailuretoPrepareAlmanackandAnnualWorkPlan

• 442.The Committeeheard that during theyear underreview,theBoardoperatedwithout an approvedAlmanack and annual Boardworkplan.Thiswas contrary to Chapter1 (1.9)of the Mwongozocodeofgovernance,whichrequiresboardmemberstohave an annualworkplan toguide their activities.In thecircumstances,theoverallgovernance oftheInstitute couldnot be confirmed.

Managementresponse

• 443.Managementinformed the Committee that thiswas an oversight.The Almanack and annual workplan arenow availedforverification.

CommitteeObservations

The committee observed that,duringtheyearunderreview,theinstitute'sBoardoperated without an approvedAlmanac andannual Boardworkplan contrary to Chapter1(1.9)of the Mwongozocodeofgovermnance,whichrequiresboardmemberstohave an annualworkplan to guide their activities.

Committeerecommendation

The Committee reprimands the then Accounting Officer for contravening to Chapter 1 (1.9) of theMwongozocodeofgovernance.

FINANCIALYEAR2023/2024

1.Budgetary ControlandPerformance

• 444.TheCommitteeheard that,thestatement ofcomparisonofbudgetand actualamountsreflects actualexpenditureofKshs.149,923,541againstactualrevenueofKshs.214,856,410resulting tounderexpenditureofKshs.64,923,869or30%oftheactualrevenue.Theunderexpenditure mayhavenegativelyimpacted onexecution of theplannedactivitiesand the achievement of theInstitute's objectives.

Managementresponse

• 445.The Committeewas informed that,theunder-absorption ofKshs.64,923,869was as aresult Jo
• 446.DelayedDisbursement ofFunds-Some fundswere received later than anticipated, affectingthetimelyexecutionofplannedactivities.
• 447.Procurement andAdministrativeDelays-Certainprocurement processes tooklonger than expected,leadingtopostponedexpenditures. TheInstituteendeavor tostreamline theprocurement and administrativeprocesses toensure thattheyareundertakenwithinthescheduledtimelines

CommitteeObservations

TheCommitteeObserved that,theinstitutesunder-absorbedthebudgetbyKshs.64,923,869 whichderailedtherealizationoftheplannedactivitiesandpublicservicedelivery.

Committeerecommendation

TheCommitteerecommendsthat,themanagementoftheinstitute toensure thatallthe planned activities areundertakenduring thefinancialyear.

2.UnresolvedPriorYearMatters

• 448.TheCommitteeheard that,n the auditreportof thepreviousyear,severalissueswereraised under theReportonFinancial Statements,Report onLawfulnessandEffectivenessinUseof PublicResourcesandReportontheEffectivenessofInternal Controls,RiskManagementand

Governance.However,theManagementhadnotresolved theissue asat30thJune2024or given anyexplanation for thefailure toresolve them.In addition,the status of the issues and the dates when the issueswere expected toberesolvedwere not indicatedinAppendixIof thefinancialstatementasrequiredbytheannual financialreportingtemplate.

Managementresponse

• 449.ManagementinformedtheCommittee thattheinstitutehasmadeeffortstoresolvemost of therecurringissues.Further,theinstituteisyet toappearbeforetheparliamentaryinvestment committeeforfurtherdeliberationandrecommendations on theissues.

Committee observation

TheCommitteeobservedthat thefinancial statementswereincompletesince theunresolved prioryearissueswerenotdisclosed intheprogressonfollow-upofauditorsrecommendations section of the financial statements,as required by the Public Sector AccountingStandards Boardreportingtemplate

CommitteeRecommendations

ThecommitteereprimandsthethenAccountingOfficerforbreachofsection81(3)ofthe PFMAct CAP412A,whichprovidesthat theAccountingOfficershallpreparethefinancial statementsinaform thatcomplieswiththerelevantaccountingstandardsprescribedand publishedbytheAccountingStandardsBoardfromtimetotime.

3.ExcessBoard Membership

• 450.The Committeewas informed that the statement of financialperformancereflects board expensesofKshs8,276,950 asdisclosed innote11tothefinancial statement.However,the Institutehad tenboardmemberscontrary toSection 1.1.3oftheMwongozoCodeof Governance for State Corporations,2015,which requires boardmembership of all state corporationsofbetween7and9members.

In thecircumstances,managementwas inbreachof the Mwongozo Code of Governance for State Corporations.

Managementresponse

• 451.Managementinformed theCommitteethat,theInstitutesoughitguidancefrom the appointing authority.TheMinistryhas sinceprovided cleardirectionson thematter,and theissue has beenfullyresolvedincompliancewiththeMwongozo Codeof Governance.Management acknowledgestheobservationandreaffirmsitscommitmenttoadheringtostatutoryand govermancerequirements in all operation.

TheexcessboardofTrusteeMemberwasinformedandretiredvoluntarily

Committeeobservationsandrecommendations

Thecommitteehaddeliberatedon theissueofExcessBoardMembershipinitsreportforthe FY2022/2023,observed andmaderecommendations thereon,theCommitteeupholds the observationsandrecommendationsthereon.

4.Non-compliancewith Guidelines onPersonswithDisabilities.

• 452.TheCommitteewasinformed that thestatement financialperformanceandasdisclosedin Note10to thefinancialstatementsreflects employeecostsofKshs.2,830,002whichincludes salaries andwagesofKshs.2,819,922.Analysisofthesampledstaffrecordsrevealedthatonly one(1)memberofstaffwaslistedasPersonswithDisabilities(PWD),representing3%of the total staff members which isless than therequired minimum of 5%.Thiswas contrary to SectionB23(2)ofthePublicServiceCommissionHumanResourcePoliciesandProcedures Manual,2016whichstatesthat thegovernment shallimplement theprinciplethatatleastfive
• (5)percentofall appointmentsshallbeforpersonswithdisabilities.
• 453.In the circumstances,Managementwas in breach of thePublicService CommissionHuman ResourcePolicies andProceduresManual,2016.

Managementresponse

• 454.ManagementinformedtheCommitteethat,theinstitute'sadvertthatwassentouttothepublic domain hadencouraged applications from people livingwithdisability.The management recruited2peoplelivingwithdisability,howeveronehadnotpresentedadisabilitycertificate and currently haspresented the certificate.Hence,we are compliantwith the guidelines on personswithdisabilitybasedon therecruitmentinquestion.Wearealsoplanningtorecruit formore staff in the nextfinancialyear and thiswill surpass theminimum threshold.

Committeeobservation

TheCommitteenoted that;theinstitutehademployed twoPWDstaffwithonewhohadno disability certificate.Theone PWD represented 3% of person listed as Persons with Disabilities(PWD)contraryto Section B23(2)ofthePublic Service Commission Human Resource Policies and Procedures Manual,2016 which states that the government shall implement theprinciplethat at leastfive(5)percent of all appointmentsshallbeforpersons with disabilities.

Committeerecommendation

TheCommitteereprimandsthe thenAccountingOfficerforcontraveningSectionB23(2)of the PublicService Commission HumanResource Policiesand ProceduresManual,2016 Subsequently theAccountingOfficers should abideby the law onPWD.

5.Inadequate staffinglevels.

• 455.TheCommitteeheard thattheReviewof theInstitute'sstaffestablishmentrevealedapproved staffestablishment of twohundred andforty-seven(247)positionswhile currentstaffinpost stood at thirty-three(33)as at30June,2024resulting inunfilledpositions of twohundred andfourteen(214).In the circumstances,theinadequatestaffinglevelsmayhaveaffected the effectiveness of achievingtheInstitute'sprincipal activities

Managementresponse

• 456.Managementinformedthe Committee that,the Institute carried out the firstphaseof recruitment in June 2024,however we did not recruit adequate staff due to budgetary constraintsinallocationofthepersonnelemolumentsbytheNationalTreasury.Anexemption approvalisbeing soughtwithregardtothe secondphase ofrecruitment consideringthe austeritymeasuresinplaceonrecruitmentbygovernment.

