Sierra Leone: Le60.9 billion missing in social security and pension funds
By Chernoh Alpha M. Bah, Matthew Anderson, and Mark Feldman
A special internal audit into the financial status and operational activities of Sierra Leone’s National Social Security and Insurance Trust (NASSIT), the country’s social security agency, has discovered that officials in charge of managing retirement pensions and issuing social security benefits to workers and their dependents failed to account for over Le60.9 billion Leones (more than US$6 million) in pension and retirement funds in 2019 alone.
Auditors say they discovered a difference of Le60.9 billion between contribution income recorded in the NASSIT Financial Statement for 2019 and the amount recorded in the 2019 NASSIT General Ledger and Trial Balance.
The special internal audit into the country’s social security agency covered fiscal year 2019 and was established to audit 2019 NASSIT Financial Statements to examine possible material misstatements. This audit and its repot are presented in accordance with international financial reporting standards (IFRS).
An advance copy of the report seen by the Africanist Press identified serious misstatements in these financial records, showing explicitly that NASSIT officials did not completely and accurately record workers’ contribution income in fiscal year 2019.
The report notes that whereas the NASSIT General Ledger records a total of Le631,293,248,084.87 (about US$63.2 million) in income for fiscal year 2019, However, the NASSIT Financial Statement shows a total of Le570,363,754,136.00 (about US$57.6 million), a difference of over 60 billion (about US$6 million) not accounted for.
“We identified a difference of Le60,929,493,948.87 between income as per financial statement and income as per general ledgers and trial balance. The difference was as a result of understatement of interest income in the financial statements and omission of government pension in the financial statements for the year 2019,” they stated, adding that the financial misstatement may have resulted from a deliberate underreporting of workers’ contributing income.
“These issues have caused a great impact on NASSIT’s financial and operational activities,” the report stated. Auditors also observed that NASSIT similarly underreported interest income in the 2019 financial statement by Le309 million (over US$30,000) thereby affecting the ability of the Bank of Sierra Leone (BSL) to apply the corresponding interest rate of 19.46% for investments made in marketable bonds by the institution.
“NASSIT also understated interest income of Le309 million in the financial statements. This resulted in the Bank of Sierra Leone failing to apply the interest rate of 19.46% agreed on the investment made in marketable bonds by NASSIT,” they stated.
Africanist Press reviewed a letter from NASSIT sent to the BSL dated 11 February 2020, which revealed that NASSIT invested in two marketable bonds on 14 June 2019, and 26 July 2019, valued at Le15 billion (about US$1.5 million) and Le10 billion (about US$1 million), respectively.
The letter in question noted that these marketable bonds should gain an interest rate of 19.46%. Two other letters dated 17 June 2019, and 30 July 2019, from BSL also confirmed the agreed interest rate. These letters stipulate that interest paid to NASSIT was to be made on a half-yearly basis.
However, the report of the internal audit notes that these interest payments were reduced by Le172,625,000 (about US$17,000) and Le137,083,333 (about US$14,000) – a combined total of Le309 million (about US$30,000) – by BSL. The reason cited was that the inflation rate was lower in 2019. However, interest rates at BSL set for a particular year are not typically changed due to unstable inflation rates.
“There was no evidence to confirm that NASSIT and BSL agreed on a floating interest rate at the time of entering into the agreement,” the auditors observed.
Auditors have asked in a management letter sent to the NASSIT Director of Finance to ensure that the Le60.9 billion difference noted in the 2019 financial statements be investigated, and for changes to be made in the accounting records and financial statements. The auditors also demanded that NASSIT officials, including the Director of Finance and the Director General, contact the Governor of BSL for the reduced interest to be recovered, and the funds transferred into the NASSIT Trust Account.
Auditors have instructed that NASSIT officials should provide corresponding evidence addressing the anomalies highlighted in the 2019 Financial Statements within two weeks.
“The Director of Finance should ensure that the difference noted is investigated, that changes effected in the accounting records and that revised financial statements be submitted within 15 days upon receipt of this report,” they said, adding, “the Director of Finance and the Director General should also contact the Bank Governor for the interest reduced to be recouped, and for the funds to be transferred into the NASSIT Account within two weeks.”
At the time of this publication, Africanist Press could not independently verify whether NASSIT officials have responded to the audit recommendations. However, Africanist Press did contact NASSIT’s head of public affairs, Mohamed Bangalie, to comment on the discrepancies in the financial statements.
Bangalie said he could not readily respond to the issues raised in the report because of the long weekend holiday.
“These are allegations that need clarification from those handling the transactions,” Bangalie said, adding, “this is a weekend and Monday is a holiday. It is out of courtesy that we are chatting. I still think you should be patient in the quest to seek clarification. These are not operational questions; they refer to our books that need to be consulted. I am going to a church service now and hope to get to you after the holiday.”
Bangalie also said the issues do not at present require comments from the senior management of NASSIT. “The questions do not warrant the Director General’s attention at the moment,” he said in response to whether Africanist Press could interview someone else in the institution.
“You have quoted claims and figures on some of our transactions that require reference to documents, files and persons that cannot be reached today or tomorrow,” he stated.
On their part, however, auditors say it is unlikely that they will be able to issue an unmodified audit opinion if the stipulated international auditing standards are not complied with by NASSIT and their Financial Statements are not adjusted accordingly.
NASSIT was established by the National Social Security and Insurance Trust Act of 2001 to provide retirement and other benefits to meet the contingency needs of workers and their dependents. Like any social security system, NASSIT provides old age pension and old age gratuity, retirement grant, invalidity pension, invalidity grant, survivor’s pension, survivor’s grant, as well as other benefits prescribed by the 2001 Social Security and Insurance Trust Act.
