Assets authority in the spot over Sh27.6 billion

The unclaimed Financial Assets Authority (UFA) has been faulted by the Auditor General for only releasing Sh2.4 billion in unclaimed assets to rightful owners despite having accumulated Sh60 billion worth of assets.

A report by the Nancy Gathungu-led office covering six financial years from the period between 2018 and 2024 reveals that the Authority is holding Sh57.6 billion and criticizes it for denying the rightful owners' access to their assets.

The Sh60 billion comprises  of Sh29.6 billion cash assets and Sh30.4 billion non-cash assets. Out of these, the report notes, the Authority has invested Sh22.3 billion in government securities and generated an income of Sh13.1 billion over the financial years under review.

Gathungu explains that data  from the authority indicates that the low handover of the money /assets to their owners is due to insufficient contact information which has continuously deterred efforts to locate apparent owners, limited mechanisms used to locate and notify apparent owners, and made it hard for the holders to reunify unclaimed financial assets at source. A low number of claims lodged and delayed verification processes have also stalled the handover process.

The Auditor General however noted that the argument by the Authority that the reunification process is both costly and time consuming, especially  due to low-value claimants is unacceptable as it is denying the rightful owners' access to their assets and limiting their potential contribution to the economy.

Notably, the reunification of the unclaimed financial assets is done through postal addresses, telephone numbers, email addresses, and utilization of next of kin details provided by the apparent owner during account opening or on first contact.

“The Authority has not reunified a substantial portion of the unclaimed financial assets held in the Trust Fund due to inadequate reunification mechanisms. The mechanisms used by the Authority to process claims lodged by apparent owners are inefficient,” reads the report in part.

The performance audit report also reveals that for the six financial years in question, various holders had unremitted unclaimed financial assets amounting to Sh13.4 billion. Of this amount, 8.4 percent was reunited at source, 13.9 percent was remitted to the Authority, while 75.6 percent remained unremitted.

According to law, failure of a holder to willfully report any unclaimed financial assets under their custody renders them liable for a penalty of Sh7,000, but not more than Sh50,000 for each day the report is withheld as well as be liable to a penalty equal to 25 percent of the value of the asset that should have been paid or delivered.

Consequently, 15 out of 20 institutions have been fined penalties amounting to Sh2.2 billion for failing to remit unclaimed assets. The penalties, the report shows, account for 50 percent of the value of the identified unremitted amounting to Sh5.1 billion.

The institutions include Carbacid Investments that was fined Sh30.8 million, Moi University Retirements and Benefits Scheme fined Sh111.6 million, Maseno University Sh74.5 million, Pacis insurance Company Ltd Sh10.1 million, Egerton University Sh39.1 million, Moi University Sh211.4 million, Airtel Kenya Sh27.2 million.

Others include Total Kenya Sh26.7 million, Kenyatta University Sh19.8 million, Equity Bank Sh249.7 million, United States international University (USIU) Sh34.9 million, CIC group PLC Sh999.6 million, WPP Scan group Sh62.2 million, Pioneer Assurance Company Ltd Sh131.1 million, Unaitas Sacco Sh58 million, Unga Group Sh29.4 million, Mwalimu National SACCO Sh16.6 million, Geminia Insurance Sh16.8 million and University of Nairobi Sh 66.8 million.

Further, it emerged that authority failed to fully utilize investment income Reserves for Long-Term Socio-Economic Development.

The report revealed that despite having generated Sh13.1 billion  in investment income, Sh3.4 billion was used to finance the Authority's operations, Sh9.6 billion, representing 73.37 percent of the total investment income, was retained within the Trust Fund for reinvestment.

“This reinvestment strategy resulted in a continuous increase in unutilized investment income,” adds Gathungu. 
 
It also brought reveals that the Authority does not have a mechanism to receive and secure management of the 1.7 million units of non-cash assets in the form of shares, which remained in the custody of their original holders on account of the Authority not being allowed under the law to operate a Central Depository and Settlement Corporation (CDSC) account, which is necessary for facilitating the transfer of unclaimed shares.

Further, Gathungu also pointed out that the authority was using outdated data on the Number and Value of Unclaimed Financial Assets Held by Holders.

According to the report, the Authority has not established clear timeframes for updating the data in the baseline survey which could result in under-reporting of unclaimed financial assets, thereby limiting the possibility of surrender and safeguarding by the Authority.

“As at August 2024, the Authority did not have updated data on holders of unclaimed financial assets and the respective value of assets held. The Authority had last conducted a baseline survey in 2018, which was used to determine the number of holders and estimate the value of unclaimed financial assets held by holders," adds the report.