The State has ordered a special audit of the financial books of the Saccos’ umbrella organisation, the Kenya Union of Savings and Credit Cooperatives (Kuscco) for alleged involvement in illegal deposit-taking business.
Co-operatives and Micro, Small, and Medium Enterprises Cabinet Secretary Simon Chelugui said the special audit will be conducted by one of the big four audit firms in the country.
This follows a revelation that Kuscco’s financial books had been audited by unlicensed entities for the last two years-- the same period when the organisation came under financial difficulties that sparked an investigation into their activities.
“The special audit will be carried out for the past three financial years. We trust the report will enlighten the members and provide the union with the way forward in terms of actionable recommendations,” Mr Chelugui said at a press briefing Monday.
“If members’ funds are found to have been misappropriated, firm action will be taken against the concerned individuals.”
Mr Chelugui said the ministry has now ascertained that Kuscco is receiving funds, but it is yet to determine how and from where the funds are coming, questions he said will be answered by the audit.
The CS had in October 2023 ordered a probe into Kuscco’s activities on suspicion that it was operating a deposit-taking business, contrary to its registration terms, as a union organisation for Saccos and not a deposit-taking sacco in itself.
“The suspicions were sparked by Kuscco’s inability to meet its financial obligations, including its incapability to discharge fixed deposits to members as they fell due. It had also invested members’ funds in “non-core business activities like housing, insurance, and mortgages,” Mr Chelugui said.
Kuscco currently has a membership of 4,168 Saccos and holds deposits of about Sh18.9 billion. Its primary roles are the promotion of Saccos through advocacy, training, and provision of financial services.
Preliminary findings of the inquiry led by the Commissioner of Cooperatives revealed that Kuscco had been commingling union funds between different programmes, including housing and insurance, without clear terms.
“Funds are irregularly invested in non-core capital-intensive activities without clear policies on how the funds will be recouped back, which has created liquidity challenges whereby the union is unable to pay term deposits that fall due,” the CS added.
After the initial inquiry, the ministry recommended the re-organisation of the Kuscco board and changes in the key management positions in the organisation, including the roles of chief executive and financial officers.
