Sack Byarugaba, Ayota and entire NSSF top brass over mismanagement- probe recommends

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The Select Committee of  Parliament tasked to investigate alleged abuse of office, corruption and mismanagement of  the National Social Security Fund(NSSF)   has recommended the stepping side of former Managing Director Richard Byarugaba and  Deputy Managing Director , Patrick Ayota to step aside to pave way for investigation by IGG.

According to the committee probe report,  the two officials together with others including the Chief Financial Officer Steven Mwanje and the head of Marketing and Corporate Affairs Barbra Arimi Teddy played roles in the initiation of the shs1.8 billion concealed under the Corporate Social Responsibility or investment.

The probe found that shs250million went to the board chairman, shs250 million to the labour minister, shs500 million to board members and shs800 million to unions and that all was not justified.

“Whereas the committee appreciates Mr. Richard Byarugaba and the entire management of NSSF for their effort in growing the Fund from shs 1.7 trillion in 2010 to shs17.3 trillion as at end of fourth quarter of 2022, the committee notes their involvement in the initiation of the shs1.8 billion concealed under Corporate Social Responsibility where they justified before the committee that they did it because of pressure from the board members  make donations as an investment for stakeholders,” the committee report indicated.

According to the probe, whereas the staff didn’t participate in the final approval, the mentioned staff participated in the initiation of the shs1.8 billion and are therefore culpable.

“The committee notes that their justification of succumbing to pressure to commit an illegality is no defense to criminal liability. They should step aside with immediate effect for investigations by the Office of the IGG, for the offenses of abuse of office, corruption and conspiracy to commit a felony with a view of immediate prosecution.”

Mess at NSSF

The parliamentary probe found that several staff and board members at NSSF had individual roles played in the abuse of office, corruption and mismanagement of  the Fund and recommended several measures to punish them.

Byarugaba

The probe found that it was irregular for NSSF to extend a shs11 billion  unsecured loan to Uganda Clays Limited.

The committee particularly faulted former Managing Director, Richard Byarugaba over conflict of interest after finding out that he at the same time sat on the audit committee of Uganda Clays.

“This loan was an unsecured loan and has not, for the past ten (10) years been repaid or secured.This state of affairs put the member of the Board(Byarugaba) in a conflicted situation where on one part, he has to make decisions for the good of the Fund while at the same time being a member of the decision making body of an investee of NSSF, reporting to the same Board where he serves,” the committee said.

“ This is a breeding ground for possible conflict of interest, influence peddling and breach of a fiduciary duty, which, among others requires the duty bearer to care for, be loyal to, act in good faith, bear confidentiality and act prudently to both the NSSF Board and the Investee company.  This is not practically possible.”

The committee therefore noted that it was erroneous for NSSF to guarantee an unsecured loan to Uganda Clays Limited without conducting due diligence on its credit worthiness as this positioned savers’ money at risk but also the appointment of Byarugaba on the Uganda Clays Limited board audit committee was suspect to conflict of interest.

Monies to trade unions

The committee also faulted NSSF over the manner in which it gave out money to trade unions including NOTU and COFTU to run their activities.

The committee observed that NSSF did not have any legal instrument upon which it transferred these monies to COFTU and NOTU, the absence of which renders the said transactions illegal.

“The committee observed that both unions; NOTU and COFTU did not account for funds totaling to shs756.5 million  advanced by NSSF which is a loss to the saver with NSSF.”

Chief Financial Officer

The parliamentary committee also faulted the NSSF Chief Financial Officer, Stevens H. Mwanje for failing  in his responsibility of ensuring that he obtains accountability for monies disbursed to COFTU and NOTU amounting to shs806 million between January 2018 and December 2022.

The committee  however indicated that it was wrong for Mwanje to be hired without being a  member of the Institute of Certified Public Accountants which was contrary to the law.

Section 34 (2) of the Accountants Act, 2013  provides that all heads of accounts, finance and internal audit in public and private sector entities, with public interest, shall be members of the Institute in accordance with the regulations made under this act.

“The committee therefore, notes that the employment of  Stevens Mwanje as CFO at NSSF in 2017 without being a member of the Institute of Certified Public Accountants to date was irregular, illegal and ab initio contravening the Accountants Act, 2013.”

The committee therefore recommended his sacking from NSSF.

The probe committee also faulted COFTU boss, Sam Lyomoki of influence peddling and conflict of interest while sitting on the NSSF board.

They said Lyomoki had solicited the purchase of his land in Mbale by NSSF yet he is a sitting member of the board which depicted a conflict of interest but also gave credence to the allegations that investment decisions by the Fund were always influenced by personal considerations.

“The conduct of Sam Lyomoki contravenes the principles of corporate governance, especially the principle on accountability, which obligates entities to account for and explain every action and decision taken and are obligated to take ownership of the risks involved as a means of building trust between the business and its stakeholders,” the committee said.

“The committee finds the alleged conduct of Sam Lyomoki unbecoming, contrary to the standards of behaviour expected of a Board member and brings the image, reputation, brand equity and overall performance of the Board in disrepute.”

Further recommendations

The committee noted that the NSSF  Board has failed on several occasions to ensure that there is secure, profitable and effective financial management of the fund for the benefit of the workers in particular and the county at large as stipulated in Section 4 of the NSSF Act.

“The committee therefore, recommends that the 12th NSSF Board be dissolved by the Minister of Gender, Labour and Social Development, Hon. Betty Amongi Ongom, with immediate effect and a new Board constituted.”

The committee also recommended the streamlining by parliament of the dual supervision of NSSF to follow the global practice where pension funds are seen as financial institutions and consequently investment vehicles and not labour institutions as is with NSSF.

“We strongly recommend that the NSSF Act be amended to give full supervision of the Fund with the Ministry of Finance,” the committee recommended.

“ We further recommend that the appointment of Managing Director and Deputy Managing Director should be vested in the minister responsible for finance. However, the Minister responsible for labour will remain with the sole responsibility for the appointment of Board members for checks and balance.”

 

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