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November 13, 2018

Public varsities in financial crisis as revenues dwindle

Graduands at Technical University of Kenya celebrate after they were conferred with degrees /FILE
Graduands at Technical University of Kenya celebrate after they were conferred with degrees /FILE

Public universities are broke and in a deep financial crisis that could soon grind them to a halt, following dwindling revenues.

The Star has established that most public institutions of higher learning are hardly surviving and unable to meet financial obligations, including submitting statutory deductions to various agencies.

They are also unable to pay lecturers and other university staff, throwing the future of some of the universities into disarray.

The situation has been compounded by lack of students for the module two programmes, popularly known as parallel courses, which formed the bedrock of the institutions’ revenues.

This is after the university cut-off points were lowered to C+, offering a window of opportunity for all the form four leavers who scored above the minimum university entry grade to proceed to university under government sponsorship.

In the last two years, all students who scored a minimum of C+ in KCSE were absorbed by the Kenya Universities and Colleges Central Placement Services in private and public institutions.

 DECLARED INSOLVENT

There are 31 public universities and six constituent colleges in the country. In this year’s budget, Sh91 billion was allocated for university education. 

In a report to Parliament last year, Auditor General Edward Ouko declared 11 public universities, including University of Nairobi, insolvent.

The others were Jomo Kenyatta University of Agriculture and Technology, Technical University of Kenya, Laikipia University, Machakos University College, Masinde Muliro University, Multimedia University, Murang’a University, Embu University, Pwani University and the University of Eldoret.

As per the 2015 audits, he said the universities could not meet financial obligations, as their current liabilities exceeded their current assets.

In the report, UoN was unable to remit Sh673.6 million statutory deductions from staff salaries. It had amassed Sh458 million debt and utilised Sh147.6 million of its reserves.

Last year, the university had an outstanding Sh2 billion shortfall. This year they had requested for Sh18 billion from the 2018-19 budget to fund research and self-sponsored students. They expected to receive over Sh7 billion, but only Sh4.7 billion was allocated to them by the National Treasury. 

The declined budgetary allocation will compound the financial crisis further at the oldest and most prestigious public university in the country.

Other universities that are now surviving on bank overdrafts to run their affairs and pay staff are Moi University, Egerton, JKUAT and  Kenyatta University.

In 2010-17, the auditor general notes that Moi University management made deductions of Sh598 million from staff to cater for statutory and loans, but failed to submit it to the concerned agencies. A further Sh117 million for provident fund had been deducted but not submitted to agencies.

The institution, which has about 23,500 students on government-sponsored programmes, is currently languishing in an estimated Sh1 billion debt.

Early this month, Njoro-based Egerton University’s bank accounts were frozen over workers’ deductions arrears for loans and insurance schemes that have accrued to over Sh246 million.

Audits show between 2010 and 2017, the institution collected Sh122 million from staff as Sacco savings, which was not submitted, and Sh127 million for the pension scheme. Another Sh250 million is yet to be paid to insurance schemes and staff loans.

Other than the deductions, the university, which has 19,000 students on regular programme, has a Sh500 million outstanding debt.

JKUAT, on other hand, has not submitted close to Sh300 million for statutory deductions and third-party deductions.

KU has had delayed salary payments for May and June, and is unable to furnish the newly constructed referral hospital so it can begin offering services.

 BAILOUT NEEDED

Players in the higher education sector agreed that universities, especially the big and older ones, are in serious financial crunch, and if not bailed out soon, will have massive ramifications on university education.

“None of our public universities has a sound financial base. As we speak all are in the red, and the worst affected are the older ones, the likes of UoN, KU, JKUAT, Moi and Egerton,” Dr Charles Mukhwaya, secretary general of the Kenya Universities Staff Union, said.

He said the big universities are hardest hit because they have mounted expensive academic programmes run by a huge workforce. “This is complicated further by drastic reduction in capitation every financial year by the state,” Mukhwaya said.

In remarks corroborated by the university, he said UoN, with a monthly payroll bill of about Sh870 million, only receives Sh395 million to cater for salaries, leaving it with Sh475 million deficits.

Mukhwaya said the rain starting beating universities the moment exchequer funding was reduced, leaving universities with a huge hole in their budgets.

“Most mainstream universities had their budgets drastically cut by the Treasury, so much that they cannot even sustain their payroll, leave alone paying the statutory and third-party deductions,” Mukhwaya said.

Accumulatively, universities are unable to pay pension amounting to Sh3.65 billion for staff who have retired since 2010 because Treasury has not released the funds.

In the 2010-13 Collective Bargaining Agreement, the national government promised to provide a pension component Sh1.95 billion to match the new salary increment provided by the new CBA. However, the money is yet to be paid to the universities to date. Between 2013-17, there is a Sh1.7 billion debt accumulated on pension component.

“In olden days, universities could fend for themselves to curb this shortfall through revenues collected from parallel programmes. However, that route is no longer feasible as universities record zero admission in the module II programme. This has made almost all universities now thrive on bank overdrafts to pay fees,” he said.

“As government capitation continues to go down as the number of students on parallel programme drops, this has given vice chancellors and administrators a rough time, but they must look for alternative revenue sources,” he added.

Other than reduced government capitation and decreasing parallel programmes enrolment, Mukhwaya cited massive expansion programmes.

