Hundreds of members at Stima Sacco are facing a huge loss after a forensic audit revealed huge losses exceeding to more than half-a-billion shillings.
The audit was conducted by financial consulting firm Deloitte and resulted to the Commissioner of Co-operatives removing from office the entire board of the giant Stima Investment Co-operative.
The audit by financial consulting firm Deloitte reveals how Stima Investment lost money through multiple irregular land purchases across the country in which officials bought occupied land without conducting any due diligence or site visits, failed to settle transactions after putting down initial deposits and in other cases collected funds from members even before the preliminary purchase agreements were signed.
The Commissioner of Co-operatives on February 19 dissolved the seven-member board, prompting them to file a suit in court seeking to reverse the decision.
Embu Deputy Governor David Kariuki looks at services delivery at the newly opened Stima Sacco Embu
The board members want the court to “to quash the decision made by the Commissioner of Co-operatives’, arguing that they were legally elected on November 28, 2018. “There is no basis in law and fact for the 1st respondent (Commissioner of Co-operatives) to dissolve the board of directors,” says the board in its application. The court papers point to an elaborate scheme of mismanagement of members’ funds.
The Sacco, for instance, received a Sh100 million deposit from the KenGen Foundation, which was meant to be invested and pay a return of 16 per cent against its policy capping returns at 12 per cent.
But instead of investing the funds were used to pay dividends to members for two years. The payments were deemed to be illegal since dividend is supposed to be drawn from the Society’s accumulated earnings but it was made to paint a rosy picture of a prospering organisation to the members.
The liability and interest on this fund stands at Sh150 million and continues accumulating. The organisation further presented a misleading financial statement for the year 2017, which now the management is promising to rectify by re-evaluating the organization portfolio.
The 2017 Stima Sacco Society shows its share capital grew by 38 per cent to Sh1. 3 billion while members’ deposits hit Sh2.053 billion as at 2017, an increase from Sh1.565 billion in the previous year. The Sacco said its total asset grew from Sh2.6 billion in 2016 to Sh2.9 billion in 2017.
The Stima Investment audit shows it acquired a 15-acre piece of land in Riat, Kisumu in 2016 at a cost of Sh48 million and paid 20 per cent deposit.