A tricky balancing act for varsity as cash crisis bites

The Sh2.3 billion building dwarfs everything else at the University of Nairobi’s main campus.

Once its construction is finished, the self-funded University of Nairobi Towers will be a symbol of pride and will host offices, lecture rooms and a helipad.

But beneath this veneer of success is the story of a university facing a “severe cash flow deficit” — only admitted in internal memos.

A note dated May 14 from the finance office to Vice-Chancellor Prof Peter Mbithi says the institution’s cash-flow deficit, triggered by a huge recurrent expenditure, stood at Sh2.4 billion at the end of April.

“The management has to come up with immediate solutions to address this challenge, starting with a freeze on employment,” says the note by Finance Officer Michael Karue, who describes the deficit as “very severe”. An August 2015 cash flow statement indicates that this deficit still stands.

FEE DEPENDENCE
With the university having a monthly wage bill of Sh750 million and receiving only Sh438 million from the Treasury, the 59-year-old institution is left to raise the balance of Sh312 million from other sources.

Ever since the World Bank and the International Monetary Fund forced the government to enforce cost-sharing in public universities in 1991, the institutions have had to depend, to a much greater extent, on fee income than government funding.

“What the government gives can only meet 61 per cent of the total budget. Previously, it met 75 per cent,” says Prof Julius Ogeng’o, the director of the Centre for Self-Sponsored Programmes, an outfit that manages fees from self-financing students.

For years now, the university has been relying on this “module” programme to bridge the deficit but is currently struggling against competition from other universities.

Internally, the institution’s administration admits that private and other public universities have had a negative effect on its numbers.

“The gazettement of more public universities … impacts negatively on the number of students enrolled,” says the internal memo — though Prof Ogeng’o does not think this is the case.

“Our student population has continued to grow and for a reason: we have time-tested professors, many accredited courses, best facilities in the region and various programmes. We actually turn away students,” Prof Ogeng’o says.

PRIME LOCATION
During the last six years, various university campuses have mushroomed around UoN’s Main Campus, whittling down its strategic advantage in the city centre.

The university now faces competition from Kenya Methodist University, Masinde Muliro University, Presbyterian University, Mt Kenya University, St Paul’s University and Moi University — all within a radius of less than two kilometres.

In May, the falling total student enrolment saw the university’s revenue collection from self-sponsored programmes drop by Sh36 million to Sh5.152 billion compared to Sh5.188 billion during the same period last year.

It appears the university relies heavily on fees remittances from the Higher Education Loans Board. Ninety-seven per cent of fees income from this government-run loans agency is received in July and August.

But Prof Ogeng’o, speaking on behalf of the vice-chancellor, says the government funding to the university has not decreased as such: “Five years ago, we were receiving Sh4.586 billion and during this financial year we are to get Sh5.256 billion … (However,) the increase may not be proportional to operational costs.”

AUSTERITY MEASURES
The university has a huge workforce: close to 500 professors, 2,000 other academic staff, and 5,500 administrative and technical staff. The huge recurrent expenditure is attributed to these numbers.

Another problem, acknowledged internally, has been failure by the government to remit Sh325 million pension contributions and dues by other public and constituent colleges amounting to Sh196 million.

The university’s pension scheme funds currently stand at more than Sh10 billion. In May last year, the university attempted to come up with some austerity measures.

“We only recruit when it is strategic and that is why our staff growth is now negative,” says Prof Ogeng’o.

The university has accumulated arrears in unremitted monthly pension deductions relating to the 2010-2013 collective bargaining agreement with the workers’ union amounting to Sh180 million.

It also had by May this year not remitted Sh216 million pension deductions for February, March and April.

BILLING IRREGULARITIES
The university is also going through some procurement hiccups, with senior officers contracting for services without going through the set procedures.

When the Council for Legal Education demanded to have a strategic plan for the Mombasa Law campus mid this year, the deputy vice-chancellor (Academic Affairs) instructed Prof Timothy Waema, an expert in information systems, to “help” the school develop one.

After eight working days, Prof Waema submitted a bill of Sh400,000, which was questioned by finance.

“The works/service should have been subjected to competition. Alternatively, the procurement manager may be requested to check market rates for such works. I would suggest that you seek the VC’s guidance,” wrote Mr Karue.

Some two weeks earlier, the procurement manager, a Mr Mokaya, had told the DVC (Academic and Finance): “When staff gives expert service, payment may be regarded as honoraria at the discretion of management.”

It appears part of the internal problems emanate from procuring of some services without tendering and perhaps failing to follow stringent finance management procedures.

For instance, documents indicate, two professors who had been tasked by the VC to lead a task force to transform the Board of Post-Graduate Studies into a Graduate School billed the university Sh735,000 after 12 days’ work.

FREEZE NEW PROJECTS
This was despite a government circular dated August 2003 that set the task force’s allowances at Sh5,000 per day for the chairperson and Sh4,000 per day for members as “token compensation”.

This was re-stated in a letter dated August 2, 2013, by Devolution Cabinet Secretary Ann Waiguru.

Prof Ogeng’o says they did not have the circular by the time. “We have now adopted the rates as per the circular,” he says.

In its note, the finance office also complained that the university was incurring capital and operational expenses “such as purchase of additional vehicles, exhibitions and retreats in expensive hotels”.

It asked for a freeze on new projects, non-essential maintenance, training and retreats, shows and exhibitions and further recruitment of staff.

But this appears not to happen. A cash flow statement for July shows that a Senate retreat in Naivasha consumed Sh10.5 million in conference fees, accommodation and allowances, excluding the Yoga training the participants underwent.

“This was an important meeting of about 200 members of the Senate. We spent about Sh50,000 per person for three days and we came out with a blueprint and strategies on how to make the university better,” Prof Ogeng’o said.

TRICKY BALANCING
Another recent authorisation was the purchase of two utility vehicles for the VC’s office and DVC (Administration and Finance).

But the building of the mega tower continues uninterrupted and is one of the projects that shows how the university is reinvesting the little cash it generates from its activities.

“We have not taken a loan on this project,” says Prof Ogeng’o, adding that the tower would save the university money it pays on rented premises.

The university is also building another tower in Kisumu at the former British Council plot. In its 2015-2016 budget, the university put aside Sh1.3 billion for capital development.

It is a tricky balancing act that the university is going through as its expenditure surpasses the income.

Mr Kamau is a Senior Writer with Nation newspapers.