An audit of the financial records of the Kenya Union of Savings and Credit Co-operatives (Kuscco) has revealed a rot that has cost the organisation over Sh6 billion in losses, prompting the dismissal of the board and senior officials.
The review, done by American audit firm Grant Thornton, disclosed misappropriation of member funds, illegal withdrawals, cash transfers, and engagement in illegal or unlicensed activities, ostensibly steered by the now dismissed officials.
Cabinet Secretary for Co-operatives and Micro, Small and Medium Enterprises (MSMEs) Development Simon Chelugui on Monday said the officials will be surcharged in efforts to recover the lost amount to revitalise the already struggling organisation.
“Preliminary findings indicate systemic deficiencies in the management of resources, including the creative and unreliable financial records,” Mr Chelugui told reporters at a news conference at his office on Monday.
“We will pursue all those culpable, all those that are involved, those who will be mentioned, until we recover every shilling owed to Kuscco members,” he added.
Based on the initial audit results published by the ministry, Kuscco officials oversaw “out of character” cash withdrawals totalling Sh5.5 billion between February 2013 and April 2024.
There were also “suspicious” cash transfers to the company secretary of Kuscco Housing amounting to Sh318 million, and to insurance agencies totalling Sh434 million.
According to Mr Chelugui, the irregular cash transfers to insurance agencies were “purported to be payment of commissions for services rendered to insurance services,” when the organisation has never been licensed to offer insurance services in the first place.
Additionally, Kuscco officials also oversaw the illegal extension of credit to senior staff and directors, including a Sh50 million loan to the managing director, Sh4.5 million to the company secretary, and Sh7 million to the head of Kuscco housing co-operative. It is not yet clear if the loans were ever repaid.
The organisation has also lost Sh80.5 million in the double purchase of a piece of land. Money was also irregularly transferred to the group managing director (Sh67 million) and a total of Sh134 million to two other staff members.
The special audit was ordered by the ministry in January this year, after it was established that Kuscco’s books had been audited by unlicenced entities for the last two years, the period when it came under financial distress.
The ministry had ordered an inquiry into the activities of Kuscco by the Commissioner of Co-operatives in October last year on suspicion that it had been engaging in illegal deposit-taking business, sparked by its inability to meet its financial obligations.
Initial findings had revealed that Kuscco had been commingling union funds between different programmes, including housing and insurance, without clear terms, and consequently was not able to release member deposits.
According to the ministry, Kuscco is registered as an umbrella body for Savings and Credit Cooperatives (Saccos) in Kenya, but is not in itself licensed to engage in the business of taking deposits and giving loans.
Currently, Kuscco has a membership of about 4,168 Saccos, and holds deposits estimated at Sh18.9 billion, meaning that the lost funds are over a third of the member funds the organisation holds.
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