State wants police to probe KUSCCO as report shows financial statements signed by dead auditor
The forensic audit conducted by PricewaterhouseCoopers highlighted non-performing loans and large-scale theft that have left the institution on the brink of insolvency.
The government has escalated action against financial mismanagement at the Kenya Union of Savings and Credit Cooperatives (KUSCCO) by submitting a forensic audit report to the police for further investigation and prosecution.
Speaking in Nairobi during the handover, Cooperatives Cabinet Secretary Wycliffe Oparanya revealed that KUSCCO is not the only sacco grappling with financial mismanagement.
"We are currently investigating other saccos and we will soon forward their cases to the relevant authorities, " he said
The forensic audit conducted by PricewaterhouseCoopers (PwC) unveiled shocking details, including the revelation that KUSCCO's financial statements were signed by a deceased auditor, pointing to a severe case of forgery. It further highlighted non-performing loans and large-scale theft that have left the institution on the brink of insolvency.
The report also identified at least 23 top managers as having been complicit in the financial mismanagement, with eight executives including former managing director George Ototo, chairman George Magutu and finance manager George Owino at the centre of the scandal.
PwC detailed how the agreed commission rate of one per cent was fraudulently raised by executives to three per cent, allowing them to withdraw significant sums of money under the guise of commission payments.
Advance payments
Additionally, advance payments to executives, totalling millions of shillings, were flagged as suspicious since no legitimate business deals backed them.
In a bid to ensure accountability, Inspector General of Police Douglas Kanja confirmed that a special team has been formed in conjunction with the Directorate of Criminal Investigations (DCI) to investigate the matter.
"Investigators [will] go through this report thoroughly. We will leave no stone unturned. Those involved in the mismanagement of sacco members' money will face the full force of the law," he assured.
According to the report, a significant portion of KUSCCO's financial losses stemmed from manipulated financial records designed to falsely portray a healthy balance sheet.
In reality, the cooperative body is currently burdened with a deficit running into billions of shillings, putting the savings of over 247 saccos at risk.
"We have already met KUSCCO members and pointed out to them that they are unlikely to recover this money. And even if the recovery process is undertaken, it will take too long," noted Oparanya.
The Ministry of Cooperatives has since moved to restrict KUSCCO from engaging in financial activities such as receiving deposits and issuing loans, allowing it to only focus on advocacy and training.
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