A probe into the Unified Councils Pension Fund (UCPF) has unearthed massive abuse of funds amid evidence the board pocketed US$8,7 million in allowances, sitting fees and staff salaries between 2010 and December 2017 at a time the fund did not honour pension obligations to members, an audit report shows.
By Melody Chikono
This comes after the Insurance and Pensions Commission (Ipec) in February suspended six executives from the fund to allow investigations into the scandal.
The fund manager Benjamin Chiyangwa, Brian Rusere (finance officer), Peter Chiyangwa (benefits officer), Masceline Mbukwa (internal auditor), Beular Musanhi (personal assistant) and Martha Kunaka (Bulawayo branch manager) were sent on forced leave as a result of the probe.
Information seen by businessdigest this week shows that the US8,7 million was lost at a time when the fund was unable to timely pay pension benefits that were due to members of the fund.
As at December 31 2017, outstanding benefits and arrears amounted to US$693 000.
Investigators found that the board of trustees was conflicted and acted in a self-serving manner to execute its fiduciary responsibilities as expected of trustees.
According to the findings, members of the board of trustees were remunerated as if they were full-time employees of the fund with monthly allowances of at least US$1 265 plus sitting allowances.
In 2015 and 2016, US$700 000 was spent towards the allowances and welfare of the 16-member board of trustees, while from 2010 to 2017 some of the trustees received personal loans totalling US$243 000 at an interest rate of 1% per annum.
“These loans which were benchmarked against their monthly allowances were subject to approval of the fund manager while the same also recommends the trustees’ monthly allowance adjustments. This resulted in a conflict of interest and an almost collusive relationship that compromised the board’s effectiveness in exercising its supervisory and monitoring role over the fund in particular the office of the Fund Manager,” the audit report says.
“It was ‘scratch my back I will scratch back’ relationship between the board of trustees and management in particular fund manager. This could explain why the board of trustees did not insist on securing, by way of registering mortgage bonds on Gletwyn and Zimre residential properties that were purchased by the Fund Manager using loans he accessed from the fund. In the absence of registered security, the fund is exposed to the risk of financial loss in the event of fund manager defaulting on loan obligation and/or disposing the said properties. There will be no fallback position for the fund.”
Such loans were not provided for in the Pensions and Provident Funds Act or in the rules of the fund, but were benchmarked against their monthly allowances and were subject to the approval of the fund manager.
The fund manager also recommended the trustees’ monthly allowance adjustments, a situation that resulted in a conflict of interest and an almost collusive relationship that compromised the board’s effectiveness in exercising its supervisory and monitoring role over the fund.
The report also found that the trustees were paid generous subsistence and travel allowances for site visits to assess the value of the vacant land that was given to the fund by some councils in lieu of contribution arrears.
At the time of the investigation there were no written reports on the undertaken visits that would detail the nature of the evaluation done to justify the cost of such trips to the fund.
Between 2011 and 2017 the fund paid a total of US$59 119 fund for the trustees’ cellphones, while in 2010 and 2012 the trustees were given tokens of appreciation at the end of their term of office amounting to US$139 000.
There was no evidence that the appreciations were linked to the performance of the fund nor were they provided for in the rules of the fund while the then Principal Officer of the fund, Rodgers Mozhenty got US$10 794 of these “appreciations”.
The generous payouts to the trustees is said to have attracted the attention of the regulator who ordered the fund redraft its rules, but the order was not complied to immediately.
The investigation established that the fund was not remitting statutory deductions such as pay as you earn and National Social Security (Nssa) and had made a payment plan with the Zimbabwe Revenue Authority and Nssa.
The non-compliance resulted in financial penalties in excess of US$230 000 to the fund that would adversely affect the ultimate benefit to fund members whose interests the trustees are supposed to safeguard.
It was also revealed that the internal audit function lacked the necessary independence to effectively and objectively conduct its duties reported to the fund manager both functionally and administratively.
Investigators found that six employees claimed allowances totalling US$9 073 for attending the funeral of a board member — Irene Mazongo — who passed away in September last year and contributed only US$500 for the funeral.
The fund lost a further US$5 733 when management received allowances for attending the receptionist’s (Doreen Muregwi)’s father’s funeral and burial in July 2017.
The fund manager claimed allowances for his spouse for attending these funerals, making the total amount paid by the fund to the fund manager’s spouse US$2 060.
One trustee, Majoni, spent two days in the hotel with the fund paying US$170 covering bed and breakfast and claimed US$345 in January 2018 for unauthorised accommodation expenses.
An additional act of excessive claims was observed when the fund’s Bulawayo administration officer, Martha Kunaka, claimed a total of US$2 060 for travelling from Bulawayo to Harare to attend the board meeting held on January 26 2018.
The claim was based on an itinerary that involved travelling to Harare on December 26 2017 (which was a public holiday).
There was no evidence that management held a meeting on December 27 as indicated in the memo from Bulawayo branch addressed to the finance department.
Investigations have shown that on January 13 2016, the board chairman and management claimed a total of US$11 000 for compilation of information required by the commission of inquiry.
The management team never went out of the office to compile the information, all information was at the office and it was compiled therefrom.
In another act of impropriety, management claimed allowances for visiting Checheche and Chimanimani to view land which was already catered for in the claims.
The claim forms for the Checheche land view visits included fuel based on 500 kilometres and also show that management spent three days (25 to 27 October 2015) viewing the land.
On March 10 2016, Mozhenty, the principal officer, further claimed US$1 180 for finalisation of 2014 audited financial statements. While he, given his position, has no direct role to play in the audit of financial statements and he claimed mileage of 400km, sitting allowance of US$100 as well as supplementary allowances of two days and lastly US$420 for accommodation.
In yet another scandal, It was also observed that the fund was flouting best practice in the awarding of tenders. There was no evidence to show that the fund went to tender before embarking on some of the major projects currently under implementation at the fund, such as the criteria used to select and engage Generation Shopfitters, Cormasoft, Pinnacle Holdings, Garble Construction and Stallone Consultancy was not documented.
While some instances, the investigation noted that this process was of ten rendered superfluous as the fund ended up awarding the tender to companies that would not even have tendered for the job.
This was the case for a Hwedza project, where the fund intended to construct 10 houses on land that the fund got from from Hwedza Rural District in lieu of contribution arrears.
The documents perused by the investigation team revealed that the project ended up being awarded to Hwedza Rural District Council even though the local authority had not responded to the call for tender which was floated in January 2014.
There was also no evidence to show that the committee sat to evaluate the tenders that had been submitted.
In addition, it was also noted that that although the Hwedza District Council (HRC) was engaged around May 2014, the actual written contract was done on June 17 2017.
At the time of the signing of the contract the Fund had been since early 2014 that HRC did not have to undertake the job.
The investigation established that the fund recruited Peter Chiyangwa, who is alleged to be related to the fund manager namely Benjamin Chiyangwa, as the Benefits Officer in 2010 without the necessary qualification.
The evidence of this anomaly is contained in a dated March 30 2010 that advised Mr. P. Chiyangwa of his appointment and that further that that he would be given a grace period of up to December 31 2010 to obtain the requisite qualifications.