Sleazy individuals often take advantage of such loopholes to inflate project costs and divert funds to private use.
The just announced government directive stopping public schools from taking bank loans to pay for development projects is spot on and should be enforced swiftly.
The demand is that school heads must obtain pre-authorisation from Education Cabinet Secretary and Principal Secretary before taking credit from banks and other financial institutions to help curb rampant abuse of institutional funds.
Properly implemented, this could be a big step forward given revelations that public schools owe banks and other financiers millions of shillings.
While borrowing may be a quick way of raising capital, excess debt poses risk to the very existence of institutions or businesses and caution must be exercised to limit short-term and long-term financial burden.
A key principle behind prudent borrowing is that the borrower must be in a position to repay the loans and interest in a timely and regular intervals without default.
This requires a comprehensive feasibility study on the viability of proposed projects to determine their suitability for financing through loans.
The fact is that most public schools lack capacity for such risk assessment, making their borrowing decisions whimsical and without a financial basis.
Besides, taking loans for unassessed projects creates ground for abuse of funds because there isn’t any quantification of the actual size of resources needed.
Sleazy individuals often take advantage of such loopholes to inflate project costs and divert funds to private use.
This is the reason we should hope that the involvement of Education ministry in the financial decisions of public school heads will provide additional checks-and-balances and prevent any excesses by overzealous or dishonest individuals.
The ministry has teams of professional budget and audit staff, who can help evaluate financial plans of schools for prudence.
The journey should start with audit of all existing bank loans to ensure the transactions were above board.
Any official found to have engaged in reckless borrowing should be sent packing and surcharged accordingly.
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Note: The results are not exact but very close to the actual.
