University of Nairobi sinks into Sh1.4 billion loss

The University of Nairobi (UoN) sank into a Sh1.4 billion loss last year after overshooting its budget and failing to raise projected revenue, an audit report has revealed.

A report by Auditor-General Edward Ouko shows that the university was unable to meet financial obligations worth Sh2 billion in the year to June 2018, as the biting cash crisis at the institution gets even worse.

Critical statutory deductions such as Pay As You Earn (PAYE) tax, National Social Security Fund (NSSF), National Hospital Insurance Fund (NHIF), Higher Education Loans Board (Helb), pension and Sacco deductions went unpaid, the report reveals.

Staff income tax deductions in the form of PAYE of Sh282.7 million was unpaid as well as Sh3.4 million contributions to NSSF.

Mr Ouko says in the report tabled in Parliament that the UoN failed to remit Sh10.8 million to the NHIF. The university management also failed to remit pension contributions worth Sh1.52 billion, Chuna Sacco dues amounting to Sh204.1 million and Helb deductions amounting to Sh828,387.

“The university was therefore unable to meet its financial obligations as and when they fell due,” Mr Ouko says in a qualified audit opinion tabled in the National Assembly by Leader of Majority Aden Duale.

Deteriorate

The audit reveals that the university’s financial performance continued to deteriorate during the year under review as it incurred a deficit of Sh1.4 billion compared to a surplus of Sh583 million in 2016/17 thereby reducing revenue reserves from Sh908.5 million to negative Sh498.8 million as at June 2018.

The statement of UoN’s financial position as at June 2018 reflects current liabilities of Sh5.72 billion while current assets amounted to Sh4.29 billion, resulting in a negative working capital of Sh1.44 billion.

Mr Ouko says the management attributed the deteriorating financial position to a decline in remittances from the parent Ministry, decline in student enrolment for the Module II (parallel) programme, industrial strikes by academic staff and the prolonged presidential elections which led to closure of the university. These had impaired the university’s capacity to generate internal revenue.

Strategies

Mr Ouko says the management has indicated that the university has put strategies in place to improve its financial performance to achieve its mandate.

“The university is apparently facing financial problems and its continued operations as a going concern will continue to depend on the support of the government and lenders,” says Mr Ouko.

The Auditor-General further raises concerns over the ability of the university to recover Sh871 million in student debts under the Module II programme. The debt-ageing schedule made available for audit review shows that the Sh871 million student debts were outstanding for more than one year.

“Section 8.1 (d) of the University’s Financial Regulations states that the university shall withhold any and all services, examination results, conferment of any degree, certificate or award until all outstanding fees are settled....”