Cash-strapped KBC under probe over fund misuse claims

The Directorate of Criminal Investigations (DCI) is investigating allegations of abuse of office and misappropriation of funds at the troubled Kenya Broadcasting Corporation (KBC).

Investigators are seeking to unravel how the decades old State broadcaster sank into such a deep financial mess that it was declared technically insolvent by the Auditor-General in 2016. “This office is investigating a reported case of abuse of office and misappropriation of funds at the Kenya Broadcasting Corporation,” reads a letter dated July 20 by Mr Samuel Ngeywa, an officer from the DCI.

Mr Ngeywa is seeking to know why the corporation cannot remit employees’ statutory deductions to the Kenya Revenue Authority, the national pension fund, co-operative unions, healthcare and insurance.

CONTRIBUTIONS

KBC Acting Managing Director Paul Jilani took issue with the wording of Mr Ngeywa’s letter, saying it implied that the investigator has already found the corporation’s top bosses culpable. “I feel that the letter is conclusive on the allegations even before investigations commence,” he said. “But we are co-operating with the DCI and any other relevant body that wishes to find out why we are in a mess.”

Mr Jilani said KBC’s woes are not unique. “We face the same cash flow problems many other parastatals are facing. But we need to modernise our systems if we are to get out of this rut.”

Mr Ngeywa requested KBC’s management to provide documents regarding employee contributions to eight saccos namely Ardhi, Sauti, Mtangazaji, Harambee, Shirika, Ukulima, Magereza and Hazina.

PAYSLIPS

In addition, the officer asked to be furnished with documents relating to remittance of statutory deductions to banks, remittance of PAYE as well as deductions to insurance companies and the pension scheme.

Furthermore, the investigator requested the payroll and employees' payslips over the past two years as from July 1, 2016 to June 30, 2018 for examination.

Mr Jilani, who was the corporation’s company secretary for seven years until October last year when he replaced Mr Waithaka Waihenya who retired as the MD, said KBC is in dire financial straits. “We have not made the statutory remittances due to cash flow problems,” he said.

ADVERTISERS

“We are making little money since we no longer attract advertisers as we once did. Whatever little money we raise is used to pay staff. We are planning on how to meet our statutory obligations soon.”

A statement prepared by KBC management at the request of the Senate Committee on Information Communication Technology, which is also investigating the matter, indicated that KBC owes more than Sh2.1 billion in unremitted deductions alone as of last month.

The largest of these pending payments is the Sh764 million the broadcaster is yet to remit to the employees’ pension scheme since 2011, making it impossible for retired staff to get their money.

Another notable outstanding payment is the Sh225 million the organisation is yet to remit to Treasury as employees' PAYE. The arrears are as from March last year when the corporation started defaulting on the payments. As from February this year, the corporation has not remitted Sh48 million to the eight saccos.

UNPAID LOAN

In the statement, the corporation said it is preparing a proposal for Sh1.9 billion to carry out limited restructuring by April next year. A complete overhaul of KBC will cost about Sh7 billion, said an insider.

Insiders privy to KBC’s books of accounts paint a gloomy picture. KBC’s monthly recurrent expenditure stands at Sh280 million against an average revenue of about Sh100 million. Of this amount earned, Sh87 million goes to paying the salaries of the more than 1,100 staff.

KBC’s troubles can be traced to 1989 when it signed a contract with Japan Telecommunications Engineering Consultancy Service for a Sh1 billion loan to buy equipment to improve and expand its national medium wave frequency radio broadcasting network.

STATE NEGLECT

Over the years, the loan remained unpaid and by 2015, it had grown to about Sh10.5 billion. Today it is estimated to stand at more than Sh40 billion and is still accruing interest.

The dawn of multiparty politics, the liberalisation of the airwaves and the mushrooming of private broadcast media caught KBC flatfooted. Suddenly, the public broadcaster lost its monopoly and glory. “KBC failed to adapt to the changes in time due to the deliberate State neglect which starved it of critical funding,” said Mr Eric Oduor, the secretary-general of Kenya Union of Journalists.

He said 115 KBC staff are members of his union. “Many of them have gone without salaries while others have been penalised by banks for not repaying their loans in time,” he said.