“I will be hesitant to blame it on mismanagement and extravagance by some public universities managers. To me it might not be mismanagement but misapplication of funds, where vice chancellors receive funds, say, for salaries but decide to use it on equipping a lab,” he said.

“If at all there is any misuse of public funds, we could have seen some action from investigating agencies.”

Technical University of Kenya vice chancellor Francis Aduol, who chairs the Vice Chancellor’s Committee, told the Star funds they receive are not enough to cater for human resources, let alone run academic programmes.

Aduol said the shortfalls have pushed universities to survive on bank overdrafts to keep university operations running. Other institutions have resorted to using part-time lecturers to reduce the wage bill but are still unable to pay them since 2014.

“The question people should be asking is how vice chancellors are able to sustain the universities all year round, because the institutions are seriously underfunded that they cannot support their budgets,” Aduol said.

‘INEPT’ MANAGEMENT

However a source familiar with universities’ budgeting and finance administration said the current mess is as a result of ‘inept’ management.

“We have some vice chancellors who run these universities as personal kiosks. They have transformed them into tribal enclaves. But the easy explanation they give on the financial crisis is fall in capitation and module 2 to escape scrutiny,” the source said.

“They are extravagant. They want to spend money and don’t care about procedures. Once there is no financial discipline in any institution, indebtedness becomes the norm,” the sources said.

Weak university councils and vice chancellors who run universities as a one-man show and force all other workers to sing their song, are the part of the problem, the source said.

“We have universities with no councils, and those that have, the council members are intimidated by those professorship tags, with vice chancellors who want everyone below them to be cheerleaders or else they are sacked,” the source said.

He accused the Commission for University Education and the government in general of taking little interest in managing universities. He also blamed the financial crisis on a bloated workforce with zero output.

“We have many people in these universities who are on the payroll but have never taught for years. Others have poor delivery,” the source said.

He said most universities are suffering from debts beyond Sh5 billion. “They will not tell you about this. They will bring down the numbers to paint a picture that all is well, or just give you figures of their main campuses and not their constituents colleges and campuses,” the source said.

 WRONG FUNDING MODEL 

Prof Isaac Mbeche, UoN deputy vice chancellor finance and administration, admitted that they have financial troubles. “We have financial challenges. But we are not and cannot be insolvent,” he said. 

He said last year, Sh10.68 billion was used to pay salaries against Sh5.2 billion government capitation. Student enrolment numbers have stagnated the last three years, and lack of students enrolling for module two has led to Sh1 billion losses in revenue, he said.

The university has 84,000 student populations in undergraduate and postgraduate programmes. About 40,000 students are undergraduates in government-sponsored programmes; the rest are pursuing degrees, masters and PhDs on self-sponsorship.

The exchequer funding to universities is supposed to cater for human resource wages and running university operations in the ratio of 60:40.

The funding model of differentiated unit costs that is being applied to fund universities by the government is not what the vice chancellors had in mind when they proposed it, Mbeche said.

Funding is based on number of undergraduate students and not cost of running units (courses). For example, dentistry, medicine, engineering and other technical courses are expensive to mount and teach, whereas art-based ones are slightly cheaper to run. So it’s expected that expensive courses should receive more funding, which is not the case.

“The approach favours only new universities that focus on undergraduate training, because older ones like ours don’t only teach undergraduates but have large number of Masters and PhD students,” he said.

“The only issue we have with differentiated unit cost is that it has forgotten that universities are not limited to teaching undergraduates only. We urge that to have the necessary manpower to make the country achieve the national Big Four goals, the state must allocate resources to universities to cover postgraduate programmes,” Mbeche said.

Uncertainties caused by frequent industrial unrest and the 2017 elections, he said, are other reasons that led to dipping in revenues at most universities.

He said public universities cannot survive without support from the exchequer. “Universities are state investments, they are focal or key drivers to any development. If Treasury doesn’t want to support the universities fully, then it means the state isn’t interested in investing in creation of the manpower needed for national building,” he said.

Even though universities are struggling to fund their operations, Mbeche said, it is a falsehood that they are now borrowing to plug the budget deficits.

“Any borrowing needs collateral and guarantors, which in this case will be government. I have not heard of any university that has taken their title deeds to take a loan. What people call borrowing is the local arrangements between banks and universities, where we take money in advance and pay back when capitation is received,” he said.

 AUSTERITY MEASURES

Mbeche warned that if capitation is not increased, they will be forced to drop postgraduate programmes. He further said closing down some programmes or units that consume lots of resources with little returns is on the cards as part of the austerity measures, but upon evaluations.

“The painful one, which will go against the state’s agenda of creating jobs, will be to cut down on staff to manage the wage bill,” he said.

Mukhwaya said the troubling financial standing of universities will have a direct negative impact on the quality of higher education in the country.

“If this continues, universities will be forced to downsize. This will deny them the needed workforce to meet national training needs. Which will ultimately affect the service and labour sector in Kenya,” he said.

Delayed payment of salaries to lecturers and staff of universities due to the financial troubles facing universities, has seen the lecturers spend less time with their students.

“As much as they love their students and work as lecturers when they have delayed salaries, they have to opt to look for alternative ways of survivals. They pick up small other jobs here and there so as they can have money to put food on the table for their families,” he said.

 Part two of this serial tomorrow looks at the underutilised opportunities in universities that could address the financial crisis

 

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