ICPAK sets stage for Ciano removal as committee chair

Kenya’s accounting professionals watchdog has written to Uchumi Supermarkets seeking a copy of the forensic audit report into alleged mismanagement and manipulation of accounts at the retail chain, kicking off a process that could see former CEO Jonathan Ciano lose his position as chairman of ICPAK’s disciplinary committee.

The Institute of Certified Public Accountants of Kenya (Icpak) intends to use the report to petition Treasury secretary Henry Rotich to suspend Mr Ciano and thereafter begin disciplinary hearings into claims that former Uchumi executives manipulated books of account to the tune of Sh1.04 billion.

If found guilty of the allegations of financial manipulation, Mr Ciano faces impeachment by the accountants regulatory body.

“We’re waiting for the forensic report. Once we get it, we’ll make the necessary recommendations to the Treasury,” said Icpak chief executive Patrick Ngumi.

Uchumi last week announced it had slid into the red following provisions for impairment to cover financial holes left by former management which had allegedly cooked books to prop up earnings and give a false picture of the supermarket’s financial position.

Mr Ciano was in January 2014 gazetted to chair the ICPAK disciplinary committee alongside six other members by the Treasury Secretary.

“We need to get proper evidence to petition the minister to take action. We have already written to Uchumi,” said Mr Ngumi in an interview with the Business Daily.

Julius Kipng’etich — who was hired in August as Uchumi CEO expected to turn around the fortunes of Kenya’s oldest retail chain — confirmed receipt of the accountants’ letter and said would share the forensic report.

“In the next two weeks, it will be ready and we’ll share with ICPAK,” said Mr Kipng’etich on Wednesday.

READ: Former Uchumi top managers on the spot over Sh1bn cover-up

Uchumi hired KPMG to conduct the forensic audit in which preliminary findings showed the former management concealed massive losses.

“Sh1.04 billion for write-off, which relates to items arising from management misrepresentation and manipulation of the system by the previous management,” Uchumi said when it made public the allegations of creative accounting.

That Mr Ciano is facing allegations of professional misconduct could be a classic case of the hunter being the hunted.

The other members of the ICPAK’s disciplinary team are Charity Muya, a director of KCB Bank, KenGen finance director John Mudany, Erick Odongo, Hannah Wendot, Scolastica Mbilo, and Susan Mudhune.

The watchdog committee is responsible for disciplining those engaged in professional misconduct such as cooking books and failure to disclose key audit matters.

Those who will be under the disciplinary committee’s radar are Mr Ciano’s executive team including Chadwick Omondi Okumu (chief finance officer) and David Mboya (internal auditor).

If Mr Ciano is found culpable he may be hit by a financial penalty, his practising certificate suspended, or reprimanded publicly through the Kenyan gazette and local dailies.

The Icpak disciplinary committee last year fined former CMC Motors finance director Sobakchand Shah Sh20,000 and a further Sh50,000 to meet the cost of hearing the matter – for failing to disclose financial malpractices at the troubled motor dealer including a secret account held in Jersey island.

Mr Ciano — the former CEO who helped revive Uchumi after the retailer was declared insolvent on June 1, 2006 —was ousted in June alongside Mr Okumu in what the board termed as “gross misconduct” and “gross negligence.”

Uchumi also took a Sh1.6 billion beating in impairment costs for closing all its branches in Uganda and Tanzania — which continually posted losses due to stiff competition and poor location.

This saw fourth-placed Uchumi post an after-tax loss of Sh3.4 billion in the year to June 2015 following a decline in revenue coupled with these provisions.

This is the first time Uchumi has made a loss since its shares were allowed to begin trading on May 31, 2011 after the retailer was suspended from trading in 2006.  Ernst & Young are the retailer’s external auditors.