Committee Observations

The Committee Observed that,the institute had thirty-three(33) staff against an approved servicedeliveryoftheinstitute.

Committeerecommendations

TheAccountingOfficershould atall timesadheretothePublicServiceCommissionHuman ResourcePolicies andProceduresManual onstaffing andensurefillingofvacanciespromptly asper theapprovedstaffestablishmentstructure toeffectivelydeliverservices tothepublic.

6.WeaknessinInternal ControlsandRiskManagement

• 457.The Committeewasinformed that theInstitute didnotestablishriskmanagement policy, finance and accounting manual,assets management policy,transport managementpolicy, information technology(IT)plan anddisasterrecoveryplan.Further,theaudit committee and internal audit charters were not approved and operationalized.In the circumstances,the effectivenessofinternal controlsandriskmanagementcouldnotbeconfirmed.

Managementresponse

• 458.Management informed the Committee that,theinstitute regret the oversight and are benchmarkingwithparent ministry toenableus comeupwith assetsmanagement policy, finance and accounting manual,transportmanagement policy,information technology(IT) plananddisasterrecoveryplan.Further,theauditcommitteeandinternalauditcharters are approvedoperationalized.

CommitteeObservations

The Committee observed that,theinstitutehadnotestablishedriskmanagementpolicy, finance and accountingmanual,assets management policy,transport managementpolicy, informationtechnology(IT)plan anddisasterrecoveryplan.Further,theauditcommittee and internalauditcharterswerenot approvedandoperationalized.

Committeerecommendation

The Committee recommends thatwithin threemonths upon adoption of thisreport,the institutetofurnish theNationalAssemblywiththecurrentstatuson theestablishmentofrisk management policy,finance and accounting manual,assetsmanagement policy,transport operationalizationoftheauditcommitteeandinternalauditcharters.

EXAMINATIONOFTHEAUDITORGENERAL'SREPORTONTHEAUDITED ACCOUNTSOFTHECHILDWELFARESOCIETYOFKENYAFORTHE FINANCIALYEARS2015/2016TO2018/2019

Ms.IreneMureithi,Chief Executive Officer,ChildWelfareSocietyofKenyawas accompanied byMrCharlesMaina,General ManagerFinance appeared before the Committeetoadduceevidenceon theAuditedAccountsof ChildWelfareSocietyof KenyafortheFinancialYears2015/2016-2018/2019.

FINANCIALYEAR2015/2016

1.0Property,Plant,and Equipment

• 459.The Committee heard that financial statements reflect the property,plant,and equipment balance of Kshs.1,832,062,112 outofwhich Kshs.1,374,733,833 relates to Landand buildings invarious parts of the country.As previouslyreported,twenty-four(24)parcels of landofan undeterminedvalue did nothavecomplete ownership documents asfollows:
• 460.Although correspondences available indicate that theSocietyhasinitiated theprocess of acquiringtitles for some oftheparcels,theprocessshouldbe fast-tracked topursue the disputedparcelsofland,casesincourt,and thegrabbedparcelsforrecovery andissuanceof ownershipdocuments.

| Status ofVariousParcelsof Land | Number | |----------------------------------|----------| | With Title deed | 0 | | AllotmentLetters | 6 | | Partial DevelopmentPlan | 8 | | Title deed in progress | 1 | | Otherswithunclear descriptions | 6 | | | 24 |

• 461.In the foregoing circumstances,the accuracy and completeness of the property,plant and equipmentbalanceofKSh1,832,062,112reflectedinthefinancialstatementsas at30June 2016couldnotbeconfirmed.

Managementresponse

• 462.TheSocietyinformed theCommittee thatit isworkingwiththeMinistryofLands toget all the documents.There is progress in the acquisition of the titles.We have received titles and allotmentlettersformostofthem.

Committee'sObservations

TheCommitteeobserved that;

• i.Though theSocietyreported someprogresssofarmadeinthe acquisitionof theownership documents,thepace hasbeen slow.
• i. Without the ownership documents,theSociety'sparcelsof land areexposed to therisks of being grabbed,ownership disputes,andliability or contingencies associated tolegal processes in casesin courts.

Committeerecommendations

• i.Within threemonthsupon theadoptionof thisreport,theAccountingOfficerfor theSociety shouldfast-tracktheprocessofacquisitionofitslandownershipdocumentsandsubmittothe NationalAssembly theprogressstatusreport.
• ii.Within threemonths uponthe adoption of thisreport,theAccounting Officer,incollaboration with thePrincipalSecretaryforSocialProtection,thePSforLands,and theNationalLands Commission,shouldputcaveatsin thelandsownedtoprotectthem fromrisksofillegal transfer and dealings.

2.0.BudgetControlandPerformance

2.1.Revenue

• 463.TheCommitteeheard thattheChildWelfareSocietyofKenyahadbudgetedforrevenue totallingKshs..4,200,000,000asfollows:

| Source | Budget | Actual | Over(Under) | Over/(under) | |-----------------------|---------------|-------------|-----------------|----------------| | | Kshs. | Kshs. | Kshs. | % | | GOKGrant-Recurent | 1,500,000,000 | 347,250,000 | (1,152,750,000) | (77%) | | GOK Grant Development | 2,700,000,000 | 400,000,000 | (2,300,000,000) | (85%) | | OtherGrant | | 65,260,264 | 65,260,264 | 100% | | OtherIncome | | 6,156,335 | 6,156,335 | 100% | | Total | 4,200,000,000 | 818,666,599 | (3,381,333,401) | (81%) |

• 464.However,the actual revenuerealizedamounted toKshs.818,666,599resulting ina shortfall ofKshs.3,381,333,401or 81%.The shortfall wasmainly attributed to non-receipt of Government grants totallingKshs.3,452,750,000or82%.Despite the actual receipt ofKshs. 49,240,248underothergrants andotherincomeinthe2014/2015financialyear,n0estimate wasmadeunder theseitemsduring the2015/2016.
• 465.Nosatisfactoryreasonshavebeenprovidedfor thefailure tobudgetfortheseother sources ofrevenue.Further.noexplanatory note wasprovidedin thefinancial statement forrevenue shortfallsofoverorunder10%asrequired.

Managementresponse

• 466.TheSocietyinformedtheCommitteethatthisis aresultof abudgetaryallocation shortfall Kshs.3,381,333,401,which wasnotreleasedbytheNationalTreasury.

2.2Expenditure

• 467.The Committeeheard thatActualexpenditureamountedtoKshs.910,139,768against the approvedbudgetofKshs.4,200,000,000forbothdevelopmentandrecurrentexpenditure, resultinginanunderexpenditureofKshs.3,289,860,232or78%asfollows.

| Programme/Activity | Budget Kshs. | Actual Kshs. | Over/(Under) | Over/(Under) | |----------------------|----------------|----------------|-----------------|----------------| | Recurrent | 1,500,000,000 | 438,723,169 | (1,061,276,831) | (71%) | | Development | 2,700,000,000 | 400,000,000 | (2,300,000,000) | (85%) |

| Other Grants | | 65,260,264 | 65,260,264 | 100% | |----------------|---------------|--------------|----------------|--------| | OtherIncome | | 6,156,335 | 6,156,335 | 100% | | TOTAL | 4,200,000,000 | 910,139,768 | (3,289,860,23) | (78%) |

• 468.However,theSociety didnot provide explanatory notes to thefinancial statement asrequired forexpendituresofoverandunder10%.
• 469.As a result,the societyhasnotcontained its expenditure within the approvedbudget for 2015/2016.

