Cyprian Musoke
31 October 2009
Kampala — THE National Social Security Fund (NSSF) made a net loss of sh50b for the year 2007/2008, according to a new report of the Auditor General.
As a result, the audit report says the 14% interest declared last year was eating into the reserves. About half of the interest paid out came from the reserves.
This contradicts earlier statements by suspended NSSF managing director David Jamwa who, at a press conference in July 2008, declared a sh131b net profit.
"Our excellent performance in the last financial year gives us room to adjust the interest upwards," Jamwa told reporters at Workers' House on July 14, 2008.
"For the first time we are going to pay our members above the average inflation rate, currently close to 9.5%, to create value for real economic terms." The Auditor General appointed KPMG Uganda to audit the financial statements of the NSSF in order for him to report to Parliament.
"The payment of 14% interest results in more funds being distributed than was earned. If they were to continue doing that, it would mean running the Fund down," the Auditor General, John Muwanga, told Sunday Vision.
He pointed out that interest should be paid from current earnings so as to avoid a situation whereby interest is being paid from reserves or from earnings not yet realised.
KPMG also found out that sh206b could not be allocated to specific members last year. This suggests that the accounts of individual members are not being appropriately updated and the balance outstanding on each account is questionable.
"Management has been unable to provide an analysis of this balance or confirm the completeness and accuracy of balances credited to individual members accounts," the report notes.
The report further established that NSSF lent a total of sh3.2b to its staff for the construction of personal houses at a reduced rate of 5% last year. This is an increase by sh700m for staff loans compared to the previous year.
Other NSSF contributors are not allowed to borrow any amount of their savings for investment or any other purposes before they attain the age of 55 unless they become disabled.
There have been calls from the workers that they should be allowed to borrow part of their savings before they retire, arguing that the average life expectancy in Uganda is below the retirement age.
The report dated June 30, 2008, copied to the Inspector General of Government and the ethics minister, queries the Fund's exposure of people's savings to credit currency and interest rate risks related to loans and advances.
It also queries NSSF's investment in a joint venture with Victoria Properties, where Jamwa was a deputy MD, worth 10b, Malibu Israel and Nsimbe Holdings worth another sh8.2b.
"There were no activities for these companies since inception and no records of accounts are maintained," the report notes.
NSSF's investment in Nsimbe Holdings, owned partly by businessman Isabirye Mugoya, was investigated by the IGG who declared it illegal and done in bad faith. As a result, Nsimbe Holdings challenged it before court.
"The Constitutional Court subsequently declared the agreement leading to the formation of Nsimbe Holdings unconstitutional and therefore the company does not exist in law," the report stated.
"It's a non-entity which can not sue or be sued. The recoverability of this amount is highly doubtful."
Also queried is the joint venture of NSSF with Arua Golf Course Hotel to construct a golf course for which modalities of shares had not been finalised.
"The Fund has estimated to incur losses as a result of the delayed implementation of this joint venture and ownership structure of the joint venture."
As a result, the assets in the joint venture have been written down by sh2.3b, the report states.
The annual financial report of NSSF did not include the findings of the special forensic audit which looked into specific aspects of mismanagement of NSSF.
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