Taxpayers may have lost over half a billion in Kenyatta University’s botched plan to set up campuses in Arusha and Kigali.
The college spent Sh518 million to set up Kigali (Sh420) and Arusha (Sh97 million).
However, KU shut the campuses due to operational challenges that followed a change of education laws by the Rwanda and Tanzania governments.
Auditor General Nancy Gathungu, in a report tabled in Parliament, said the university was yet to initiate the process of recovering the cash.
“Although the university has explained that due diligence was done before the decision to open up the two campuses, the management has not made any recovery on the amount incurred so far,” she said.
In her review of the university’s books for the year ending June 30, 2020, Gathungu reported that the closure followed just as the university was ready to roll out programmes.
She said Sh90 million of the Sh97 million investment in the Arusha campus, was not recoverable having been expended on salaries, rentals, operations and maintenance expenses.
“A balance of Sh7,408,610 was about furniture and equipment that was brought to the main campus and distributed to various departments,” the auditor said.
Even so, no inventory was provided for audit verification to ascertain the existence of the said assets hence yet to be traced and accounted for.
The National Treasury, the audit report shows, has granted approval for disposal of the KU property in Kigali campus with Gathungu concluding that the venture was a nugatory expenditure.
The audit also revealed that Kenyatta University is broke and is operating with a deficit of over Sh1.3 billion, higher than the Sh677 million deficits of 2019.
Gathungu said the university is technically insolvent in the face of its liabilities standing at Sh6.4 billion against its Sh1.6 billion assets – hence a negative working capital of Sh4.8 billion.
“This indicates that the university is likely to be unable to meet its financial obligations as and when they fall due,” she said, sounding a death-knell to Prof Paul Wainaina led institution.
In particular, the auditor reported that the university was unable to remit pension and taxes to the tune of Sh3.7 billion, audit fees of Sh8.1 million, and other deductions to the tune of Sh342 million.
The auditor said there were risks of the pending payments attracting fines and penalties by the intended beneficiary institutions.
“Although the university has put in place stringent cost-cutting and revenue enhancement measures to address the financial challenges, the liabilities remain unpaid,” Gathungu said.
She warned that the university may get into more trouble having resorted to financing its operations using costly short term borrowings.
“The university is operating under financial difficulties and the short-term borrowings may further worsen the liquidity position,” the audit report reads.
“The university is technically insolvent and if no urgent positive measures are taken to improve the financial position, it may not be able to meet its mandate in future,” Gathungu said.
She said the financial reports of the institution were prepared based on a ‘going concern’ on the assumption that KU will continue to receive financial support from the government, creditors, and donors.
Also flagged was that the dominance of one ethnic community in Kenyatta University’s payroll in contravention of the National Cohesion and Integration Act, 2008.
Gathungu said staff data as of June 30, 2020, revealed that one ethnic community accounted for 40 per cent of council members, 45.4 per cent of senior management and 40.7 per cent of permanent staff.
KU is also faced with the challenges of recovering part of its main campus land measuring 12.472 hectares and valued at Sh123 million which is illegally occupied by informal settlers.
Although the university has filed a case in court, the auditor is concerned that the encroachers are putting up buildings on the land as the case is taking long to be determined.
Other land issues highlight in the bold report are failure to record Kenyatta University Teaching, Research and Referral Hospital in the books of accounts.
The hospital was built through a concessional loan of Sh8.75 billion from Exim Bank of China and has since been gazetted as a state corporation.
Gathungu has also queried how the university cleared four former staff yet they had outstanding car loans guaranteed by the university.
Edited by Kiilu Damaris