Managementresponse

• 470.The Societyinformed the Committee that itreceived Kshs.818,666,599.The Ksh the amount.

Committee'sObservations

The Committee observed that;

• i. The societyreportedactualrevenueofKshs.818,666,599resultingtoa shortfallofKshs. 3,381,333,401or81%mainlyattributedtonon-receiptofGovernmentgrantstotallingKshs 3,452,750,000or82%
• ii. TheSocietydidnotprovideexplanatorynotesto thefinancialstatementforover-andunder expenditures above orbelow10%,contrary tothePublicSectorStandardsBoard disclosure requirements.
• iii. Thesocietyreported actualexpenditure ofKshs.910,139,768resultingtoa shortfall ofKshs. 3,289,860,232or 78%.Thisderailed therealizationof thebudgetary targets andservice deliverytothepublic.

Committeerecommendation

Within threemonthsupon the adoptionof thisreport,theAccountingOfficerof theSociety shouldat all timesensurethatbudgetaryprojectionsarebasedonrealistic assumptions and incorporateallpossiblestreamsofrevenue.

FINANCIALYEAR2016/2017

1.0Property,PlantandEquipment

• 471.The Committee heard that,the statement offinancialpositionas at30June 2017reflect property,plantandequipmentbalanceofKshs.2,145,456,438outofwhichrelates toland andbuildings,Aspreviouslyreported,nineteen(19)parcelsoflandspread acrossthecountry hadpartial orno ownership documents.Althoughevidence availedby theSociety shows that it isin theprocess of acquiring theownership documents for someparcels of land,theprocess ofresolvingdisputedlandissuesandcourtcasesshouldbefasttrackedtoensuresecurityof thepublic assets.
• 472.Further,theSocietydid notmaintain a proper fixed assetsregister forproperty,plant and equipmentwithnecessary detailssuchas;recordofeachparcelofland andeachbuilding and the terms on which it isheld,with reference to,the conveyance,address,area,dates of acquisition,disposal or major change in use, capital expenditure,leasehold terms, maintenance contracts and other pertinent management details as required.Documents availedforaudit indicatedthat only alisting ofvariouspropertieswasmaintained. In addition,thefinancial statements didnotincludeasummaryoffixed assets,which should
• disclose thenature,value,and status of the assetsowned by theSocietyas at30June2017
• 473.In the circumstances,it has not been possible to confirm the accuracy,completeness of the property,plant,and equipmentbalance ofreflected in thestatementoffinancialpositionasat 30June2017.

Managementresponse

• 474.Themanagement informed the Committee that the societyisworkingwith theMinistry of lands toget all the documents.There isprogress in the acquisition of the titles.Wehave receivedtitlesandallotmentlettersformostofthem.

Committee'sObservations

The Committeeobserved that;

1. Though theSocietyreportedsomeprogresssofarmadein theacquisitionof theownership documents,thepacehasbeenslow.

• ii. Without the ownership documents,theSociety's parcels of land are exposed to the risks of beinggrabbed,ownershipdisputes,andliabilityorcontingenciesassociated tolegalprocesses in cases in courts.

111. withnecessary details contrary tosection143(1)of thePFMregulationwhichrequires that theAccountingOfficertoberesponsibleformaintainingaregister of assets under his or her control orpossession asprescribedbytherelevantlaws.

Committee'srecommendations

• i. Within threemonths uponthe adoptionof thisreport,theAccountingOfficerfortheSociety shouldfast-track theprocess ofacquisitionofitslandownershipdocuments andsubmit to the NationalAssemblytheprogressstatusreport.
• ii. Within threemonths uponthe adoption of thisreport,theAccounting Officerin collaboration with thePrincipalSecretaryforSocial Protection,thePSforLands,and theNational Lands Commission,shouldputcaveatsinthelands ownedtoprotect them from risks ofillegal transfer and dealings.
• iii. Within threemonths upon adoptionof thisreport,theAccountingOfficertoprepare an asset register andsubmit it to theNationalAssembly.

2.Inventory and StoresManagement

• 475.TheCommitteeheardthatthefinancialstatementsfortheyearended30June2017reflect inventoriestotalingKshs.59,513,036.However,nostock takeexercisewascarriedoutatthe end of theyear toestablish the accuracy of thisbalance asrequired.
• 476.In the circumstances,it hasnot been possible toverify and confirm the accuracy,nature, existence,andvalue of theinventory ownedbytheSocietyasat30June2017.

Managementresponse

• 477.TheInventoriesbalance asat30thJune2017wasKsh19,807,217asindicatedinthefinancial statements.Thestocktakeexercisesheetsareavailablefor2016/17

Committee'sObservations

TheCommitteeobserved that;

• i.ReportedinventoriesofKshs.59,513,036lacked stock sheets,implyingstockexercise was not carried out.
• ii.The poorinventory and storemanagement exposed the assets of the society to risksof losses andinaccuraciesinbalances on the financial statements.
• ii.Thebelatedlysubmittedstocksheetslackedthe details ofvalues oftherespectiveinventories; hence,they donot serve theintendedpurpose ofestablishing thevalueoftheinventory,which isthebasis andrationaleofconductingthestocktake exercise.

Committee'srecommendations

TheCommitteerecommendsthattheAccountingOfficershouldatall timesensure that regular stock takeexerciseisconductedand accuratestockamountsareincorporatedin the financialstatements.

BudgetandBudgetaryPerformance

1.1 Revenue

• 478.The Committeeheard that theSocietyreceivedgrants totallingKshs.915,670,771against the estimated totalofKshs.917,520,771resulting in a shortfall ofonlyKshs.1,850,000.The recurrent vote was allocatedKshs.480,000,000 while the development vote was allocated Kshs.298,650,000with an additionalKshs.100,000,000reservedforOrphans andVulnerable Children(OVC).The Society also received grants from donors such as UNICEF,Kshs. 10,000,000againstKshs.32,991,800in2015/2016,NakuruLapsetryKshs.17,100,400etc, all totallingKshs.32,026,805andotherincomesfrominvestments totallingKshs.4,243,966 asshownbelow:

| Revenuehead | BudgetKshs. | Actual Kshs. | Excess/(shortfall) Kshs. | Excess/(shortfall) % | |-----------------------------|---------------|----------------|----------------------------|------------------------| | Government grants Recurrent | 481,250,000 | 480,800,000 | (450,000) | (0.09) |

| Government grant Development | 300,000,000 | 298,600,000 | (1,400,000) | (0.47) | |--------------------------------|---------------|---------------|---------------|----------| | OVC development | 100,000,000 | 100,000,000 | 0 | 0 | | Otherrants | 32,026,805 | 32,026,805 | 0 | 0 | | Otherincome | 4,243,966 | 4,243,966 | 0 | 0 | | Total | 917,520,771 | 915,670,771 | (1,850,000) | (0.2) |

1.2Expenditure

• 479.Expenditure analysisindicates that the Societyhadbudgeted tospenda totalof Kshs.913,144,922but actual expenditure amounted toKshs.868,589,833and thereby underspent thebudgetedamountbyKshs.44,555,089or5%astabulatedbelow:

| Expenditure | udgetKshs. | Actual Kshs. | hder(-)Kshs. | Over/Under () % | |-----------------------------------|--------------|----------------|----------------|-------------------| | Compensationofemployees | 300,000.000 | 266,662,658 | -33,337,342 | -11 | | Directors expenses | 2.500,000 | 2,548,775 | 48,775 | 2 | | Administrativeexpenses | 125,500,000 | 105,863,763 | 19,636,237 | -16 | | FosterCare&Guardianship Programme | 20,000,000 | 11205,477 | -8,794,523 | -44 | | AdoptionProgramme | 12,000,000 | 297,925 | -11,702,075 | -98 | | OvCDevelopment | 131,894,922 | 129,793,075 | -2,101,847 | 2 | | DevelopmentBudget | 300,000,000 | 334,624,686 | 34,624,686 | 12 | | Capitalexpenditure | 21,250,000 | 17,593,474 | -3,656,526 | -17 | | Total | 913,144,922 | 868,589,833 | -44,555,089 | (5) |

programme where Kshs.11,702,075or 98%wassaved,fostercareand guardianship programmeswhere Kshs.8,794,523or 44% was saved.Theover expenditure ofKshs 34,624,686or12%under thedevelopmentbudgetwas attributed toemergency acquisition of additional capital items such asbeds,mattresses,utensils,etc.

