Egerton in the red over Sh5b debt, court told

Egerton University is indebted to the tune of Sh5 billion, the management has revealed in court.

In suit papers filed at the High Court in Nakuru on November 1, Moses Odero Ouma, the finance officer, admitted that the debt level had become unmanageable.

Mr Ouma made the revelation in a response to a suit filed by Egerton University Saving and Credit Society (Sacco) that is seeking court orders to compel the institution to remit over Sh434 million owed to its members.

The Sacco has sued the university and the Kenya Commercial Bank (KCB).

KCB is being accused of failing to collect deductions and make remittance to the Sacco account. The bank had been appointed by the Commissioner for Cooperative Development to act as an agent to collect the remittances by the university and deposit the same in the Sacco account.

The institution has since opposed the application by the Sacco terming it misplaced, noting it should have been first filed at the cooperative society’s tribunal.

Statutory deductions

“The university is obligated to remit deductions monthly to the Sacco. However, from November 2017, there has been a continuous default by the university in paying deductions it has made from its employees who are members of the Egerton University Sacco Limited,” said Ezekiel Cheboi, the chairman of the board and the Egerton University Sacco Limited.

Mr Cheboi said the university owes the Sacco Sh434,406,515.15 and wants the court to order the bank to attach funds in 17 accounts.

The finance officer, as per court documents filed on November 1, 2019, revealed that the university has been forced to default in some of its statutory obligations and has not paid pensions, Pay As You Earn and NHIF due to its staff accumulating to Sh3.6 billion.

The outstanding dues, according to the university, was Sh229,753,002.90 and is still subject to audit but not Sh434,406,515.15 as claimed in the Sacco application

He said to cushion and ensure that the university operates, it approved an overdraft of Sh100 million with KCB.

“The university is undergoing unforeseen financial challenges as a result of significant cutback in the financial support that public universities have traditionally received," he said.

He further claimed the university was greatly affected in the 2017-2018 financial year in its revenue collection due to industrial action by staff.

The strike, he said, hampered revenue collection while at the same time escalated cost of operations.

The university continued to pay rent for its lease premises in Nairobi, Nakuru, Baringo yet no learning took place for three months.

Tax liability

He said the university’s accounts were frozen by Kenya Revenue Authority on September 13, 2019, due to outstanding tax liability of Sh856,741,693.

A debt repayment agreement was executed on September 26, 2019 with conditions.

It also emerged that the university withholds staff deductions as captured in the payslip and has been experiencing difficulty in remitting the same due to underfunding.