How University of Nairobi got into Sh2.7 billion cash crisis

University of Nairobi Vice Chancellor Peter Mbithi

The University of Nairobi (UoN) is managing the Sh2.7 billion deficit it is currently operating under, Vice Chancellor Peter Mbithi has told MPs.

Prof Mbithi noted that one of the factors that led to the huge deficit is delayed remittance of Sh526 million capitation money for September.

"Members, I am happy to announce that this money was sent to us yesterday (Wednesday) and we pray that we continue to get the money on time," he told the National Assembly Education Committee.

He appeared before the committee following a request by Navakholo MP Emanuel Wangwe for an inquest on university management issues including the financial crisis.

Committee chairman Julius Melly said Mbithi was also summoned to shed light on the ongoing infrastructural projects including financing, cost and procurement process for the projects, companies awarded and the directors of the said companies.

Mbithi said the university looked for ways and means to raise the money to pay September salaries.

"On September 28, the UoN council approved the procurement of an overdraft facility of Sh450 million to enable the university to render timely payments of the September staff salaries," he said.

He said the attendant interest and bank charges from this overdraft is Sh10 million and called for timely remittance of capitation money to cut the costs.

"Assuming an average of one overdraft facility per month to cater for timing delays, then the potential outflow is Sh120 million per annum in additional costs. This needless cost could be saved by timely remissions of capitation," Mbithi told the lawmakers.

In his brief to MPs, the VC itemised how the Sh2.7 billion deficit resulted.

The document shows Sh1.4 billion was slashed from the university proposed budget (from the approved Sh6.681 billion to Sh5.256 billion).

Disciplinary action

Mbithi said another Sh628 million outstanding pensions arising from the 2010-13 Collective Bargaining Agreement (CBA) also contributed to the deficit.

The VC noted the Sh196 million owed by other public universities arose from the distribution of Sh7.8 billion allocated for the 2010-13 CBA.

Mbithi told MPs that he would take disciplinary action against his deputy if he continues to disobey him.

He also denied any illegal procurement had been effected under his watch and dismissed reports that the university was on the verge of collapse.