• 481.TheSociety should therefore considerbudgetingforcontingenciestoavoid forcedsavings on specificbudgetaryitems.

Management response

• 482.Themanagementinformed the Committee that thefundssaved from theunder-expenditure
• arefor theEmergencyResponseProgramme and tocaterfor children'swelfare at all times. Committeeobservation

TheCommitteeobserved that,

• i. The society reported actual revenue ofKshs.915,670,771 resultingin a shortfallofKshs. 1,850,000,mainly attributed tonon-receipt of the Government grant.

11. The societyreported actualexpenditureofKshs.868,589,833resultingtounderexpenditure ofKshs.44,555,089or5%.Thisderailedtherealizationofthebudgetarytargetsandservice delivery to thepublic.

Committeerecommendation

TheAccountingOfficerof theSocietyshould at all timesensure thatbudgetaryprojections arebased onrealistic assumptions andincorporateall possiblestreamsof revenue.

FINANCIALYEAR2017/2018

1.PropertyPlantandEquipment

• 483.TheCommitteeheard that,thestatementoffinancialpositionasat30June2018reflects property,plant andequipmentbalance ofKshs.2.500,083,716whichincludes an amountof Kshs.1,147,113,276inrespect toland.Aspreviouslyreported,nineteen(19)parcelsofland spread acrossthecountryhadpartialornoownershipdocuments.Althoughevidenceavailed by theSociety shows progressin acquiring the ownership documentsforsome parcelsofland, theprocessofresolving disputedlandissuesand Court casesshouldbefast tracked to ensure security of thepublic assets.

• 484.Further,theSociety didnotmaintainacomprehensivefixedassetsregisterforproperty,plant andequipmentwithnecessarydetailssuch as;recordofeachparcel ofland andeachbuilding and the termsinwhich itisheld,withreference to,theconveyance,address,area,dates of acquisition,disposal or major change in use,capital expenditure,leasehold terms, maintenance contracts and other pertinent management details asrequired.Documents made availablefor audit indicated that onlyalisting ofvariouspropertieswasmaintained.
• 485.In the circumstances,it has not been possible to confirm the accuracy,custody,security, valuation,and completeness of the property,plant,and equipment balance of Kshs. 2,500,083,716as at30June2018.

Managementresponse

• 486.ThemanagementinformedthecommitteethattheSocietyisworkingwiththeMinistryof Lands toget all the documents.There isprogress in the acquisition of the titles.We have receivedtitlesandallotmentlettersformostofthem.

CommitteeObservationsandRecommendations

• 487.The Committeeobserved that theissueonNon-PerformingInvestmentinUnquotedEquities wasdeliberatedinitsReportforthefinancialyearending30tJune,2017,andupholdsthe observations andrecommendationstherein.

2.0InventoryandStoresManagement

• 488.TheCommitteeheard thatthestatementoffinancialpositionasat30June2018reflectsan amountofKshs.17,786,191inrespectofInventoriesforconstructionmaterialspaidforbut notcollectedfrom thesuppliers.However,nodocumentaryevidencewasprovidedforaudit scrutinytoshow thatastocktakewascarried outattheendofthefinancialyear asrequired. Consequently,it hasnotbeenpossibleto confirm the balancesheld by the suppliers or the accuracy andcompleteness of theKshs.17,786,191inventoriesbalanceas at30June2018 Managementresponse
• 489.Themanagerinformed theCommitteethat thestocktakesheetsare available.

Committee'sObservationandRecommendation

The Committee observed that thematter onPropertyPlant and Equipmentwas deliberated on itsreportforthefinancialyearending30hJune2017andupholdsitsrecommendations therein.

3.0UnremittedPayasYouEarn (PAYE)

• 490.TheCommitteeheard thatthestatementoffinancialpositionasat30June2018reflectstrade andotherpayablesbalanceofKshs.71,101,478,whichincludesPAYEdeductionsamounting toKshs.54.206,764.Areviewofthestatus as atthe time ofauditinMarch2019indicatethat betweenAugustandDecember2018anamountofKshs.30,859,009hadbeenremitted to Kenya RevenueAuthority (KRA),leaving a balance of Kshs.23,347,755outstanding.
• 491.Failure toremitPAYE deductionswithin the stipulated timelines exposes the Society to payment ofavoidableinterestandpenaltiestoKenyaRevenueAuthority

Managementresponse

• 492.ThemanagementinformedtheCommitteethattheamountrelatestoerroneousentriesmade to thePAYEliability account and thatJournal entries havebeenpassed to correct thesame in theyear2022/2023financialyear.

Committee'sObservations TheCommitteeobserved that,

1. ThePAYEoutstandingofKshs.23,347,755continuestoattractfinesandpenaltiesifnot settledwithinthelegallystipulatedtimelines.Themanagementexplanation thattheamount relatestoerroneousentriesmadetothePAYEliability account andthatJournalentrieshave beenpassed tocorrect theanomalyin thefinancialyear2022/2023wasnot supportedbyany documentary evidence on how the error arose.Further,there was no clearance certificate indicating that the society'sPAYE agency account withKRAwasfullysettled.

• ii. Themagnitude of the amount inquestion and the admissionby themanagement of theSociety thattherewereerroneousentriesmadeto thePAYEliabilityaccountisanindicationofa weaknessinpayroll management and ineffectiveinternal auditfunctionwithin theSociety.

Committee'srecommendations

1. Within threemonthsupon adoptionof thisreport,theAccountingOfficer toprovidea current compliancecertificatefrom theKRAto theNationalAssembly and theAuditor-Generaland areport detailinghowthe error ofsuchmagnitude arosein the society'sbooks.Thereport should includeexplanatorynotesonwhichfinancialyears theamountrelates toandwhich individualsorKRAPINswereaffected.

• ii. TheAccounting Officer of theSociety should strengthenits internal audit unit tofacilitate early detection,deterrent andcorrectionofsucherrors.

4.0TrusteesAccount

• 493.The Committeeheard that,the statementoffinancialpositionasat30June 2018reflects current assetsbalanceofKSh.195,951,996.Includedin this balanceisan amount ofKshs. 120,659,747describedasTrusteesAccountwhichisexplainedinNote16tothefinancial statements asincomegenerating activitiesandpropertyheld there underwhichcontinue tobe presidedoverby theTrustees undertheTrustDeedof12June1970 asperLegal NoticeNo. 58of2014.

However,the analysesprovideddidnotfully support theincrease ofKshs.52,059242from Kshs.68,600,505in2016/2017toKshs.120,659,747in2017/2018.

In consequence,theaccuracy of theTrustees Account balance ofKshs.120,659,747as at 30 June2018couldnotbeconfirmed.

Managementresponse

• 494.Themanagementinformed theCommittee that,therewas a mispositioningoffiguresin the Balance sheetwhere FY 2017cash balance ofKshs68,600,505was positioned against TrusteesbalanceinJune302018.

Committee'sObservations

TheCommitteeobserved thatthepresumedincreaseofKshs.52,059242wasatransposition errorwhenpresentingthebalancesonthefaceofthestatementoffinancialposition.Theerror didnot have aneffect the actual figuresbutwasmisleading.

