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KENYA
Eleven universities face insolvency – Report
Eleven Kenyan universities, including the country’s flagship institution, are insolvent and unable to meet their financial obligations, according to a new auditor general’s report.

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

The report has been submitted to the parliamentary committee on education for deliberation and ruling.

Auditor General Edward Ouko’s report for the year ended June 2015 shows that the University of Nairobi recorded a deficit of US$4.6 million (against a 2013-14-deficit of US$4.35 million) which reduced the university’s revenue reserves to a deficit of US$1.4 million.

According to the report, university management attributed the poor financial performance to “inadequate government funding to cater for increased costs in academic programmes, refurbishment of teaching facilities and increase of personal emoluments based on improved terms and conditions of service, among others”.

Warning

“If strategies are not put in place to reverse the deficit trend, the university’s future operations are likely to be adversely affected,” the report warns.

In a statement, University of Nairobi Director of Corporate Affairs John Orindi denied the university was in a financial crisis even though it was experiencing cash flow challenges emanating from delayed exchequer issues, an issue that he said has been raised before and will be “sorted out”.

In last year’s Times Higher Education snapshot ranking of the best universities in Africa the University of Nairobi was placed eighth.

According to Ouko, mismanagement of funds by Kenyan universities is the main challenge the universities are facing and is the main contributor to the poor state of the higher education institutions in the country.

He described the universities’ financial positions as “precarious” and said the institutions’ continued existence depends on continued support from government, creditors and bankers.

Inadequate reporting

In relation to the other universities, the audit revealed deficits and the absence of adequate documentation. For example, with regard to Jomo Kenyatta University of Agriculture and Technology, the audit could not confirm the propriety of expenditure totalling US$52,441, while the financial statements of the University of Eldoret revealed that the university had accumulated trade and other payables from US$5.3 million in the previous year (2013-14) to US$7.16 million.

In addition, the supporting documents such as invoices, demand notes or suppliers’ statements were not available for audit verification. Consequently, the validity and accuracy of the university property, plant and equipment net book value of US$8.43 million could not be confirmed, said the report.

“The university is therefore technically insolvent and may face financial challenges in settling liabilities as and when they fall due,” noted the report.

The Technical University of Kenya recorded a deficit of US$2.97 million, reducing its revenue reserves to negative US$4.79 million as at 30 June 2015.

Questions around accuracy

Pwani University records differed from those of the government in respect of transfers from other governments. “Consequently, the accuracy and completeness of transfers from other governments… could not be confirmed,” said the report.

At Murang’a University College, the accuracy and ownership of the property, plant and equipment balance of US$117,563 could not be confirmed; nor was it possible to confirm the accuracy and the source of an investment balance of US$240,365.

At Multimedia University of Kenya, the full recoverability of receivables from an exchange transaction balance of US$1.56 million could not be confirmed.

In respect of the Masinde Muliro University of Science and Technology, the accuracy and completeness of the financial statements could not be ascertained.

Machakos University recorded a deficit of US$1.25 million which reduced the general reserves from negative US$206,242 in 2013-14 to negative US$1.45 million, prompting the auditor general to warn that if strategies were not put in place “to reverse the deficit trend, the university’s future operations are likely to be adversely affected.”

Although Laikipia University had a fixed asset register, it was not properly maintained and lacked details on accumulated depreciation, location of the assets, revalued assets, serial numbers of the assets and asset number, according to the report.

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