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Lapfund on the spot for Sh1.3bn advance payment to contractor
Visitors view some of the housing projects offered by LapFund on the last day of the 254 Realty Homes Expo held at the KICC grounds on September 30, 2023.
The Local Authorities Provident Fund (Lapfund) is on the spot over an unapproved Sh1.3 billion advance payment in a housing project, exposing weaknesses in its procurement processes.
Lapfund’s management is accused of making the deposit to a contractor in the Bellevue Park Residences housing project even before works could be certified, raising concerns over prudence in use of the public funds.
The advance payment was part of Sh2.89 billion that Lapfund paid to facilitate construction at the Bellevue housing project by June 2025, shows an Auditor-General’s report for the State entity.
“It was observed that an advance payment of Sh2,898,604,851 was made whereas the value of works certified as at 30 June, 2025 stood at Sh1,585,691,063, raising concerns on efficient utilization of funds,” Auditor-General Nancy Gathungu said.
The public auditor faulted Lapfund over the excess Sh1.31 billion payment to the contractor involved in the Sh16.1 billion project.
The project entails modern residential houses, from studios to three-bedroom units, commercial spaces, a kindergarten and a health centre, located at South C, Nairobi.
Lapfund, which manages the pensions of county workers and former employees of defunct local authorities, started the Bellevue housing project in January 2023.
The mixed-use development project was expected to be concluded in October last year but the public auditor notes that it has experienced delays that put it 16 months behind schedule as of July 2025.
“The project was expected to take 31 months to complete with a commencement date of 26 April, 2023 and expected completion date of October, 2025," Ms Gathungu said.
"A site visit carried out on 10 July, 2025 revealed that although the contractor was on site and the works were ongoing, the project was 16 months behind schedule, with 25 out of 31 calendar months having elapsed equivalent to 81 percent of the contract period.”
The Auditor-General expressed doubts that the pension fund manager would deliver the project within set timelines, noting that a formal request to extend it had not been made.
Ms Gathungu also faulted the fund for listing some of its projects still under construction and thus not ready for sale or occupancy as part of its Sh36.7 billion investments in property.
“However, the investment includes assets under construction of Sh19,570,612,000 which were classified as investment property even though they were not complete for sale or occupation,” Ms Gathungu said.
The fund manager also faces challenges in its framework for collection of debts, with Ms Gathungu revealing that Lapfund could lose Sh42.27 billion in unremitted contributions.
By end of June 2025, Lapfund was owed Sh17.7 billion in long-term debts and Sh1.89 billion in short-term debts, after deducting the expected losses of Sh42.27 billion.
“The gross non-current receivables increased by Sh6,201,164,000 from the Sh59,667,556,000 reported in 2023/24 to Sh65,868,720,000 in the year under review due to penalties charged on outstanding debts,” the Auditor-General revealed.
The public auditor warns that Lapfund has not demonstrated measures taken to ensure the enhanced collections of its debtors. She also reckons that the fund manager continues to apply penalties and levies on unremitted contributions which have raised the debts owed to it, without innovating better ways to get the cash.
Lapfund has been in existence since 1960, managing pensions for workers in defunct local authorities before evolving to manage those of county workers following the onset of devolution in 2013.