Committee'srecommendation

TheAccountingOfficerof theSociety should strengthenitsinternal audit unit to facilitate earlydetection andcorrectionofsuch errors.

1.0.BudgetaryControlandPerformance

1.1.Revenue

TheCommitteeheard that,thesocietyhadbudgetedforrevenue totallingKshs.1,079,828,192 but totalrealizedamounted toKshs.935,821,227resultingtoashortfallofKshs.144,006,965 or13%asfollows:

| RevenueHead | Budget Kshs. | ActualExcess/(Shortfall)Variance Kshs.Kshs. | | % | |--------------------------------|--------------------|-----------------------------------------------|----------------|-----| | Government Recurrent | Grants-481,250,000 | 481,250,0000 | | 0 | | Government Development | Grants-300,000,000 | 225,000,000 | (75,000,000) | 25 | | OrphansandVulnerable Children | 276,000,000 | 207,000,000 | (69,000,000) | 25 | | ProjectsGrants-Nakuru Lapsetry | 18,878,192 | 18,878,192 | 0 | | | Donations/other Incomes | 3,700,000 | 3,693,035 | (6,965) | 0.2 | | Total | 1,079,828,192 | 935,821,227 | (144,006,965) | 13 |

• 495.Theshorfall was largely attributed toa shortfallinGovernmentDevelopment Grants,which had abudgetofKshs.300,000,000againstactualreceiptsofKshs.225,000,000 andOrphans and Vulnerable Children receipts,which were budgeted at Kshs.276,000,000,but actual receiptsamounted toKshs.207,000,000.

1.0 Expenditure

• 496.The Committee heard that theSocietyhadbudgeted for expenditure totallingKshs. 913,250,000,but the actualamount spentwas Kshs.918,070,524resulting to an overexpenditure of

| Expenditure | Budget Kshs. | Actual Kshs. | Over/(Under) Kshs. | Variance % | |----------------------------------------|----------------|----------------|----------------------|--------------| | OperatingExpenses | 99,620,506 | 99,035,170 | (585,336) | 0.6 | | FamilyStrengthening&13,000,000 tracing | | 12,689,711 | (310,289) | 0.2 | | Capitalexpenditure | 94,279,494 | 8,926,308 | (85.353,186) | 91 |

| Personnel Costs | 271,200,000 | 270,160,151 | (1,039,849) | 0.3 | |------------------------|------------------|---------------|---------------|-------| | TrusteeExpenses | 2.150,000 | 2,202,429 | 52,429 | 2.4 | | Sub-Total | 481,250,000 | 393,013,769 | (88,236,231) | 18 | | OVCDevelopment | | | | | | CapacityBuilding | 14,200,000 | 13,112,339 | (1,087,661) | 8 | | Education & Dev. | Skills45,000,000 | 43,589,270 | (1,410,730) | 3 | | Emergency Preparedness | 62.800,000 | 13.425,770 | (49,374,230) | 79 | | TemporaryPlaces Safety | of76,000,000 | 75,632,601 | (367,399) | 0.5 | | Alternative Care | Family9,000,oo0 | 8,732,250 | (367,750) | 3 | | Sub-Total | 207,000,000 | 154,492,230 | (52,507,770) | 25 | | ProjectsDevelopment | 225,000.000 | 370,564,525 | 145,564,525 | 65 | | Total | 913,250,000 | 918,070,524 | 4,820,524 | 1 |

Management Response

497.Themanagementinformed theCommittee that theOverexpenditureisat an acceptablelevel of1%.

Committeeobservations

TheCommitteeobservedthat,

• i. The societyreported actual revenue ofKshs.935,821,227resulting in a shortfallofKshs. 144,006,965or13%,mainly attributed to non-receipt of theGovernmentgrant.
• ii. ThesocietyreportedactualexpenditureofKshs.918,070,524resultinginanoverexpenditure ofKshs.4,820,524or5%.Thisimplies that the societyincurred anunapprovedexpenditure of the same amount contrary toSection 12of theState Corporations Act,CAP446.The sectionprovides thatnostatecorporationshall,without theprior approvalinwritingof the Minister and theTreasury,incur any expenditure for which provision has not beenmade in an annual estimatepreparedand approvedinaccordancewithsection1l.

Committeerecommendation

TheCommitteereprimands theAccountingOfficeroftheSocietyforbreachof Section12of theState CorporationsAct,CAP446.

ExpiryofBoardofDirectorsTerm

• 498.TheCommitteeheard thatSection7(i)oftheChildWelfareSocietyofKenyaOrder2014 requires that themanagement of theSociety shall bevested in a non-executiveBoardwhich consistsofachairman and 6members,whiletheChiefExecutiveOfficerofthesocietyis the SecretarytotheBoard.Itwas,however,noted that the term ofthepreviousBoard expiredon 20March2018,and theSocietythereforeoperatedforthreemonthswithoutaBoard.Atthe timeoftheauditinMarch2019,aBoardwasstillnot inplace.

Managementresponse

• 499.Themanagementinformed the Committee that thedelayinappointmentof theBoardwas as aresult of conflict of operations of theLegal OrderNo.58of 2014and Trustee deed.The Boardwas appointed in2019.

Committee'sObservations

• i.The Committee observed that the term of theprevious Board expired,and theSociety operatedforthreemonthswithoutaBoard,whichcouldhavederailed therealisationof the strategic objectives andplans ofthe Society.Thelapsewas as a result ofconflict betweentheLegalOrderNo.58of2014andtheTrusteedeed,whichhadnotyetbeen resolved atthetime ofwriting thisreport.

11. ThelegalstatusoftheChildWelfareSocietyofKenyawasnotclearinlightofconflict between theLegalOrderNo.58of2014andTrusteedeedas towhetherChildWelfare continuestooperateasstatecorporation,aTrustee,anyotherformpublicentityoraprivate entity.Further,itwasnot clear whether the society should continue drawingfunds from theexchequer.

• 11i. Thecommitteenotedthatthroughacommunicationbytheexecutivedated21January 2025,thecabinetresolved todeclassifythesocietyasastatecorporation thatshouldnot befinanced through the exchequer.

Committee'srecommendations

Withinsixmonthsupon adoptionof thisreport,theSocietyincollaborationwith theAttorneyGeneral,should fast-track theresolution of thelegalconflictbetweenLegal OrderNo.58of 2014andtheTrusteedeed.

Non-Non-AppointmentofanAudit Committee

• 500.The Committeeheard that Section174(1),(2),and(4)of thePublicFinance Management (PFM)Act,Regulations2015require eachnational Government entitytoestablishan audit committee.Duringtheyearunderaudit,theSocietyoperatedwithoutan audit committeefor threemonthsstartingfromApril2018,andevenatthetimeoftheauditinMarch2019,itwas not put in place.
• 501.Failure toappoint an audit committeeis contrary to therequirements of thePFMAct,2012, andalsoimpliesthattheactivities oftheSociety'smanagementwerenotindependently appraised.

Managementresponse

• 502.Themanagement informed theCommitteethatLegalOrderNo.58of2014createdaconflict between theState Corporation and the ChildWelfareSocietyofKenyaIrrevocableTrust Deed,therefore interferingwith the normal operations of the trust.The confusionwas created bythe2legalinstruments operatingat the same time.Thisisbeingresolved astheLegal order is awaiting degazettement.

Committee'sObservations

• Themanagement was in breach ofRegulations 174(1),(2)and(4)of the PublicFinance Management(PFM)Act,Regulations2015whichrequireseachNational Govermmententity toestablishan audit committee.

11. Nothavinganaudit CommitteeinplaceintheSocietycompromised theoversightoffinancial reporting,nternalcontrolsriskmanagement,ntrnalandextrnalauditrocesses,whichr thecrucialmandatesexecutedbytheaudit Committee.

