Universities need State bailout to survive, Auditor General warns

Kenyan taxpayers could soon be forced to bail out public universities currently on the verge of bankruptcy, in a move likely to increase the taxation burden.

According to the Office of the Auditor-General, majority of the country’s public universities have liabilities that exceed their assets, casting doubt over their ability to sustain operations.

“Almost all the universities have a problem and we have told them even as they prepare their books to factor in their ability to operate as a going concern,” said Auditor General Nancy Gathugu. 

The latest report from the National Treasury indicates that Moi, Egerton and Kenyatta universities reported Sh1.7, Sh1.3 and Sh2.1 billion respectively in deficits for the 2020/2021 financial year.

The Jomo Kenyatta University of Agriculture and Technology and the University of Nairobi also reported Sh1.4 billion and Sh2.1 billion in deficits respectively during the period under review. 

“The universities need to re-organise themselves to ensure they are self-sustaining and most of them will need funding from the government,” she said.

Ms Gathugu said that the same applies to several other State-owned enterprises, some of which should be scrapped to stop further bleeding of taxpayers resources though bailouts.

“We need to evaluate the mandate of some State-owned enterprises to see if they can be collapsed into their line ministries since they remain a drain to taxpayers,” she said. “This is a conversation we are having with the management of these entities.”

Gathugu was speaking at a session hosted by the Public Sector Accounting Standards Board (PSASB) where the regulatory body stated the government was ready to scrap cash-based accounting standards for international best practice.

“We are moving from cash-bred accounting to accrual accounting which we believe will improve transparency in the public sector,” said Jonah Wala, director for accounting services at the National Treasury.

Currently, government entities, including ministries and counties, use cash-based reporting which has been criticised for promoting irregular expenditure such us spending at source and pilling up of pending bills.

“Cash-based accounting has been causing transparency problems in reporting standards and we now have the capacity to implement accrual reporting within the IFMIS environment,” said Mr Wala.

“All our assets are have been coded and our liabilities have also been included into the government’s financial statements,” he said, adding that “this will help in project-tracking and debt management particularly in our large projects that are often multi-year.”

Stephen Masha, interim chairman of the PSASB said switch from cash-based to accrual accounting has been a long time coming and will help tackle the perennial challenge of pending bills. 

“When it comes to the issue of pending bills, accrual accounting means we’ll be able to capture all our assets and liabilities in our financial statements to ease the settlement process,” he said.