CS kicks out Kuscco board after new audit reveals loss of billions
Business
By
Macharia Kamau
| May 07, 2024
The Ministry of Cooperatives has disbanded the board of the Kenya Union of Savings and Credit Cooperative Society (Kuscco), following an audit that the Ministry said found numerous incidences of mismanagement of resources and even cooking of financial records.
This comes just four months after the top management of the union was bundled out of office. George Ototo, Kuscco's long-serving chief executive, and George Magutu, the chairman of Kuscco's board left after an inspection by the Commissioner of Cooperative Development done in October last year revealed discrepancies in the management and operations of the giant union.
The two left in January this year.
Kuscco started as an umbrella body for Saccos in 1973 but has diversified to include operations as a deposit-taking Sacco, which is among the things that have been under investigation for operating without oversight by the Saccos Societies Regulatory Authority (Sasra).
Following the inspection, the Ministry appointed audit firm Grant Thornton to undertake an audit of Kuscco's financial affairs.
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On Monday, the Cabinet Secretary for Cooperatives, Micro, Medium and Small Enterprises (MSMEs) Development Simon Chelugui said the independent audit appeared to point to an even more grave situation at Kuscco - revealing system deficiencies in the management of its resources, which he noted, included "creative and unreliable financial records".
He said the audit showed irregular withdrawals of Sh5.46 billion over the 11 years between February 2013 and April 2024 from Kuscco's accounts that appeared to be going into the pockets of individuals.
"Effective immediately, I, the CS for Cooperatives and MSMEs Development hereby announce the dismissal of the current board of directors," said Chelugui.
"Furthermore, the Commissioner for Cooperative Development is directed to appoint an interim board comprising 15 members drawn from esteemed leaders of affiliate cooperatives. The interim board will be tasked with overseeing the transformation and rehabilitation of the union, with the full support of a dedicated technical team."
Other discrepancies that were found by Grant Thornton include suspicious cash transfers to the Company Secretary Kussco Housing of Sh318.16 million, loans to senior Kuscco staff and directors including the group managing director (Sh50 million), company Secretary Kuscco Housing (Sh4.5 million) and head of Kuscco Housing Society (Sh7 million), double purchase of a piece of land at Sh80.54 million and cash transfer to insurance agencies of Sh434 million.
The audit also showed irregular cash transfers from Kuscco accounts to staff accounts including Sh67 million to the group managing director, Sh118 million and another Sh15 million to two other members of staff.
It also found that Kuscco has been operating unregulated Front Office Services Activity (Fosa) Sacco (Kusasa), which offers transactional services including deposit taking as is the case with commercial banks.
Such activity is regulated by the Sacco Societies Regulatory Authority (Sasra).
"It has come to light that despite incurring losses, the union proceeded to declare bonuses, dividends and interest, a practice that cannot be condoned," said Chelugui, explaining how the Ministry arrived at a decision to kick Kuscco directors from office. "In light of these egregious lapses, a consultative meeting convened on April 25, 2024, with representatives from depositors reached a unanimous consensus on the future of the union."
"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."