Pension and healthcare shocker for civil servants as MPs unearth scam

Chairman of Public Investment Committee Adan Keynan stresses point when NSSF top officials appeared before his committee to answer allegation charges on corruption at Parliament buildings Nairobi 22/04/15 [PHOTO:MOSES OMUSULA/STANDARD]

Thousands of Government workers could be locked out of healthcare services because their employer has failed to remit their medical insurance deductions, a parliamentary committee has revealed.

More could have lost millions in retirement savings because their employer did not pass on the deductions to the pension scheme, according to findings of a probe carried out by the Public Investment Committee (PIC) of the National Assembly.

The committee chaired by Adan Keynan has unearthed that several parastatals made statutory deductions such as income taxes and insurance premiums payable to the public health insurer, National Hospital Insurance Fund (NHIF) but never conveyed the funds. Such workers would be forced to pay from their pockets to settle medical bills when they or their dependents fall ill, even though they are not at fault.

“National Museums of Kenya had unremitted statutory deductions and other third party payments totaling Sh167 million and Sh12 million,” PIC says in a report to be tabled in the National Assembly. NHIF, like any other insurer, requires that members be up to date before it can honour any claims.

The gaps in remittances date back to more than 15 years, according to the audit. Keynan’s committee said the agencies failed to remit the deductions in what is potentially criminal schemes to cover revenue shortfalls. “The Committee noted that some of the State Corporations used these statutory deductions such as pension dues and income tax (PAYE) to meet deficits in allocations from the National Treasury and ensure their continued operation.”

While appearing before the committee, National Museums of Kenya management informed PIC that statutory deduction for PAYE and pensions had not been remitted at the time of audit due to financial constraints.

In one example, School Equipment Production Unit – mandated to manufacture and distribute science materials and apparatus to educational institutions, deducted pension savings from workers’ salaries and remitted only a tiny of it to the administrator.

Be disbanded

“During the year ended 30 June 2002 SEPU only remitted Sh350,000 out of Sh2,089,937 which was payable in respect of 10 per cent of members’ basic salary contribution to the pension scheme administered by Madison Insurance Company, and Sh1,112,204.50 in respect of other statutory deductions.”

SEPU’s pension scheme was also not registered with the retirement industry regulator, RBA, as per the requirements of the law. Another State agency Kenya Medical Laboratory Technicians and Technologists Board (KMLTTB) as at June 30, 2010 had in its books of accounts Sh9,096,011 relating to PAYE made up of principal of Sh8,009,426 accrued interest of Sh1,062,665 and arrears of tax amounting to Sh23,920. Also, KMLTTB did not remit the PAYE for the period of January 2002 to April 30, 2006.

Keynan’s committee recommends that State Corporations that continue to perform non-strategic national functions and continue to rely on National Exchequer for financial support should be disbanded and the functions transferred to the relevant National Government departments or the functions should be transferred to the County Governments.

“The National Treasury should fast track the restructuring and privatisation of poor performing commercial State Corporations such KMC so as to address its future commercial viability and the required financial and management resources.”

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