KU’s woes linked to over Sh500m bad investment

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.

ILLEGAL

The university had also established another campus in Arusha and was ordered to close it down by education authorities in Tanzania over quality queries.

Now, Mr Ouko says both campuses are worth more than Sh500 million and that the investments 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,” says the report.

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.

REMITTANCE

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.

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

Mr Ouko also takes the university to task for failing to strike an ethnic balance regarding 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.

“The university has failed to improve the ethnic balance as similar percentages remain relatively unchanged compared to the previous year,” says the report.