Auditor's verdict: With mounting debts, Moi University faces bleak future
By Patrick Kibet
| November 6th 2021
Moi University has been facing a barrage of audit queries, according to reports by Auditor General Nancy Gathungu.
The latest audit report dated August 26, 2021 shows the institution had numerous audit issues in the financial year 2019-2020, some of which were inherited from previous years but remain unresolved.
A review of publicly available audit reports for the last three financial years by Saturday Standard shows the university has been grappling with financial challenges, which have led to non-remittance of PAYE and statutory deductions for years.
Gathungu raised issues over the sustainability of the university operations, noting that the institution reported a negative working capital. The university, according to the report, had total liabilities of Sh5.6 billion against assets of Sh5.2 billion.
The audit report showed the university had negative working capital of Sh476 million by end of June 30, 2020.
“The university also had an accumulated deficit of Sh3.2 billion as of June 30, 2020. The university is, therefore, technically insolvent and may face challenges settling liabilities as and when they fall due,” the audit report concludes.
The auditor also raised concern over non-payment of Sh105 million outstanding claims raised by part-time lecturers.
In addition, the institution had accumulated Sh1.1 billion pending claims, which the auditor general noted could expose the university to legal challenges.
She flagged Sh4 million payment of wages for 44 causal employees not recorded in the master roll.
Furthermore, available information revealed that the university has engaged 736 casual employees for over three years, with some having worked for 25 years.
“Such appointments may be for a specified period of time, provided that it does not exceed three months. Further, the casuals had been performing tasks that were long-term in nature. Consequently, the university was in breach of law and regulations,” Gathungu observed.
In the 2018-19 financial year, the university, according to an audit report, spent Sh138 million to pay wages for 802 casual employees working in various departments.
The audit showed the casual labourers have worked for a period of 12 months contrary to the university’s human resource policy manual.
According to the manual, casual employment is offered for day-to-day defined tasks and is to be remunerated in accordance with minimum wage guidelines.
The audit further questioned expenditure of Sh1.5 billion under the digital learning programme and 2019 Kenya Population and Housing Census. The expenditure was related to supply of parts used to assemble PC tablets such as solar chargers, power banks and mobile devices.
However, the audit found they directly procured from an international company in breach of procurement laws and regulations.
“Available information indicated the parts were directly procured from an international company. However, the prevailing conditions did not meet the conditions set out in the Public Procurement and Asset Disposal Act (2015) for use of direct procurement method,” the report concluded.
The assembly plant at Rivatex, which was inaugurated by President Uhuru Kenyatta, was set up in collaboration with JP.IK, a global organisation, to serve as a technology enabler in terms of accessing and transferring knowledge.
“Further tender documents, inspection and acceptance reports and interim and completion certificates were not availed for audit verification. University in breach of law,” adds the audit report.
In a bid to boost its finances, Moi University also launched Elimu Millers, but the investment, according to the auditor general, has been making losses.
In 2020, the firm made an income of Sh7.7 million but operation costs totalled to Sh10.2 million, leaving the company with Sh2.6 million. This is in addition to Sh6 million reported in 2019.
The university, according to the report, has also failed to remit Sh1.9 billion pension and provident deductions and a further Sh1.6 billion statutory deductions against the requirements of the Employment Act.
In the 2017-18 audit report, the university had Sh486 million which had not been remitted to respective pension managers and trustees contrary to the law.
“However, available information revealed that the unremitted pension fund contribution amounted to Sh923,601,847 and the Provident Fund contribution stood at Sh149,922,468 all totalling to Sh1,073,524,315 instead of the total balance of Sh486,357,748 reported in the statement of financial position.
In his 2017-18 report, the then Auditor-General Dr Edward Ouko noted that the institution had not included all current liabilities in the financial statements for the year ended June 30, 2018.
The auditor flagged the promotion of one staff to deputy chief flight instructor at the School of Aviation on January 28, 2015. The report noted that he was promoted to chief flight instructor and chief ground instructor on February 19, 2020 without advertisement as per the HR policy manual.
The audit noted that the officer was irregularly paid Sh4.5 million responsibly allowances, which were not approved for the salary grade.
Another staffer was found to have been promoted from administration assistant to assistant registrar. “There was no advertisement for the position, and she was irregularly promoted by three grades.”
The institution, according to the audit, had contracted a construction company to build the second floor of the School of Dentistry on June 16, 2017 at the cost of Sh82 million. However, a physical visit to the school in December 2020 found the building was incomplete.
The audit revealed that the university had engaged a new contractor to complete the project at a cost of Sh169 million. The procurement records were, however, not availed for audit verification.
In 2016-17, Ouko noted that the university’s accounts reflected a Sh231 million loan advanced to the university to acquire Karatina campus. The campus was gazetted on October 1, 2010 as a constituent college of the university.
The loan, according to the report, had not been transferred to the university and remained unserviced since the gazettement of Karatina campus.
“Although Moi University has written to the Government seeking consent to assign the loan to Karatina University, no evidence was provided to show that the consent was given,” Ouko noted.
The report added, “Under the circumstances, the justification of the continued retention of the loan in the books of Moi University and when repayment would resume or who would be liable for the interest/penalties accrued during the period when the loan was not being repaid could not be confirmed.”
Special Report: How Moi University found itself in a financial crisisRecent events depict a university that has lost both its vision and mission, audit found an accumulated deficit of Sh3.2 billion by June 30 last year.
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