Committee'srecommendations

TheCommitteereprimandstheappointingauthorityforfailuretoappoint theaudit committee, thereby contravening the provisions of Section 174(1),(2),and (4)of the PublicFinance establishanauditcommittee.

InformationTechnology (IT)Internal andManagement Controls

• 503.TheCommitteeheard that,areviewof thefinancialtransactionsprocessingenvironment revealedthattheSocietyusesQuickBookssoftwarefor accountingandfinancialrecords whichseemsinadequatetomeet thedemandsofthesocietyasit lackedkeymodulessuch as; informationmanagementetc.Further,areviewof theinformation technologyenvironment revealedthefollowingmatters:
• 504.The CWSKdoesnothavean IT strategic committee.Non-establishment ofan ITstrategic committee attheboardlevel couldresultinITgovernancenotbeingaddressed adequately.

Managementresponse

• 505.TheManagementinformedtheCommitteethatthiswas asaresultof theconflictofoperations oftheLegal OrderNo.58of2014and theTrustDeed.Thepolicyis approvedandinplace

Committees Observations Thecommitteeobserved that;

• iTheSociety still uses outdated QuickBooks softwarefor accountingandfinancial records, which isinadequatetomeetthedemandsof thesocietyasitlackskeymodulessuch as payroll processing,humanresourcemanagement,assetmanagement,rocurement,child information management.
• ii.The weak IT Internal and Management controls expose the Society to the risks of manipulation offinancialrecords,inefficiencies,andineffectivenessin theprocessing of various operational activities and transactionsbeingundertakenbythesociety.

• ii.Non-establishment ofan IT strategiccommittee at the board level couldresult in IT governancenotbeingaddressedadequately

Committeerecommendations

Within threemonthsupon adoptionof thisreport,theAccounting Officer should conduct an ITneeds assessmentof theSociety,prepareandsubmit areport to theNationalAssemblyand the Auditor-General.A copy should be shared with the lineministry with the relevant budgetaryrequirementforapproval andfundingin thesubsequentbudgetcycle.The society should subsequentlyestablish anIT strategicCommittee.

FINANCIALYEAR2018/2019

1.UnsupportedExpenditureAdjustments

• 506.The Committeeheard thatthestatementoffinancialperformancereflectsanexpenditureof Kshs.245,903,942under Orphans andVulnerable Children(OVC)development,which,as disclosedinNote11tothefinancialstatements,includesanamountofrelated toTemporary Places ofSafety.However,journal entriesandsupportingdocumentsfor the adjustment of Kshs32,279,721from theinitialreported amount ofKshs.94,780,057werenotprovidedfor audit.Consequently,theaccuracy of theexpenditureofKshs.127,059,778reported for TemporaryPlacesofSafetycould notbe confirmed.

Managementresponse

• 507.Themanagementinformed thecommitteethat the amount hadnotbeen capturedinitiallyin thedraft accountsbutwascapturedin thefinal accounts.

Committee's Observations

Thecommittee observed thatthejournalentries andsupportingdocumentsforthe adjustment ofKshs,32,279,721werenotprovidedfor audit.Thiswasincontravention tosection62of thePublicAuditAct,CAP412.

Committeerecommendations

The Committeereprimands the then AccountingOfficerforderelictionofdutypunishable undersection62ofthePublicAuditActCAP412B.

2.0Property,Plant andEquipment

• 508.The statement of financialpositionreflects abalance ofKshs.2,853,099,079underproperty, plant,andequipment.Thefollowingobservationsweremaderegardingthebalance:

2.1LandwithoutOwnershipDocuments

• 509.The reported property,plant,and equipment balance includes an amount of Kshs. 1,151,313,276relatingtoand.However,aspreviouslyreported,nineten(19)parcelsofland spread across the countryhadno ownership documents.Althoughevidenceprovided by the Society indicatedprogress in acquiring the ownership documentsfor some parcels ofland, disputes and Court cases concerning the land parcelshadnot been settled.
• 510.Further,theSociety didnotprovideforauditreviewacomprehensivefixed assetsregisterfor land and buildingswithnecessary details such as;record for eachparcelof land and each building and thetermsunderwhichitisheld,withreferencetotheconveyance,address,area, dates of acquisition,disposal ormajor change in use,capitalexpenditure leasehold terms, maintenancecontractsandotherdetailsasrequiredunderRegulation143(2)ofPublicFinance ManagementRegulations,2015
• 511.In the circumstances,it has not been possible to confirm the accuracy,existence and completenessof theproperty,plant and equipmentbalanceofKshs.2,853,099,079.Itcould alsonotbeconfirmedwhetherManagementhadappliedadequatemeasurestosafeguardthe Society's assets.

Managementresponse

• 512.Themanagement informed theCommittee that,Societyisworkingwith theMinistry of lands toget all the documents.There isprogressin the acquisition of the titles.Wehavereceived titlesandallotmentlettersformostofthem.

Committee'sObservationsandRecommendations

TheCommitteeobservedthatthematter onlandswithoutownershipdocumentswere deliberatedonitsreport for the financialyear ending30hJune 2018andupholds its recommendationstherein.

UnsupportedAdditionstoProperty,Plant andEquipment

• 513.As disclosed in Note 12 to the financial statements,additions to property,plant,and equipment amountedtoKshs.372905.970during theyearunderreview.However,payment vouchers in support of the purchase of the assets totalingKshs.48,423,043relating to a borehole(Kshs.3,966,226);parkingbay (Kshs.2,289,800);computers and accessories(Kshs. 5,898,000);furniture andequipment(Kshs.2,847,000)and motorvehicle(Kshs.33,422,017) werenotprovidedforaudit.
• 514.Management explained that thepaymentvouchers weremissingfrom theSociety'soffices and thematterhadbeenreportedatLangataPoliceStation,theoutcomeoftheinvestigations hadnotbeen communicated.
• Inthecircumstances,ithasnot beenpossible toconfirm the accuracy andvalidity of the reportedproperty,plant and equipment balanceofKshs.2853099079

Managementresponse

515.Thepaymentvouchersweremisfiled.Theyhavebeenlocatedand arenowavailable

Committee'sObservations

TheCommitteeobservedthat;

• i. Thepayment vouchers in support of thepurchase of the assets totallingKshs.48,423,043 relating to aborehole(Kshs.3,966,226);parking bay(Kshs.2,289,800);computers and accessories (Kshs.5,898,000);furniture and equipment(Kshs.2,847,000)andmotorvehicle (Kshs.Kshs.33,422,017)werenot provided foraudit.Thiswas in contravention to section 62 ofthePublicAuditAct,CAP412

2. The management of the society's written response that the vouchers were misfiled contradicted theverbalsubmission,whichindicatedthatthevouchershadbeen taken away bysomeunscrupulousstaffwiththeintentiontofrustrate themanagement.

• ii. Therewasnodocumentaryevidencesubmitted toeitherconfirm that thematterofthemissing voucherswasreported atLangataPoliceStationortoindicatetheoutcome ofthepolicecase
• IV. No documentaryevidencewasadduced to confirm that anyadministrativeactionwas taken ontheunscrupulousstaffmemberswhowerefrustratingthemanagementbymishandlingthe documentsofthesociety.

Committeerecommendations

The Committeereprimands the then Accounting Officer for dereliction of dutypunishable undersection62ofthePublicAuditActCAP412B.

4.Inventories

• 516.The statement of financialposition reflects an amount of Kshs.2,894,020inrespectof inventorieswhich,asdisclosedunderNote14tothefinancial statements,relatedtobeddings andcutlery.However,stock-taking sheets in support of thebalancewere notprovided for audit.Consequently,it hasnotbeenpossibleto confirm theaccuracy andcompletenessofthe reportedinventoriesbalanceofKshs.2,894,020

Management Response

• 517.Themanagementinformed the Committee that a stock take exercisewas done,and stocktake sheets are available.

