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Citizen Weekly

Sunday, 4 January 2015

No end to Egerton University Sacco graft

The  Egerton University administration  has  started  investigations into the current corrupt activities at the Egerton University Sacco and a senior  co-operative officer in Nakuru county that has literally  brought the institution on its knees  as  a result of fraud and abuse of office. As this happened,  the  chairman of  the board  Kepha Orina  released  a  fact-sheet defending his tenure  and the resultant fraud and abuse of office.
 In fact, he has offered  members advance dividends  that has not been approved by  the annual general meeting, the  supreme organ of the Sacco to  calm the growing and unrelenting antagonism to his leadership style.
He has also threatened to  discipline two board  members, Aggrey Tshombe and Everious Chester, for not supporting his  way of leadership and the co-operative officer at the county offices in an attempt to crush his perceived and real “enemies”  that they are also accusing of leaking information to the  press, members  and the public about the goings on at the Sacco. They have, however, moved to court to sue Orina and the co-operative officer.
A  board member told   Weekly Citizen through telephone  that  members  of the Sacco will  soon  demonstrate against Orina, Owidi, Mwangi and the  co-operative officer as “members  are  unhappy and worried  about their Sacco and they will take to the streets soon”. As this was going on at the Egerton University, the university’s ethics and integrity committee has taken up the matter to investigate what is  considered to be  the biggest  financial sting to hit the Sacco patronised by staff of Egerton  University in the less than 12 months. The  committee  headed  by  a professor  at  the university has interviewed a  board member  who  has provided scandalous revelations.
 The committee is shocked  that a senior cooperative officer   received  Sh375,000  for  allegedly writing a less than 10 page election policy for the  Sacco amid financial misappropriation. This at the behest of the clumsy board  chairman Kepha Orina who has  promised to crush anybody including board members and staff who does not bend over  to his  malpractices and predisposition.
 In fact, the chief executive officer Ruto, told Weekly Citizen when contacted that he  has been under constant pressure and harassment from Orina and the chairman and  secretary of  supervisory  committee, Simuyu Matete and Augustine  Ndenda, for allegedly leaking information to members, former board members and university administration.
Ruto said that the co-operative officer has also threatened him on many occasions for not being “loyal” to Orina, Owidi, Mwangi, Matete and Ndenda, the clique that run the show at the university. He has appealed for protection from those who care about the Sacco and members funds.  It is claimed that a  co-operative officer at the county   has vowed to protect Orina and his loyalists as the university  Integrity and Ethic committee  promises to get to the bottom of the scandal. It is said that  the co-operative officer  received thousands of shillings  before, during and after the  election of Orina. He is said to have shoved aside memorandum of members questioning the credential of Orina to lead the Sacco soon after the election.
At Sasra, an official confirmed that such a memorandum had been received  but no one listened to their advice to uphold members quest for good leadership of the Sacco.  Among the issues being investigated is drawing of allowances to the tune of over Sh3 million by Orina’s board in the last eight months with Orina receiving the highest of Sh392,000.
The co-operative officer  recently declined to see three  board members Prof Kibe, Joyce Ondeki and Chester when they  wanted to present hard facts about Orina and the manner in which the Sacco was operating.  They wanted a special board meeting but the co-operative officer dismissed them as busy bodies out to undermine Orina “good leadership”. He is said to have told them to go and beg Orina to call for a special board meeting for him to attend.
Sasra again told Weekly Citizen that the Sacco had loans to members portfolio totaling to Sh1.225 billion as at August 31  2014 with a loan deficit reserve of Sh19.8 million against the requirements of Sh38.9 million based on loan performance in line with regulatory analysis of the loan listing thus the Sacco has under provided for loan losses adding that the surplus was overstated by the under-provisioning of loans loss. 
While the Sacco reported Sh129.8 million as interest income, only Sh94 million had been received in cash form. This contradicts Sacco’s policy that income is recognised when cash is received.
The Sacco reports different figures for the loan portfolio in different financial reports. The inspection assessed the credit risk exposure of the Sacco based on the regulatory. Section 33 (3b) of the Sacco Societies Act, 2008 requires every Sacco society to prescribe in writing an asset review system, which accurately identifies risk and assures the adequacy of provisions for losses account.
The inspection team reviewed the loans listing with a review of measurement of credit exposure and especially establishing compliance with the regulatory requirements on classification of the loans portfolio based on the performance. About 626 loans accounts amounting to Sh 110.8 million could not be classified due to incomplete information especially issue date and loan principal amount disbursed. As at August 31 2014, about Sh84 million of the loans were not performing, accounting for 15pc of loan portfolio that is at risk. The analysis further reveals that there is an underprovision of loan loss of over Sh8.8 million excluding the unclassified loans.
 This implies that the Sacco may not be able to adequately monitor the credit risk exposure. Further, the Sacco had provided for Sh19.1 million as the provision for loan loss against the requirements of  Sh38.9 million.
This exposes the Sacco to potential capital reduction as a result of the inadequate provision of loan losses and therefore, a possibility of collapse. The Sacco, Sasra, said has not kept the financial information in the most accurate way possible that would ensure that financial condition is fairly stated.
 Further, the Sacco does not comply with the regulatory requirements especially capital adequacy ratios, liquidity ratio and non-earning assets to total assets ratio. The Sacco has not managed the credit risk in compliance with the Sacco Societies Act by ensuring that the loan book is accurate and complete in reporting, ensuring that loans are completely secured and adequate provisions for the probable loan loss are made.
 The loan administration is managed within the confines of the credit policy and minimum requirement of the credit management practices in the Act. In the internal and accounting controls, the Sacco has increased risk exposure for members’ funds by allowing the overdrawing of member accounts that also reduces the opportunities for potential revenue.
 The Sacco does not observe the budget as a planning tool for guidance and cost control and management. The Sacco has to a larger extent not complied with the procurement Act, rules and regulations in engaging and management of services. The management of the procurement process has indicated to a larger extent partisan interests, hence services rendered not meeting the expectation of the management and payment still being made, managed treasury without full proof controls to safeguard members funds, especially segregation of duties when the supervisors is absent, incompleteness of the records among others ills.