UoN retirees face pension crisis as varsity fails to remit Sh7.2 billion

Retirees from the University of Nairobi (UoN) could find themselves walking away empty-handed after years of service, following a financial crisis at the institution that has left the workers' pension scheme in disarray.

A new audit by the Auditor General, Nancy Gathungu, has revealed that the university has failed to remit over Sh7.2 billion to the pension scheme.

This oversight, flagged in Gathungu's report for the period ending June 30, 2024, paints a grim picture of the university's financial mismanagement.

According to the audit, the UoN, as the primary sponsor, owed the pension scheme Sh7,223,501,000 an increase of over Sh1 billion from the previous year.

The contributions in arrears date back to November 2016, exposing a longstanding issue that has left UoN's retirees facing an uncertain future.

Gathungu noted that a remedial plan had been developed by the university council and approved by the Retirement Benefits Authority (RBA) in 2019, which required the university to remit Sh50 million monthly towards clearing the arrears.

However, the university has not adhered to this plan.

"Had the university stuck to the plan, the outstanding arrears would have been cleared by September 2025," Gathungu said in her report.

In May 2020, the university requested the RBA to suspend the monthly payments, citing the financial strain caused by the closure of institutions following the Covid-19 pandemic.

Despite this, the auditors found that as of September 2024, the university had not made any significant contributions nor submitted a revised plan to settle the overdue payments.

Financial reporting standards

The Auditor General further noted that the valuation of the contributions owed had not been done in line with financial reporting standards, making it impossible to confirm the regularity and accuracy of the amounts owed.

The crisis at UoN mirrors a wider financial struggle affecting public universities across Kenya.

Treasury reports show that debts owed by these institutions, including pension arrears, have ballooned to approximately Sh60 billion.

The sector is in dire need of financial restructuring, with no clear strategies in place to address the deepening crisis.

UoN's pension scheme has also faced its own challenges. Despite owning valuable assets like Ambank House and Unipen Apartments, the scheme has failed to collect over Sh195 million in outstanding rent.

Of this, Sh111 million is owed by Ambank House, while Sh4 million is still pending from Unipen apartments.

Some of these arrears have been overdue for a considerable period, raising doubts over the scheme's ability to recover the funds.

Adding to the financial woes, the pension scheme's management has been called out for mismanagement of funds.

The scheme is reported to have incurred a possible loss of Sh7 million on a failed Enterprise Resource Planning (ERP) system.

The scheme had also entered into a new contract for the installation of a similar system, worth Sh13 million, but this project has been delayed and is now at risk of failure.

The auditors discovered that the initial ERP contract had been terminated, and the contractor is seeking an out-of-court settlement.

"As a result, it was not possible to determine whether the scheme received value for money on the expenditure of Sh7,162,000 incurred on the terminated contract and Sh13,359,789 spent on the procurement of the new system," Gathungu explained.