Committeeobservationandrecommendation

TheCommitteeobservedthat thematteroninventorieswasdeliberatedoninitsreportforthe financialyearending3ohJune2017andupholdsitsrecommendationstherein

5UnreconciledVarianceinReceivables

• 518.The statement of financialpositionreflects areceivablesbalance ofKshs.6,136,717which, asdisclosed inNote15to thefinancialstatements,comprised depositsrefundable andstaff debtorsofKshs.827,525andKshs.5,309,192respectively.However,thereportedreceivables balance of Kshs.6,136,717 differed with the ledger balance of Kshs.7,196,241 by an

unexplaineddifference ofKshs.1,059,524.Consequently,theaccuracy and completenessof thereceivablesbalance ofKshs.6,136,717could notbeconfirmed.

Managementresponse

• 519.ThemanagementinformedtheCommitteethat,thesewerestaffmotorvehicleloandeductions from payroll which hadnotbeen posted.At the finalization of the accounts,theledger and the accountbalanceswerebalancing

Committeeobservations

ThereportedreceivablesbalanceofKshs6,136,717differedwith theledgerbalance of Kshs.7,196,241resulting to an unexplained difference ofKshs.1,059,524.However,the submissionbythemanagement thatthevarianceresultedfromloandeductionsnotpostedbut thefinal accounts,theledgerand account figuresbalanced,wasmisleadingsince theauditors verified thefinal accounts and hence the auditquery.

Committeerecommendation

The Committee reprimands the Accounting Officer for the misleading submission to the Committee.Failure to keep proper records or concealing,or wrongfully destroying, informationthatisrequiredtoberecordedisanoffenceprescribedandpunishableunder Section197ofthePFMActCAP412A.

6.BudgetaryControlandPerformance

• 520.TheCommitteeheard that societyhadanapprovedbudgetofKshs.935,424,000forrecurrent expenditure and OVCdevelopment programmes.However,actualexpenditure amounted to Kshs.752,519,697resulting in an expenditureofKshs.182,904,303 or19.6%.Theunderexpenditure mayhavehada negativeimpact on service delivery.Further,theSocietyhad an Kshs.312,026,743resulting to an over expenditure ofKshs.30,526,743or 11%.The Managementhasnot explained thesourceof theextrafunding.

Managementresponse

• 521.Themanagementinformed the Committee that theSocietyreceived fundslate from the exchequer,i.e,on28thMay2019and24thJune2019,ofKsh114,856000and119,000000 respectively,whichoccasioned theunderexpenditure2018/19.
• 522.TheSociety didnotreceiveKsh300,000,000asbudgeted and fell short byKsh18,500,000, therebygiving anover expenditureof 11%.Ifwehadreceived thefull amount of thebudget, the over-expenditurewould havebeenwithin the tolerable limit.

Committee'sObservations

1. on the development budget byKshs.30,526,743or 11%,whichnegatively impacted the realisationoftheenvisagedcriticalpublicservicedeliveryin theprogramme.

• ii. Themanagement didnot provide documentary evidence that theover-expenditureby11% was procedurally regularized through supplementarybudgetspursuant to theprovision of Regulation40ofthePFM(National Government)Regulations2015whichprovidesthatPrior toincurring any additionalexpenditure anAccountingOfficers shall seek the approval of the National Treasury,and if approval is granted by the Cabinet Secretary it shall be communicatedtotheAccountingOfficersthroughanotificationwhichshall becopiedtothe Auditor-General and the ControllerofBudget.

Committeerecommendations

1. Within threemonthsupon adoption ofthisreport,theAuditor-General to audit all thestreams ofrevenuewith theaimofestablishingwhether thesocietyhasbeenmakingfull disclosure ofitsrevenue andwhether therevenues areusedforlawfulpurposes andreport in the subsequent audit cycle.

• ii. TheCommitteereprimandsthethenAccountingOfficerforfailuretocomplywithRegulation 40of thePFM(National Government)Regulations 2015.

7.Delayed Completion of Projects andIrregularVariations

• 523.The reported property,plant and equipment balance ofKshs.2,853,099,079includes an amount ofKshs.1,381,433,046relating to constructionworksinprogress.However,most of

theProjects didnothave a specifiedcompletionperiodexcept theProposedFoster Care CentreProjectinJoska,whichhad acompletionperiodof52weeksfrom4April,2014.The projecthadnotbeen completedby thetimeoftheauditinApril2020.Inaddition,cost variationsrangingfrom4.7%to199%fromtheinitialestimatedcostsoftheProjectswere noted asanalyzedbelow:

| | ProjectName | Initial Project Cost Estimates Kshs. | Project Budget Estimates 2018/19 Kshs. | Variatio n Percent age | |----|-------------------------------------------|----------------------------------------|------------------------------------------|--------------------------| | 1 | ProposedFosterCare Centers,CWSKIsiolo | 357,000,000 | 665,052,012 | 86% | | 2 | ProposedFoster Care Centers,CWSKNanyuki | 394,971,904 | 613,363,838 | 55% | | 3 | ProposedFosterCareCenters,CwSKMamaNgina | 258,000,000 | 593,560,457 | 130% | | 4 | ProposedFosterCare Centers,CWSKMurang'a | 211,000,000 | 494,866,167 | 136% | | 5 | ProposedFosterCare Centers,CWSKJoska | 300,000,000 | 628,766,776 | 110% | | 6 | ProposedFosterCareCenters,CWSKBungoma | 218,021,007 | 465,255,303 | 113% | | 7 | Proposed Foster Care Centers,CWSKEmbu | 147,432,032 | 440,752,481 | 199% | | 8 | ProposedFosterCareCenters,CWSKKisumu | 371,000,000 | 615,452,481 | 66% | | 9 | ProposedFoster Care Centers,CWSKBomet | 155,755,914 | 436,452,481 | 180% | | 10 | Proposed Foster Care Centers,CWSKKisii | 220,444,635 | 241,000,000 | %6 | | 11 | ProposedFoster Care Centers,CWSKNyahururu | 217,800,000 | 228,000,000 | 4.7% | | 12 | ProposedFoster Care Centers,CWSKLodwar | 218,250,000 | 433,252,481 | 98% | | 13 | Proposed Foster Care Centers,CWSKBaringo | 218,100,000 | 419,252,481 | 92% | | 14 | ProposedPerimeterWall CWSKHQS | 1,400,000 | 14,775,000 | 29.6% |

• 524.No evidence was provided that theprocedure and conditions forvariation of contracts providedunderSection139(1),(2),(3),and(4)ofthePublicProcurementandAssetDisposal Act,2015wereobserved.Inaddition,thecontractpriceforsome oftheProjectshadincreased bymore than25%contrary toSection139(5)of thePublicProcurementandAssetDisposal Act,2015whichprovides thatwherevariationsresultin anincrement ofthecontract priceby more than twenty-fivepercent,suchvariations shall be tenderedfor separately.Further,the

stalledprojects anduncertaintyinprojectcompletion timelinesmayleadtofurther cost escalations.

• 525.In the circumstances,theSocietywas in breach of thelaw,and theregularity andvalue for moneyontheexpenditurecouldnotbeconfirmed.

