Details Emerge on How Saccos Lost Ksh13 billion Through the Signature of a Deceased Official

In Summary

• A forensic audit has exposed financial fraud at Kuscco, implicating top executives in forgery, financial misreporting, and misappropriation of funds.
• CRA is revising the revenue-sharing formula to improve fairness, ensure stability, and align allocations with county functions.
• Kenya’s forex reserves remain stable despite concerns over the US aid freeze, with key economic inflows cushioning the shilling.
• Investor wealth at the NSE rose by Ksh24 billion, with strong stock and bond market performance driving market gains.
• The Treasury has increased pension payouts to clear backlogs, but mass retirements continue to pressure the budget.
• Airtel Money paybills and tills will start accepting M-Pesa payments by March, enhancing mobile money interoperability.
  

A forensic audit by PwC has uncovered large-scale financial fraud at Kenya Union of Savings & Credit Cooperatives ( KUSCCO), a Sacco board in Kenya,  where top executives forged the signature of a deceased auditor to approve falsified financial statements, putting Ksh13.3 billion in sacco deposits at risk. The audit, as reported by The Business Daily, found that KUSCCO engaged in book-cooking, large-scale theft, bribery, and financial misreporting, leading to a Ksh12.5 billion insolvency. Key executives, including former MD George Ototo and finance manager George Owino, were implicated in concealing expenses worth Ksh3.7 billion and misclassifying losses to report fake profits. The forensic report also found that KUSSCO ran an interdepartmental lending scheme that hid Ksh6.5 billion in unreported loans. It emerged that the auditor, Mr Basweti, had died long before the signing of the Kuscco’s books in a strange occurrence that was picked by the auditors after they noticed his signatures in 2022 and earlier documents differed. The auditors retrieved incriminating information such as e-mails, computer logs, M-Pesa statements and documents of at least 23 top managers at KUSCCO in a review that placed eight executives in the spotlight. The audit further exposed fraudulent commission payments and overpayments to insurance brokers, with Ksh500 million potentially misappropriated.

The Commission on Revenue Allocation (CRA) has proposed changes to its Third Basis for equitable share allocation among counties, citing data inconsistencies and the need for better alignment with county functions. The revised Fourth Basis will maintain key parameters such as population, geographical area, and poverty levels but adjust their weights to better reflect county needs. A stabilisation factor has also been introduced to prevent any county from receiving less funding than before. While new proposals like the blue economy and environmental performance were rejected due to unreliable data, economic output incentives and enhanced support for small counties have been incorporated. Simulations indicate counties like Nairobi, Kakamega, and Mandera may see slight increases in their allocations, while others like Kiambu and Machakos may experience minor adjustments, according to a report by Capital Business.

The suspension of US aid through USAID, which channeled over Ksh84 billion into Kenya last year, has raised concerns about the stability of the Kenyan shilling, according to a report by  The Standard. The freeze affects funding for key projects, including health and NGO programmes, which play a role in foreign currency inflows. However, economists argue that the impact on forex reserves will be minimal, as reserves are largely influenced by IMF and World Bank disbursements. CBK Governor Kamau Thugge noted that the country’s reserves, standing at Ksh1.2 trillion, remain sufficient to cushion against short-term shocks, with diaspora remittances and tourism arrivals continuing to boost forex inflows.

In a report by The Business Daily, Airtel Money users will soon receive payments from M-Pesa customers through paybills and tills, closing a gap that has existed since 2022. Airtel Money Managing Director Anne Kinuthia-Otieno confirmed that plans to implement full interoperability are in the final stages and will be completed within the current quarter. The move follows Safaricom’s 2022 rollout, which allowed its users to pay into rival platforms, and is part of a Central Bank of Kenya-led plan to enable seamless mobile money transactions across different networks.

The Star reports that Kenya’s capital markets kicked off the year on a positive note, with all indices at the Nairobi Securities Exchange (NSE) recording gains. A weekly market bulletin by the Central Bank shows that investor wealth at the NSE rose by Ksh24 billion, pushing market capitalisation to Ksh2.04 trillion. Total shares traded increased by 62.5 percent, driving equity turnover up by nearly 50 percent. East Africa Portland Cement was the biggest gainer, rising by 9.34 percent to Ksh30.45, ahead of its first dividend payout in 13 years. Treasury bills attracted the highest bids at Ksh71.2 billion, following a 50-basis-point cut in the base lending rate to 10.75 percent.

Payouts to retired public sector workers surged by 40.39 percent in the first half of the financial year, with the Treasury disbursing Ksh82.84 billion compared to Ksh59.01 billion in the same period last year. According to The Business Daily, the increase follows efforts to clear a backlog of Ksh23.78 billion carried over from the previous fiscal year due to revenue shortfalls. President William Ruto’s directive for civil servants to retire at 60 has further strained pension expenses, with 85,400 workers expected to exit by June 2026. Despite the rise in payouts, the pension budget still lags by Ksh28.74 billion. The Treasury plans to digitise and re-engineer the pension management system to streamline payments and eliminate inefficiencies.