In a sweeping crackdown on financial mismanagement, the Ministry of Cooperatives and Micro, Small, and Medium Enterprises (MSMEs) has officially handed over a forensic audit report on the Kenya Union of Savings and Credit Co-operatives (KUSSCO) to national security agencies.
The report, compiled by PricewaterhouseCoopers, revealed gross mismanagement, financial irregularities, and possible criminal activities within the apex cooperative body.
Speaking at a press conference accompanied by high-ranking officials from the Ministry, KUSCCO and the regulatory body SASRA, the Cabinet Secretary (CS) for MSMEs Development Dr. Wycliffe Oparanya announced that the Inspector General (IG) Mr. Douglas Kanja, who was present at the conference, and his team would commence investigations immediately.
According to the CS, the forensic audit highlighted non-performing loans totaling Sh3.7 billion, overstated profits of nearly Sh798 million over the last six years, irregular commissions amounting to Sh2.7 billion, and mismanagement of the central finance fund to the tune of Sh1.3 billion.
“KUSCCO was established in 1973 as the umbrella body for SACCOs across Kenya, but the management veered from its core mandate, engaging in unsanctioned financial activities without proper regulatory oversight,” noted Dr. Oparanya, adding that this has led to operational inefficiencies, regulatory non-compliance, and significant financial losses, prompting intervention from the government.
Dr. Oparanya emphasized that while the government does not direct security agencies, it expects them to take appropriate legal and administrative actions, including criminal investigations and potential asset recovery. “We are optimistic that this will serve as a deterrent to other organizations engaging in similar malpractices,” he expressed.
However, despite the damning findings the CS stated that KUSCCO remains operational albeit under significant restructuring.
He said the Ministry has confirmed that KUSCCO’s role would be narrowed to focus solely on advocacy and capacity building for SACCOs as all financial activities of the organization currently stand suspended until the institution regains public confidence.
“We have already advised SACCO members that the likelihood of recovering their money is slim, and they should adjust their financial statements accordingly,” he said, encouraging affected SACCOs to spread their losses over several fiscal periods, with the support of local banks in order to prevent widespread insolvency.
Further, the CS announced that the Cooperative Bill 2024, which aims to tighten regulatory oversight and improve governance within the cooperative sector, has been passed by the National Assembly and awaited Senate approval.
“This bill is crucial for preventing future mismanagement in apex institutions like KUSCCO,” explained Dr. Oparanya.
On his part, the IG assured that the police will do their investigations thoroughly adding: “Anyone involved in the misappropriation of members’ funds will face the full force of the law.”
Kanja, promised formation of a specialized team within the Directorate of Criminal Investigations (DCI) to scrutinize the report. “This is just the beginning. Any institution found culpable will be held accountable,” warned the Inspector General
By Jesee Otieno