Managementresponse

• a)The projects havebeen progressing as per the availability of funds.The trustees are working hard to ensure that projectsareseenthrough tocompletionin theshortest timepossible
• b)There wasnovariation of the projects cost.There is no BQfor anygiven siteas a whole. Everyunitwithin thesitehasits ownBQe.g.bungalow,marionette,school,kitchen,stores admin block,perimeterwall etc.Theprojectsareimplementedinphases dependingon the need andavailability offunds.Theinitialprojectcostsincludedonlyunits tobestartedat the time anddidnotincludeunits thatwere tobe developedlateratthesite asawhole.Thecurrent costsindicateddonotimplycostincrement orvariation,butrather theinclusion ofadditional units

CommitteesObservations

TheCommitteeobserved that;

1. The assertionby themanagement thateveryunitwithin thesitehasitsownBills ofQuantity (BQ)e.g.bungalow,marionette,school,kitchen,stores administrationblock,perimeterwall hence thereisnoBQforanygivensite as awholewasnotconvincing and anindication of poorprojects'planning,management andimplementation.

• ii. ThecontractpriceforsomeoftheProjectshadincreasedbymorethan25%contrary to Section139(5)ofthePublicProcurementandAssetDisposalAct,2015,whichprovides that wherevariationsresult in anincrement of the contractpricebymore thantwenty-fivepercent.
• iii. The delay inimplementationof the capital projectsby theSocietyexposes them torisks of escalation ofthe costs on account offluctuation ininflationrates,exchangerates,penalties andfinesforcontraveningcontractual timelinesobligations.

Committeerecommendations

• i.Within three months upon adoption of this report,theAccounting Officer should

prepareandsubmit to theNationalAssembly andAuditor-General areportonall the capital projectsin question,planned completion timelines and therespective costs to completion and accompany thesamewith contract documents,certifiedworksdone by thedepartmentofPublicworks andthecertificateofcompletionforeachof the said capitalprojects.TheAuditor-Generalshouldreview andreport the statusin the subsequentAuditcycle.

• ii. Within threemonthsupon adoption of thisreport,EACCshould investigate howthe procurement oftheprojectsweredone,anyirregularitiesandrelatedfinancialloss, andsubmitthereport totheNationalAssembly.Further,ifanyofficerisfound culpableforthenugatory expenditure,he/sheshouldbeheldpersonallyliableforany lossofpublicfunds.DPPshouldinitiatealegalprocesstorecoverthe amountsolost from the concerned officer(s)at the prevailing CBKrates.

8.Non-CompliancewithReporting Guidelines

• 526.TheCommitteeheard thattheProgressonfollow-upofauditmattersreportedintheprior yearwasnotprovidedin thefinancialstatements,contrarytothereportingguidelinesissued bythePublicSectorAccountingStandardsBoard(PSASB).

Managementresponse

• 527.ThemanagementinformedtheCommitteethat theyhavesinceimplemented theauditor's recommendations.

CommitteeObservations

The Committee observed;

• Thesociety didnotprovide theprogress on follow-up ofaudit matters in theprioryear, contraryto thereportingguidelinesissued by thePublicSectorAccountingStandardsBoard (PSASB).
• ii. Consequently,it couldnotbereviewed to what extent the audit issues raised had been addressed.

Committee'srecommendations

The Committeereprimands the then Accounting Officer for contravening thereporting guidelinesissued by thePublicSectorAccountingStandardsBoard(PSASB).

9.LackofBoardofDirectors

• 528.The Committeeheard thatSection 70of theChildWelfareSocietyofKenya Order,2014 providesthattheManagement oftheSociety shall be vested ina Non-ExecutiveBoard consistingofa Chairman andsix(6) Memberswith theChiefExecutive Officerof theSociety astheSecretary.However,duringthefinancialyear2018/2019,theSocietyoperatedwithout aBoardofDirectors.

Managementresponse

• 529.Themanagement informed theCommittee that thedelayinthe appointment of theBoardwas a result of theconflict ofoperationsof theLegal OrderNo.58of 2014and theTrustee deed.

CommitteeObservationsandRecommendations

TheCommitteeobserved that theissueoftheLackofBoarddirectorsinitsreportforthe financialyearending30June2018andupholdsitsrecommendationstherein.

10.Non-AppointmentofanAuditCommittee

• 530.The Committeeheard that,theSocietydidnot have anAudit Committee asrequired under Section 73(5)of thePublic Finance Management Act,2012,which provides that every nationalgovernment publicentityshallestablishanAudit Committeewhosecomposition and functions shall be as prescribed by the Regulations.TheAudit Committee forms a key component in thegovernanceprocessbyprovidinganindependent expert assessmentof the activities of top management,the quality of the risk management,financialreporting, financial management andinternalaudit to the topManagement.
• 531.In the circumstances,the effectiveness of theinternal controls,riskmanagement and overall governancefor theSocietycouldnotbeconfirmed.

Managementresponse

• 532.TheManagementinformed theCommittee that,Legal OrderNo.58of2014createda conflict between StateCorporationandChildWelfareSocietyofKenyairrevocabletrustdeed thereforeinterferingwith thenormal operations of the trust.This is beingresolved as the Legal orderis awaiting de-gazettement.TheBoard of Directors isnow inplace.

Committee'sObservationandRecommendations

The Committee observed that theissue on non-appointment of Audit committee was deliberatedonitsreportfor thefinancialyearending3othJune2016andupholdsits recommendationstherein.

11.InadequateInformationTechnology(IT)Internal Controls

• 533.The Committee heard that,the society didnot have anIT Strategic Committee,a formally approvedITSecurityPolicy,anIT ContinuityPlan andaDisasterRecoveryPlan.NonestablishmentofanITStrategicCommitteeattheBoard levelmayhaveresultedinIT governancenotbeing addressed adequately.In addition,data confidentiality,integrity and availability aswellascontinuityofoperationsincaseofadisastercouldnotbeconfirmed.

Managementresponse

• 534.Themanagementinformed the Committee that,an approvedITPolicy,ITcontinuityplan and DisasterRecoveryplanarenowinplace.

Committee'sObservationandrecommendations

TheCommitteeobserved thatthematteroninadequateITInternal Controlswasdeliberated onitsreportforthefinancialyearending30hJune2018andupholdsitsrecommendations therein.

Date.

HON.EMMANUELWANGWECBS,MP CHAIRPERSON PUBLICINVESTMENTSCOMMITTEEONSOCIAL SERVICES,ADMINISTRATIONANDAGRICULTURE

REPUBLICOFKENYA

THIRTEENTHPARLIAMENT-(FOURTHSESSION2025) THENATIONALASSEMBLY

PUBLICINVESTMENTSCOMMITTEEONSOCIALSERVICESADMINISTRATION& AGRICULTURE

DIRECTORATEOFAUDIT,APPROPRIATIONSANDGENERALPURPOSE COMMITTEES

COMMITTEEMEMBERSREPORTWRITINGADOPTIONLIST

| No. | NAME | DATE | SIGN | |-------|------------------------------------------|---------|--------| | 1. | Hon.Emmanuel Wangwe,MP,CBS-Chairperson | | Au | | 2. | Hon.CalebAmisi Luyai,MP-Vice Chairperson | | | | 3. | Hon.FerdinandKevin Wanyonyi,MP | | | | 4. | Hon.Martin Peters Owino,MP | | | | 5. | Hon.(Amb.)BenjaminLangatKipkirui,MP | | | | 6. | Hon.NicholasNgikorNgikolong,MP | | | | 7. | Hon.(Dr.)Lilian Gogo,MP | | | | 8. | Hon.Fatuma JehowAbdi,MP | | elle | | 9. | Hon.JoshuaKivindaKimilu,MP | 1216/2s | | | 10. | Hon.Umulker SheikhKassim,MP | 1316/25 | | | 11. | Hon.Caleb Mule Mutiso,MP | | | | 12. | Hon.(Dr.)JacksonKipkemoiKosgei,MP | | | | 13. | Hon.Michael WambuguWainaina,MP | | | | 14. | Hon.Paul Nabuin Ekwom,MP | | | | 15. | Hon.Elijah NjoreKururia,MP | | |