NSSF Loses Over Ksh.16 Billion in Dubious Deals as CEO David Koross Faces Heat Over Pension Fund Mismanagement

Auditor General Nancy Gathungu’s damning report exposes systematic financial irregularities threatening retirement savings of millions of Kenyan workers

NAIROBI, Kenya – The National Social Security Fund (NSSF) has lost over Ksh.16 billion in questionable investments and inflated procurements, according to a devastating audit report that puts CEO David Koross and his management team under intense scrutiny.

Auditor General Nancy Gathungu’s report covering the financial year ending June 2024 reveals a shocking pattern of financial mismanagement at Kenya’s primary pension scheme, which serves millions of workers across the country.

Bond Trading Disaster Costs Pensioners Ksh.272 Million

The most damaging revelation centers on NSSF’s catastrophic handling of government bond trades. The audit shows the fund purchased bonds worth Ksh.5 billion at premium prices before selling them at devastating losses, resulting in Ksh.272 million in realized capital losses.

“Management failed to balance capital losses against yield rates, a lapse inconsistent with prudent investment practices expected of a pension fund,” Gathungu stated in her report.

The fund also spent Ksh.12 billion purchasing government securities with a premium of Ksh.500.7 million without satisfactory explanation, raising questions about the investment strategy under Koross’s leadership.

Ksh.2 Million Desktop Computer Highlights Procurement Excesses

In what has become emblematic of the fund’s financial recklessness, NSSF purchased a desktop computer for its reception area at an inflated cost of Ksh.2.08 million – a sum that could have bought dozens of computers at market rates.

The procurement violations extend far beyond the computer purchase. The audit reveals:

• Ksh.317.58 million spent on travel, conferences and meetings, with facilities procured from non-registered suppliers
• Ksh.51 million in fuel procurement conducted entirely in cash, bypassing public procurement rules
• Ksh.410 million on renovation works acquired through irregular processes
• Ksh.1.04 million for an eight-bay bulk filer purchased without following proper procedures

Nearly Ksh.1 Billion in Tax Refunds Goes Missing

NSSF has failed to recover Ksh.940.3 million in tax overpayments to the Kenya Revenue Authority, despite the fund’s tax-exempt status. The Auditor General found no evidence of progress in recovering these funds.

“Management did not provide audit review evidence of progress made in the refund of overpaid taxes. NSSF has not been getting any returns on the long outstanding tax receivables balance,” the report states.

Real Estate Blunders and Idle Properties

The fund’s real estate strategy has proven equally disastrous. NSSF purchased land in Nairobi’s Upper Hill area for Ksh.115 million, only to discover the title deed had been revoked because the parcel was reserved for public use.

The audit also reveals five idle properties in Nairobi’s Central Business District valued at Ksh.4.02 billion that generate no income, while other properties are rented out without valid lease agreements.

Investment Portfolio in Crisis

NSSF’s investment decisions have consistently failed to deliver value:

• Ksh.127 million tied up in underperforming quoted equities that lost 17.64% of their value
• Ksh.38.4 million stake in loss-making Consolidated Bank
• Ksh.946.6 million in provisions for doubtful debts unlikely to be collected
• Failed to recover Ksh.1.3 billion in staff loans and Ksh.158.3 million in mortgages

Despite setting a return target of 15 percent, NSSF achieved only 8 percent – well below market benchmarks.

Board Excesses Violate Government Rules

The board of trustees held 14 full meetings and nine finance committee meetings – more than double the government-approved limit of six meetings annually. These excessive gatherings cost Ksh.68.78 million in emoluments.

“This represents an abuse of governance structures,” Gathungu noted in her findings.

Political Fallout Intensifies

The revelations have triggered a political storm, with former Deputy President Rigathi Gachagua making explosive allegations about the misuse of NSSF resources.

Speaking in Mazeras, Gachagua accused President William Ruto of illegally diverting NSSF money for infrastructure projects, including the Mau Summit-Rironi highway.

“That NSSF money, Kasongo has planned it, he has taken that money illegally,” Gachagua declared, using local vernacular to emphasize his allegations.

Expert Calls for Urgent Reform

Finance expert Alfred Samarere has questioned whether employers should continue sending contributions to NSSF as the default option.

“When funds cannot buy computers without losing millions, should we be trusting it with our employees’ future?” Samarere asked.

He argues that a transparent, well-run NSSF could be transformative for Kenya’s economy, financing infrastructure and housing while ensuring competitive returns for workers.

CEO Koross Under Pressure

David Koross, who was appointed Managing Trustee and CEO in May 2023, now finds himself at the center of Kenya’s biggest pension fund scandal. While some irregularities predate his tenure, his leadership during this critical period faces intense scrutiny.

Koross has previously faced criticism over ethnic hiring practices at NSSF, with senators questioning what they termed “perpetuation of ethnic imbalance” at the state corporation.

Membership Targets Missed

The fund also failed to meet its new membership target of 650,000, registering only 556,306 members – a shortfall of 93,696 or 14 percent underperformance.

Additional financial irregularities include:

• Eight tenants owing Ksh.13.97 million in rent arrears with court injunctions
• Two custodial bank accounts holding Ksh.3.5 million operated by an uncontracted entity
• Pending bills of Ksh.8.97 million, some over two years old
• A stalled Ksh.128 million boundary wall project in Bamburi

Parliamentary Action Expected

The scale of financial mismanagement is likely to trigger intense scrutiny from Parliament’s Public Investments Committee. Civil society groups and trade unions are also demanding accountability as public confidence in the institution erodes.

With repeated breaches of the Public Finance Management Act documented in the audit, there are growing calls for criminal investigations and prosecutions.

Impact on Workers’ Future

The revelations raise serious concerns about NSSF’s ability to meet obligations to current and future pensioners. Contributions from members are often delayed in allocation, causing workers to lose potential earnings during critical market periods.

For millions of Kenyan workers depending on NSSF for retirement security, these failures represent not just financial losses but a potential threat to their future well-being.

The fund collects billions from workers annually, yet the audit reveals systematic misuse of these contributions, raising fundamental questions about whether contributors’ interests are being protected.

Call for Forensic Audit

The comprehensive nature of the irregularities suggests an urgent need for a forensic audit to examine not just financial transactions but also the decision-making processes that led to such systematic failures.

Opposition leaders and civil society groups are calling for a complete structural overhaul, including new leadership, strengthened oversight mechanisms, and professional investment management to restore public confidence.

As Kenya positions itself as a regional financial hub, the NSSF scandal threatens to undermine confidence in the country’s financial institutions and regulatory framework.

The Auditor General’s report represents more than routine government oversight – it exposes institutional failures that threaten the retirement security of millions of Kenyan workers and demand immediate action to prevent further losses of public funds.