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Citizen Weekly

Monday, 9 February 2015

Fist fights mar Egerton University Sacco AGM

An official with Sacco Society Regularity Authority turned a hero during the annual general meeting of the trouble-ridden Egerton University Sacco when he admitted that  the institution is  faced  with  a myriad of governance issues as a result of poor management, abuse of office, misapplication and misappropriation of funds  and  promised  to take immediate  actions against those responsible
The official, a  Mr  Njuguna  from Sasra   came  into action at the  nick  of time as  members  nearly  threw out the  Nakuru county  commissioner  for co-operatives for allegedly appearing to shield  the current management under the  chairmanship of  Kepha  Orina.
During a meeting held on January 30 2015,  attended  by  three  immediate  former  chairmen Prof Muchiri and Job Kipkeput, angry  members  said  they  would not accept further mismanagement of their society  with  the county  commissioner for co-operatives saying half truths  and in other  instances,  outright lies without budding an eyelid. Angry members of the Sacco told the county commissioner for co-operatives to sit down since he was saying nothing other protecting Orina
Njuguna  said  the  Sasra  report that was in circulation and  any other documents were real  and  said though they were meant for the  board and staff, members had a right to know what was  happening in their Sacco as provided in the various laws  that manage co-operative societies.
After  the  meeting that started at 10.45am  and ended at 8pm, a group of members from Kisii University Campus   allegedly hired by Orina turned  against each after disagreeing on the sharing out of money they  had been given to influence proceedings in his favour. They manhandled each other until security personnel intervened.
In his  contribution, Kikeput explained  how  he  had  spearheaded the  Sacco  to be affiliated to  Sasra as a  way of promoting transparency and accountability and urged  the institution under  Carlius Ademba to save the organisation from outright mismanagement by taking immediate and decisive action.
Njuguna said that Sasra had carried  an elaborate inspection of the Sacco’s operation and unearthed  serious  misapplication of the law and funds, misappropriation of funds as well as abuse of office to the extent that there is conflict of interest. This, he said, did not permit the board members to execute their duties in the interest of members and the growth and development of the Sacco considered one of the biggest in the country.  Njuguna  said  that  board  members and over 200  members  had  been  given abnormal loans which they  cannot service given the money on the pay slip.
The management of Egerton University has written to anti-corruption commission to investigate the activities of Egerton University Sacco activities. The  university administration  is  shocked  that  the  Nakuru county  commissioner  received  Sh375,000  for  allegedly writing a  less  than 10-page  election policy for the  Sacco  amid  financial misappropriation. The  university is  also concerned  with the quality  of  supervisory   committee report presented to members during the  AGM  by chairman Simuyu Matete, saying  they will  interrogate it for facts, accuracy and sincerity. Other issues being investigated include drawing of allowances to the tune of over Sh3 million by Orina’s board members in the last eight months with Orina receiving the highest at Sh392,000
The   county co-operative commissioner recently declined to see three board members Prof Kibe, Joyce Ondeki and one Chester when they wanted to present facts about Orina and the Sacco’s operation and financial impropriety.  They wanted a special board meeting but the co-operative officer dismissed them as busy bodies out to undermine Orina’s “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 said in its inspection report that the Sacco had loans to members portfolio amounting to Sh1.225 billion as at August 31 2014 with a loan loss reserve of Sh19.8 million against the requirements of Sh38.9 million based loan performance in line with regulatory analysis of the loan listing the Sacco, has thus underprovided for loan losses and added 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. 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 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 member’s funds by allowing the overdrawing of member accounts that also reduces the opportunities for potential revenue.