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Kenyatta University in a financial mess and might stop operations – Auditor General

Kenyatta University is in a financial crisis and might be unable to continue operations unless the situation is turned around, Auditor General Edward Ouko says in his latest report on the institution.

The report specifically points to two buildings the university bought in Kigali and Arusha in 2016 to house campuses.

The Rwandan government ordered the Kigali one closed even before the university could admit students. The building, worth more than Sh420 million, was fully equipped with books, computers and other learning materials but now sits idle.

The National Assembly’s Public Investments Committee (PIC) had in 2016 determined that KU opened the Kigali campus without regulatory approvals from Nairobi and Kigali and that Rwanda’s Education ministry had not approved KU’s application to set up a campus.

CAMPUS CLOSED

The university also established a campus in Arusha, which the education authorities in Tanzania ordered closed following standards-related queries.

Mr Ouko says both campuses are worth more than Sh500 million — investments that could turn out to be “a sunk cost”.

“Though the university has explained that all due diligence was done before the decision to close the campuses, the management has not made any recovery on the investment,” the report says.

The Commission for University Education had also blacklisted the campuses, saying, they were set up abroad in contravention of the Universities Act, given that Kenyan taxpayers publicly fund the university.

The institution recorded a deficit of more than Sh2 billion, reducing the accumulated surplus from Sh8 billion in 2017 to Sh6 billion by June last year.

It was also unable to remit pension and taxes amounting to Sh1 billion, more than Sh3 million in audit fees and other statutory deductions worth more than Sh200 million.

“The university is therefore operating under financial difficulties and currently it has resorted to financing its operations using costly short-term borrowings which may further worsen its liquidity position,” he said. KU is technically insolvent and unless urgent steps are taken to improve the situation, “it may not be able to meets its mandate in the future.”

LACK OF ETHNIC BALANCE

Mr Ouko also puts the university to task for failing to strike an ethnic balance it its staff composition. He says one community accounts for 40 per cent of council members, 45 per cent of senior management and 40 per cent of permanent staff. He said the university had “failed to improve the ethnic balance as similar percentages remain relatively unchanged compared to the previous year.”

KU recorded more than Sh2 billion deficit, reducing the accumulated surplus from Sh8 billion in 2017 to Sh6 billion by June last year. It was unable to remit pension and taxes amounting to Sh1 billion, more than Sh3 million in audit fees and other statutory deductions worth more than Sh200 million.

The university was facing financial hardships, the report said, and has been reduced to financing its operations through costly short-term borrowings that could worsen its liquidity position.

“The university is technically insolvent and if no urgent positive steps are taken to improve the situation, it may not be able to meet its mandate in the future,” the auditor says in his report.