The prestigious University of Nairobi (UoN) is staring at unprecedented financial crisis after making a Sh1.4 billion loss last year after overshooting its budget and failing to raise projected revenue.
According to Auditor-General Edward Ouko 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.
UoN has attributed its poor financial health to the decline in capitation from the Education ministry, the decline in student enrollment, strikes by academic staff and disruptions during the 2017 presidential elections.
The reduction of university cutoff points to C-plus for government-sponsored students has eliminated the self-sponsorship programmes that have been varsities’ cash cow.
It has also rendered useless the tens of university campuses that had been opened to accommodate the swelling numbers of self-sponsored students.
At Kenyatta University, the Auditor-General said the institution had failed to remit pension and taxes amounting to Sh808.3 million, and Sh161.8 million deductions to the respective beneficiaries there by risking fines and penalties.
Ouko also said KU may further worsen its liquidity position, having resorted to financing its operations using short-term bank overdrafts.
The university recorded a deficit of Sh2.1 billion during the year under review.
Its current liabilities exceed its Sh847 million current assets, resulting in negative working capital of Sh3.5 billion.
“This indicates that the university was unable to meet its financial obligations when they fall due,” Ouko said.
Multimedia University is also in the red.
The audit report indicates that the university was unable to remit workers’ deductions totalling Sh574.8 million.
These are pensions, gratuity and taxes of Sh242.9 million and Sh331.9 million, respectively
This means that UON, KU and Multimedia are holding onto workers deductions totalling Sh4.6 billion.