Economy

UoN financial deficit grows to Sh1.62 billion

uon

University of Nairobi main entrance. FILE PHOTO | NMG

The University of Nairobi’s (UoN) financial deficit at the end for the year to June 2020 widened by Sh330 million to Sh1.62 billion, underlining the cash flow problems at the institution that is now running a negative capital position.

Auditor General Nancy Gathungu said the university is operating under financial difficulties and is unlikely to meet its financial obligations as and when they fall due.

UoN has already started its reforms, recently scrapping eight colleges and collapsing faculty functions from 35 to 11.

“The statement of financial position as at June 30, 2020 reflects current liabilities amounting to Sh10.27 billion while the current assets amounted to Sh6.73 billion resulting in a negative working capital of Sh3.54 billion,” Ms Gathungu said in a report tabled in Parliament.

“In the circumstances, the university is technically insolvent and its continued operation as a going concern will depend on the continued support from the government, donors and creditors.”

She added that the institution was unable to remit statutory deductions amounting to Sh7.01 billion in the period. These included Pay as You Earn (PAYE) and VAT totalling Sh3.79 billion and pensions contributions of Sh3.22 billion.

UoN was also unable to pay audit fees of Sh18 million which had been outstanding for more than one year.

Public universities have come under financial strain in recent years as a result of rapid expansion amid a dip in student enrolment, lower state funding and mismanagement. They are expected to undergo reforms to cut their costs and make them financially viable.

The number of self-sponsored students in the past three years has gone down due to a drop in number of students scoring the mandatory C+ and above grades in KCSE for eligibility.

Students enrolling for the parallel degree programme courses had over the years generated billions for the institutions.

The cash crunch for the universities has also been caused by the implementation of the Differentiated Unit Cost (DUC) model that resulted in a reduction of government capitation in large universities. This caused huge payroll gap and accumulation of debts.