State agencies amassed over Sh93.28bn in surplus cash

State corporations held over Sh93.28 billion in surplus cash in the financial year ended June 2018, new data shows, underscoring the Treasury’s recent resolve to turn to them for cash flow support.

Some Sh80.49 billion, an equivalent 86.2 percent of the total, was held by just 17 cash-rich parastatals such as the National Social Security Fund(NSSF), Kenya Electricity Generating Company (KenGen), the National Hospital Insurance Fund(NHIF), Kenya Pipeline Company(KPC), the Communications Authority(CA) and the Kenya Airports Authority(KAA) –the report on revenue and expenditure for state corporations shows.

An analysis shows that after deductions of the salaries and expenses from their revenues, several semi-autonomous agencies held huge reserves.

These include NSSF which led with the highest amount at Sh28.56 billion followed by KPC with Sh8.56 billion, KenGen (Sh8.11 billion), NHIF (Sh6.4 billion), Kenya Re-Insurance Corporation (Sh5.32 billion) and CA (Sh4.51 billion) closing the top six cash-rich slots.

Others moneyed corporations are KAA at Sh3.81 billion, Kenya Deposit Insurance Corporation (Sh2.61 billion).

Interestingly, Kenya Power, which has seen its financial position deteriorate in the last year had Sh1.90 billion to add to the surplus cash pot. The Tourism Fund nearly matched the power utility firms contributions with Sh1.71 billion.

It was followed by Policy Holders’ Compensation Fund (Sh1.57 billion), Kenya Medical Training College (Sh1.46 billion), Geothermal Development Company (Sh1.43 billion), Kenya National Highways Authority (Sh Sh1.27 billion), Higher Education Loans Board (Sh1.08 billion), Kenya Rural Roads Authority(Kerra) (Sh1.06 billion) while Kenya Civil Aviation Authority returned Sh1.05 billion.

The Competition Authority of Kenya closed the list with Sh123.01 million.

State corporations are required by the law to remit surplus funds to the Consolidated Fund every year, rather than keeping the amounts in commercial banks.

But they are not always prompt to comply, which saw the National Treasury in August last year report order all state corporations to surrender balances in their bank accounts.

At the time of the order, among State corporations were in arrears of remittance of surplus funds included Central Bank of Kenya, Kenya Bureau of Standards, CA, the National Environmental Management Authority, Capital Markets Authority and the Insurance Regulatory Authority.

The cash surplus order by CS Ukur Yatani was intended to cut the government’s cost of borrowing and inject the monies into development projects.

In November, Mr Yatani reported that he had received Sh33 billion, about half of the targeted Sh78 billion at the time. As at February this year, the Treasury had moped up Sh76.9 billion from the state corporations.

However, the total estimates from the exercise remain unclear as most of the state companies are yet to release financial results for the year ending June 30, 2019 owing to an 11-month delay in the appointment of a new Auditor-General.

Former Auditor-General Edward Ouko was only replaced by Nancy Gathungu in July, nearly a year after he retired in August 2018.

This means there is a massive backlog of unsigned audited accounts going back to the 2017/18 financial year.

The release of the surplus cash to the Treasury, however, raised concerns with claims that it would impair cash flows of the corporations, affecting operations and service delivery.

Ealier in the year, analysts warned that recalling the cash could severely limit their ability to do their own investments.

But the Treasury downplayed the cash flow concerns and followed the surplus mop up order with a December circular directing chief executives and principal secretaries of both State Corporations and semi-autonomous government agencies to refrain from opening bank accounts without Treasury’s prior approval.

“Similarly, no state corporation should invest surplus funds in any financial institution/ bank account without prior approval of the Treasury, other than where the investment is in Treasury bills/bonds,” the circular dated December 20, 2019 stated.

“All regulatory authorities are required to remit to the National Exchequer 90 percent of the operating surplus for the preceding financial year upon completion of audit of the financial statements and annual report,” it added.

Deficits

Besides the cash-rich corporations, the report also revealed a number of agencies with huge deficits, indicating their worsening financial positions and risks of collapse.

Out of the 238 corporations, 98 were operating in deficit.

Kenya Ports Authority (KPA) held deficit of Sh934 million despite high revenues at Sh42.74 billion.

Financially troubled East Africa Portland Cement Company (EAPC) had a deficit of Sh5.86 billion. Last year, the company revealed that it was making daily losses of up to Sh8 million over declined production and revenues.

The highly–indebted company posted Sh1.5 billion loss in the half year to December 2019 forcing it to send home employees as it anticipated revival plans from the national government.

The report also showed most of universities were on deficit or on very low balances.

The University of Nairobi held deficit of Sh1.87 billion, Kenyatta University (Sh564.5 million), Moi University (Sh592.0 million) and Technical University of Kenya (Sh663.11 million).

The public institutions have been struggling over years forcing them to seek loans from banks, abolish programmes or merging departments to maintain operations and deal with the huge deficits.

Standards agency, Kenya Bureau of Standards under Ministry of Industry, Trade and Cooperatives had nil balances.

Statutory obligations

Early this year, the Treasury froze loan guarantees and approvals for State corporations which had defaulted on repayment and other statutory obligations.

CS Yatani said the state corporations in default of debt servicing and payments would be required to cut on operation costs and slow down on implementing new projects.

The Treasury has been tough on expenditure consolidation in the agencies to avoid ballooning budgets amid

In the year ended June, the Treasury rejected the budgets of most state corporations, citing an overshoot in spending limits and ambiguous expenditure plans.