Kuscco board axed as audit reveals Sh6b hole
Kenya Union of Savings and Credit Co-operatives Ltd (Kuscco) former directors and senior managers are on the spot after audit revealed mismanagement of more than Sh6 billion in the last 11 years.
Grant Thornton, an auditing firm, appointed by the government to conduct a thorough examination of the union’s financial affairs has in its preliminary findings reveals systemic deficiencies in the management of resources, including creative and unreliable financial records.
The interim report also notes that despite the union incurring losses, the directors and managers proceeded to declare bonuses, dividends and interest a practice that cannot be condoned.
Co-operatives and Micro, Small and Medium Enterprises (MSMEs) Development Cabinet Secretary Simon Chelugui yesterday confirmed the directors and managers undertook illegal cash transfer from Kuscco accounts to staff accounts, doubled purchase of properties, advanced themselves loans and operated illegal entities contrary to co-operative regulations.
Affiliated Saccos
The revelation by the preliminary report comes on the heels of the directors affiliated to Saccos unanimously passed a resolution dismissing the entire Kuscco board, accusing it of failure to steer the union effectively. However, Arnold Munene, the acting CEO was spared.
Yesterday during a press conference in his Upper Hill office, Chelugui announced the dismissal of the current board of directors. He also directed Commissioner for Co-operative Development to appoint an interim board comprising 15 members drawn from esteemed leaders of affiliate co-operatives, in accordance with the Co-operative Societies Act CAP 490 Laws of Kenya. The interim board, hew added will be tasked with overseeing the transformation and rehabilitation of the union, with the full support of a dedicated technical team.
If the former directors and the managers are found to have mismanaged resources once the audit is completed, the CS warned that they will be subjected to the full force of the law. The audit firm was appointed following acknowledgement of the findings of an inspection conducted by the Commissioner for Co-operative Development in October 2023. The commissioner inspection report revealed significant discrepancies in the management and operations of a Kuscco.
Three months after the long-serving chairman and Group managing director George Ototo stepped down to pave the way for investigations. Since then other senior managers have been dismissed.
“Out of the thorough examination of the union’s financial affairs, preliminary findings indicate systemic deficiencies in the management of resources, including creative and unreliable financial records,” said Chelugui. For example, the preliminary findings of the audit reveals high cash withdrawals out of character with expected operations of Sh5.4 billion between February 2013 and April 2024, he said. The initial audit report reveals suspicious cash transfers of Sh318.1 million to the Company Secretary Kuscco Housing.
Further there has been selective loans to senior Kuscco staff and directors including the former Managing Director George Ototo who received a loan of Sh50 million. The former board is further accused of cash transfers from Kuscco accounts to their staff accounts. For instance, Ototo is accused of receiving Sh67million and two other members of staff each Sh118 million and Sh15.9 million respectively.
Other accusations include cash transfer of Sh4.5 million to Company Secretary Kuscco Housing Society and head Kuscco Housing Co-operative - Sh7 million.
The former board is further accused of double purchase of the same land (LR 23269/35) – at Sh80.5 million and suspicious cash transfer of funds to insurance agencies to the tune of Sh434.1 million.
