The Unclaimed Financial Assets Authority (UFAA) has done little in delivering on its core mandate of connecting beneficiaries with their cash that is lying idle at the State agency.
This is according to a new report by Auditor General Nancy Gathungu, which notes that the agency’s success rate of distributing unclaimed assets to their rightful owners is significantly low.
As of June last year, the authority had given out 2.7 per cent of assets it had received to the beneficiaries.
But UFAA in responding to queries by the Auditor General cited a restrictive legal framework that it said has held it back in dispensing its mandate.
Entities such as banks and listed firms deposit idle financial assets, including cash in dormant accounts, unclaimed dividends and shares owned by Kenyans from all walks of life with the authority.
The authority is then tasked with giving out the assets to the rightful owners. UFAA held nearly Sh50 billion of unclaimed assets as of December last year.
“Although there has been improvement in the reunification rate of assets with beneficiaries from a low of less than one per cent in 2017, the rate is still significantly low and standing at 2.7 per cent of June 30, 2020,” said the Auditor General’s report accompanying Ufaa annual report for the financial year to June 2020.
“Management has attributed the slow pace to the Unclaimed Financial Assets (UFA) Regulations, 2016, which do not adequately support reunifications. Management has submitted a proposal to The National Treasury for amendment. In the circumstances, the authority is not meeting its mandate of tracing unclaimed assets and reunifying them with the beneficiaries efficiently and effectively.”
The authority said as of December last year, assets worth Sh48.18 billion were being held in the unclaimed financial assets trust fund.
These are in cash (Sh20 billion), shares worth an estimated Sh28.75 billion (901 million shares) and units trusts of an estimated Sh55.66 million (9.87 million unit trusts).
It added that it had paid out Sh530.2 million and 8.27 million units of shares to 6,123 claimants.
UFAA started receiving unclaimed financial assets from holders in 2014 and giving them out to beneficiaries in 2016.
In the year to June last year, the Auditor General also queried the level at which UFAA outsourced key services to contractors.
These included key functions such as internal audit, which led the Auditor General to question the authority’s capacity to deliver on its mandate.
“During the period under review, the authority hired consultants to provide consultancies in various areas, including internal control activities, at a cost of Sh224.18 million and representing 63.95 per cent of administrative expenditure. It was noted that consultancies were incurred in areas of internal audit, customer survey, information security, holders’ audits, branding and public relations,” said the Auditor General in the report.
“This is indicative of inadequacy of the existing capacity to deliver on the authority’s mandate, which may negatively impact on the effective delivery of services.”
The report also noted low levels of inclusion within its human resource, with just two communities accounting for 54.5 per cent of its workforce.
And according to the Auditor General, there are fewer women than men at the authority, with “men over-represented at 75 per cent of the filled positions within senior management cadre.”
“Although management indicated that this situation is historical, no plans were provided to remedy the situation,” said the report.