Broke Posta Kenya on the spot for ceding land to counties

Corporation faced with Sh8.3 billion debt, charged interest on delayed payments

In Summary

•Postal Corporation of Kenya reported to be suffering cash strains yet has property grabbed.

•Posta Kenya has not paid Sh1.7 billion in respect of pensions and gratuities

Information, Communication and Digital Economy CS Eliud Owalo with officials from the Postal Corporation of Kenya (PCK) on Monday, November 7, 2022.
Information, Communication and Digital Economy CS Eliud Owalo with officials from the Postal Corporation of Kenya (PCK) on Monday, November 7, 2022.

Broke Posta Kenya is on the spot for giving up key revenue sources including, ceding prime land to private developers without much return for taxpayers.

A scathing audit report reveals that permanent structures have been irregularly erected on 10 parcels of land owned by the corporation.

In some instances, county governments have repossessed the properties and are collecting rent, yet Posta is faced with extreme cash shortages.

Auditor General Nancy Gathungu has cited cases in Kisumu, Busia and Rongo where land belonging to PCK have been repossessed.

“Parcel of land in Kisumu was repossessed by the county government of Kisumu and stalls were constructed for Kisumu traders who are reported to be paying rent to the county government,” Gathungu reports.

Posta’s land in Busia was also repossessed by the county government after the same was left lying idle for a long time. An audit inspection revealed it is exposed to encroachment.

Gathungu reported that the land in Rongo has temporary structures but the tenants pay rent to the county government, with a large part left lying fallow.

The Auditor General says the developments have been undertaken contrary to the leasing guidelines of the Postal Corporation of Kenya.

The guidelines provide that no structures of permanent nature shall be allowed in any of the corporation property.

Posta Kenya has also been called out for failing to charge rent in respect of Huduma Centres as per an agreement of October 17, 2013 on the use of its premises.

Gathungu raised concerns that Huduma Kenya has failed to sign a new contract with Posta Kenya, hence there is no formal contractual agreement between the two entities.

The auditor says that Huduma Kenya is denying the corporation much-needed revenue by occupying offices in various postal offices across the country without paying rent.

“In the circumstances, the corporation may not obtain value for money for its various leased properties,” the auditor said.

As Posta Kenya is letting go of precious revenue, the corporation is faced with a serious cash crunch despite making a surplus Sh291 million in the year ending June 30, 2022.

The corporation is faced with a Sh8.3 billion debt against current assets worth Sh1.6 billion, hence a negative working capital of Sh6.7 billion.

“The corporation’s financial statements have been prepared on a going concern basis on the assumption it will continue to receive financial support from the government, bankers, and creditors,” the report reads.

Gathungu raised concerns that the material uncertainty in relation to the crisis at the corporation and any measures to change the scenario has not been disclosed.

In the face of the woes, Posta Kenya has been unable to pay up statutory deductions including pensions, gratuity, staff loans and service charge for subscriptions.

The audit report reveals that the corporation has not remitted Sh725 million to Kenya Revenue Authority, being statutory deductions and excise duty.

“The unremitted deductions continue to attract unnecessary interest and penalties for the period they are unpaid,” Gathungu warned.

Posta Kenya has equally not paid Sh1.7 billion in respect of pensions and gratuities, Sh98.8 million due to cooperatives and Sh309.8 million in respect of staff bank loans.

Due to late payment, Posta Kenya has been charged Sh156 million, being an interest of Sh12 million and Sh144.5 million in respect to unpaid Sacco dues and unpaid pensions respectively.

“The accumulated interest, would have been avoided had the corporation remitted the Sacco dues and pensions in time. In the circumstances, the value for money of interest totalling Sh156,504,914 in respect of delayed Sacco dues and pensions contributions could not be confirmed.”

The monies have not been remitted to the relevant institutions, meaning the staff could be subject of reference to the credit bureaus.

“This is contrary to Section 19 (4) of the Employment Act, 2007 which requires an employer who deducts an amount from an employee’s remuneration to pay the amount deducted and remitted within the stipulated time,” Gathungu said.

The corporation has equally failed to remit Sh1.2 billion in respect of revenue it collected on behalf of other entities under the Posta Pay EFT service.

Posta is also owed Sh2.9 billion whose recovery the auditor says is in doubt, as well as another Sh26.8 million stolen by employees that the corporation’s insurer has declined to pay.

“Management has not explained the measures taken to recover the same from the former employees,” Gathungu said, adding that there are no measures in place to recover the long outstanding debtors.

WATCH: The latest videos from the Star