Postal Corporation of Kenya on the brink of collapse amid Sh7.3 billion deficit, audit reveals

The Postal Corporation of Kenya (PCK) is on the brink of collapse as an audit reveals massive losses, illegal payroll practices and questionable spending that have left the state-owned entity in a deep cash flow crisis.

According to Auditor General Nancy Gathungu’s report for the year ending June 2024, the corporation wasted Sh147 million on unnecessary interest payments, failed to remit billions in taxes and pensions, and is struggling with liabilities far outweighing its assets.

The Sh147 million in nugatory expenditure resulted from PCK’s failure to remit staff pension deductions on time.

“The value for money resulting from the expenditure of Sh147 million couldn’t be confirmed,” Gathungu said in the report tabled in Parliament.

The corporation posted a staggering Sh1.1 billion net loss, pushing accumulated deficits to Sh7.3 billion. Its current liabilities reached Sh9.5 billion, dwarfing current assets of just Sh1.8 billion. This left PCK with a negative working capital of Sh7.7 billion, signalling a severe cash flow crisis amid mounting unpaid bills and no clear prospects for recovery.

Despite this dire financial state, the report notes that PCK management failed to properly disclose going concern risks in its financial statements.

Adding to the crisis, the audit uncovered Sh3.5 billion in unremitted payroll deductions, including Sh1.1 billion in unpaid taxes and Sh1.9 billion in pension contributions. This breach of employment law betrays workers’ trust and violates statutory requirements.

“This is against the law, which requires an employer who deducts an amount from an employee’s remuneration to pay the amount deducted and remit the same within the stipulated time. The management was in breach of the law in the circumstances,” reads the report.

The Corporation's asset management also raises concerns. PCK holds Sh1.7 billion in land assets with legal issues, including 34 disputed parcels and 55 properties without title deeds. Accounting irregularities were found in operational software assets worth Sh255 million, classified as “work in progress” for eight years, inflating asset values artificially. Meanwhile, Sh57 million was wasted on obsolete software systems that were never used.

Further financial irregularities include Sh1.6 billion in dubious supplier transactions, such as Sh177 million from a terminated contract lacking documentation. The audit also flagged Sh26 million lost to suspected employee fraud, with no recovery attempts documented.

On liabilities, Sh96 million in contingent liabilities dating back to 1999 had no verifiable supporting documents, and Sh31 million in aged debts continued to distort financial records.

The report highlights budgetary indiscipline with actual revenue falling Sh1.4 billion (41 per cent) short of projections, while expenditures exceeded income by Sh754 million (38 per cent).

“The going concern of the corporation is uncertain without the support from the government, bankers, creditors, and other stakeholders,” the auditor general warned.

Though internal controls were described as effective, the scale of irregularities paints a starkly different picture. From unnecessary interest payments to billions in unpaid statutory deductions and questionable assets, PCK faces systemic failures that have worsened over time.

The report has called for urgent reforms despite the Public Investment Committee yet to act on previous audit findings.

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