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Audit finds public varsities in the red with Sh5 billion debts

The University of Nairobi students during a graduation ceremony at the graduation square for the 51st graduation ceremony due to take place tomorrow, Friday 28th, August 2014. [Photo/Jonah Onyango].

Some public universities are cash-trapped and are unable to pay debts amounting to more than Sh5 billion.

The learning institutions are in the red despite offering parallel degree programmes for years, besides hotel and mortuary services that generate income.

This has been going on even as some of them allow students to graduate without clearing their fee balances and paying contractors the full amount for projects not completed.

The Auditor General’s report for 2016/17 reveals that the universities were put on the spot after it emerged that their current assets were less that the liabilities.

In the report, Auditor General Edward Ouko raises queries on Kenyatta University’s financial accounts for the year under review. The university’s current liabilities of Sh3.2 billion exceeded the current assets of Sh1.6 billion that resulted in a negative working capital of Sh1.5 billion.

“In particular, the university was unable to remit pension and taxes amounting to Sh808,367,887 and other deductions of Sh161,875,694 to the respective beneficiaries, thereby risking fines and penalties,”  reads the report.

The university’s financial statements are said to have been prepared on a going-concern assumption that it will continue to receive financial support from the government, bankers, creditors and donors.

“The university is therefore operating under financial difficulties and if no positive steps are taken to improve the financial performance, it may not be able to meet its mandate in future,” Ouko states.

Jomo Kenyatta University of Agriculture and Technology (JKUAT) was unable to pay creditors and insurance claims worth Sh51,317,415.

At JKUAT, current liabilities of Sh3.9 billion exceeded current assets of Sh2.6 billion, leading to a negative working capital of Sh1.3 billion. The liabilities include money owed to suppliers, loans, grants and bank overdraft.

Valuation report

On the University of Eldoret, Ouko says the transfer of assets worth Sh1,124,982,329 from Moi University to the institution could not be confirmed because no valuation report on the items was forwarded to his office.

However, the report reveals that 156 students at Eldoret University were allowed to graduate without clearing their fee balance totaling Sh10,661,304, which he said was in breach of the students’ fee policy of 2014.

It also emerged that Moi University has long outstanding debtors who owe it Sh101,971,356, an amount the university has not managed to recover for three years.

During the period under review, the auditor’s office discovered that a Sh231 million government loan granted to Karatina Campus that is a constituent college of Moi University was still reflecting in its financial books.

According to the order establishing the college, all liabilities, assets and rights held by anybody on behalf of Karatina Campus were to be automatically transferred to the college.

Queries are also being raised on the construction works of a Sh427 million hostel block at Garissa University.

The construction works is said to have stalled after only 43 per cent of the job had been completed and Sh251,400,282 paid to the contractor before he abandoned the job.

“In view of the foregoing, it was not possible to confirm the propriety and value for money of the project expenditure of Sh251,400,282 and the opportunity cost by the delayed completion of the hostel project,” reads the report.

The tender for the construction of the hostel set to accommodate 750 students was awarded to the contractor on January 17, 2014 with the approval of the university’s council.

However, the contract agreement was made on April 24, 2014 but did not indicate the start, completion and taking over dates.

“According to implementation committee meeting held on November 17, 2014, the commencement date was indicated as May 2, 2014 and completion January, 2015 and contract period being eight months,” the report states.

However, a review of the contract records and audit inspection of the same project carried out in September 28, 2017 revealed that the contract extension period of nine months was awarded to the contractor in March 2015, pushing the completion date to October 3, 2015.

This was one of the projects affected when Al Shaabab militia stormed the university in April 2015, killing 148 people, and injuring 79.

Kenyatta University is said to have suffered a major blow after its Kigali Campus in Rwanda and Arusha Campus in Tanzania were shut down.

The university had pumped Sh420,749,207 to set up the Kigali institution and another Sh97,425,152 in Arusha.

Recovery efforts

“Although the university has explained that all due diligence was done before the decision to open up the two campuses, the management has not explained the steps being taken to recover the amount so far incurred totaling to Sh518,174,359,” he says.

The report shows Maseno University failed to give the auditor a satisfactory explanation as to why income generated from Kisumu Hotel had reduced while its expenditure increased as compared to the financial year that ended on June 30, 2016.

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