Universities told to issue regular financial reports

Kenya’s universities have been ordered to publish regular financial performance reports as part of sweeping regulations which take effect this year, aimed at lifting the veil of secrecy that has shrouded institutions’ financial status and effectively put millions of dollars at risk.

This means the universities may now be forced to operate like firms listed on the Nairobi Securities Exchange which are expected to publish quarterly financial reports for investors, shareholders and the general public.

While details about the frequency of the reports are yet to be released, the Commission for University Education, or CUE, Chairman Chacha Nyaigotti-Chacha said the universities will be expected to make public detailed reports on their financial, human resource and governance structures.

“The universities have to periodically demonstrate that they are financially sustainable and that there are good governance and human resource management systems in place,” he said.

Drift into financial problems

Currently, the publication of financial performance for public universities takes as many as four years, a situation that has seen most institutions drift into financial problems. In addition, none of the private universities in the country has ever made public their financials despite their handling millions of dollars in student funds annually.

The commission said several universities are already in the red for failing to honour statutory dues and failing to pay salaries.

The change in regulations is seen as one of the latest in an arsenal of measures taken to arrest the declining quality of higher education in Kenya. Employers have been raising concerns that, while the country has been releasing a growing number of graduates onto the market – estimated at more than 10,000 annually – most lack the technical skills the economy needs.

For a start, the regulator now wants three private universities to prepare detailed performance reports to aid a further audit. In addition to checking on compliance, the review will also touch on the financial status of the three institutions: the Catholic University of Eastern Africa, Presbyterian University of East Africa, and Kenya Methodist University.

Kenya Methodist University is said to be struggling to service a US$30 million loan from a commercial bank and has found itself defaulting on taxes and salaries to employees.

Universities are not 'profit centres'

“Kenya’s educational institutions should not be run like profit centres where managers’ only concern is to keep costs down as revenues grow. Only last year, Kenya shut down several campuses after an official audit uncovered lack of basic facilities and personnel,” said the Business Daily, Kenya’s leading economic newspaper in an editorial last week.

A 2016 report by the CUE showed that the public universities are operating with at least US$100 million in budget deficits arising from poor financial management practices. In a February 2017 assessment of public universities, the country’s auditor general listed 11 of the country’s institutions as being insolvent.

The University of Nairobi, the second biggest institution by student numbers, was on the list and it has warned that the decision to cut allocations will significantly affect service delivery.

Additionally, universities are spending more than 80% of their budgets on recurrent expenditure – largely salaries and wages – at the expense of capital projects, research and innovation.

Too big a problem to hide

“What we are seeing in Kenya’s universities is a long-time financial management problem that has over the years been kept under wraps by the institutions, but [which has] now grown too big to be concealed,” said Mwangi Wachira, a part-time lecturer in one of Nairobi’s universities.

“If the rot in universities is to be properly uncovered, several would close down, further hurting the credibility of the country's already dented higher education system,” he said.

The new guidelines come in the wake of a comprehensive institutional review in Kenya’s higher education sector, which was meant to clean up those universities which are offering sub-standard courses, are mismanaged and those not accredited by CUE.

“Kenya’s public institutions are poorly funded and often disgracefully managed. The litany of ills includes poor record-keeping leading to cases of missing grades, the abuse of credit accumulation or transfers and unjustifiable progression rates for some students,” said Nickanor Amwata, who studied in Kenya and is now a lecturer in business and management sciences at the University of Kurdistan Hewler, northern Iraq.

“Financial mismanagement also looms large over the university education. A host of institutions have been found to have engaged in various financial improprieties,” he wrote in a commentary in the media earlier this year, criticising the management of universities in Kenya.