Why Govt Fired KUSCCO Bosses

The Ministry of Cooperatives has announced the dismissal of the board of directors of Kenya Union of Savings and Credit Co-operatives Ltd (KUSCCO), an umbrella body for Saccos in Kenya.

In a statement dated Monday, May 6, the CS Simon Chelugui-led ministry revealed that the decision came following a consultative meeting convened on April 25, 2024, with representatives from depositors which reached a unanimous consensus regarding the future of the union.

“It has come to light that despite incurring losses, the union proceeded to declare bonuses, dividends and interest, a practice that cannot be condoned. It was concluded that the current board of directors has failed in its duty to steer the union effectively. Consequently, in the interest of ensuring accountability and restoring confidence, the Ministry has taken decisive action on this matter,” reads the statement in part.

The ministry revealed that an inspection conducted in October 2023 found significant discrepancies in the management and operations of KUSCCO. 

In response to these findings, immediate administrative measures were taken, including the dismissal of implicated top managers and administrators, to facilitate a comprehensive audit of the union's operations and financial records.

“Subsequently, the Ministry appointed Grant Thornton, a reputable auditing firm, to conduct a thorough examination of the union's financial affairs. Preliminary findings indicate systemic deficiencies in the management of resources, including creative and unreliable financial records,” the statement adds. 

11 Issues Unearthed 

Among the deficiencies includes Ksh5.5 billion in suspicious withdrawals. Below are the 11 issues identified in detail;

1. High Cash withdrawals out of character with expected operations - Ksh5,466,016.687 between February 2013 and April 2024
2. Suspicious cash transfers to Company Secretary KUSCCO Housing - Ksh318,160,172
3. Loans to senior KUSCCO staff and directors (including subsidiaries) some text
   1. Group Managing Director - Ksh50 Million
   2. Company Secretary KUSCCO Housing Society - Ksh4.5 Million 
   3. Head KUSCCO Housing Co-operative - Ksh7M
4. Double purchase of the same land (LR 23269/35) - Ksh80,546,000 
5. Suspicious cash transfer of funds to Insurance Agencies - Ksh434.160.379
6. Cash transfers from KUSCCO accounts to their staff accountssome text
   1. Group Managing Director - Ksh67,035.752.35 and two other members of staff each Ksh118,046,999.90 and Ksh15,986,289.00 respectively.
7. Inter Subsidiary Cash transfers.
8. KUSCCO Operating unregulated FOSA - KUSASA Neither a - registered FOSA nor Microfinance.
9. Irregular account opened for KUSASA under KUSCCO CIF
10. Customers' cheques received at KUSASA endorsed and deposited at KUSCCO account for clearing.
11. The bank not indemnified on third party cheques.

Earlier this year, KUSCCO Group Managing Director, George Ototo, as well as the National Chairman, George Magutu, stepped down, with the union later replacing them with David Langat as Chairman and Arnold Munene as acting MD.

CS Chelugui in 2023 had ordered an inquiry into KUSCCO, which has a membership of over 4,168 Saccos for allegedly being involved in illegal deposit-taking business.