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Kenya:University fights to stay afloat after gaining new status
Published on 24-10-2016 - at 00:58' by Daily Nation

From outside, the Technical University of Kenya (TUK) looks impressive; neat lawns, huge workforce and a rented Sh500,000 a month office for its council chairman at the ACK Gardens in Upper Hill, Nairobi.

But inside this pioneer polytechnic in the country is a story of an institution on the verge of bankruptcy — thanks to the mad rush to turn mid-level institutions into fully fledged universities and wastage.

With an estimated Sh2 billion debt, insiders at TUK are worried about the fate of the institution, which owes its workers, suppliers, pension scheme and other government agencies such as the Kenya Revenue Authority, hundreds of millions of shillings.

Documents show that TUK is struggling to keep its head on the surface.

It does not remit the statutory Pay as You Earn, pension, and sacco savings deducted from its workers.

Besides the contractors and suppliers, it has huge unpaid dues for part-time lecturers in addition to other management woes.

Chartered into a university in January 2013, TUK is a classic case of a failed experiment that threatens to sink Kenya’s premier polytechnic into financial limbo.

With a weak financial muscle to anchor its technical courses and sustain the increasing student population from the government’s central placement agency, the documents indicate that the debt could be above Sh2 billion.

A big chunk of the debt is owed to the pension scheme, where some of the members have died waiting for their lifetime savings.

The surviving pensioners, together with thousands of their colleagues currently employed by TUK, now risk losing more than Sh1.1 billion in pension contributions, as the administration runs out of options.

Established in 1961 to train laboratory technicians and technologists, the institution was the largest polytechnic in Kenya before it was turned into a university.

The Nation has since got documents showing how the institution has sunk into debt.

With a workforce of more than 1,500, the workers have only their pay slips as proof of statutory deductions – and it is only when they go to seek tax compliance certificates from the revenue agency that they find that their taxes were never remitted.

Those who seek loans from their sacco also meet the same fate.

THE GENESIS
TUK Vice-Chancellor Francis Aduol admitted that the institution was heavily undercapitalised, hence the survival tactics to keep afloat.

“Our financial woes started when the university transitioned from a college and was required to retain all the staff on new terms as well as hire more to offer degree courses,” Dr Ken Ramani, the director in charge of communications, said.

Apparently, the Sh40 million institution’s capitation from the government was not adjusted to measure up with the new scenario.

“We have been appealing for funding since then in vain. Our courses are also capital intensive and require specialised skills to teach and are less popular with the evening classes. We can’t offer art courses in the evening and sacrifice our core mandate,” Dr Ramani said.

This funding limbo has left the university on the brink of collapse.

Already, the TUK Staff Retirement Benefits Scheme, registered in 2013, has written to the Retirements Benefits Authority (RBA) chief executive, Mr Edward Odundo, seeking the winding up of the scheme over failure to recover Sh800 million in unremitted deductions from the university.

This letter is dated May and the scheme’s interim administrators, appointed in November 2015, have recommended so after failing to trace the lost cash.

“We have in our meetings asked for current contributions to be paid but the university does not seem to take this seriously. In our view, the university is not committed to honour their covenants under the Trust Deed and Rules.

"The more the scheme remains open, the more the members are losing out on their savings. We, therefore, recommend that the scheme be wound up to give the collection mandate to the liquidator who will have time to collect this debt,” read the letter.

The pension fund interim administrators describe the university management as “arrogant”.

Attaching any of the university assets to recover the funds will take between two to three years at best, according to the administrators’ report.

More so, the university is yet to comply with the required ration of contributions between the employer and the employees for the scheme and efforts to get an exemption certificate from the revenue body that would allow contributors some tax relief was also not successful, thanks to the missing remittances.

Mr Odundo told the Nation that the university’s assets will be attached once the pension fund is legally wound up and the money recovered to pay pensioners.

UNREMITTED DUES

At the moment, only the Sh133.5 million in assets invested in fixed deposits, corporate bonds and government securities may be safe.

“We will have to attach anything the university owns after we follow the due process,” he said.

Mwalimu National Sacco, which is owed to the tune of Sh170.5 million, is among the hardest hit financial institutions.

In a letter to the TUK vice-chancellor in August, the sacco claims unremitted payroll deductions for 17 months ending July. The sacco has suspended credit facilities to TUK members.

“Despite several promises, you have failed to remit these amounts. Without further reference to you, we shall escalate this matter for resolution unless urgent arrangement for settlement of the amount is arrived at.

"Members are not receiving normal sacco services as a result of these outstanding non remittances,” the sacco wrote.

Like Mwalimu Sacco, the Polytech Co-operative Savings and Credit Society Ltd has also had its share of problems as a result of unremitted deductions and loans.

The financial service provider has been surviving on an Agency Order procured with intervention from the Industrialisation ministry to recover the Sh55 million TUK owes it.

“We always have to get an agency order from the ministry to have money remitted to our account and the process is not an easy one,” Polytech Sacco chairman Festus Kihara told Nation.

The workers’ union officials said TUK owes them Sh11.5 million in unremitted dues.

“The university’s administration is quite arrogant and we see them doing everything to frustrate the case,” the administrators wrote to RBA.

Several lecturers, both part-time and full-time, have left the institution over unpaid salaries — some stretching from 2013.

An executive officer at the office of the vice-chancellor, Mr Cosmas Kanyadudi, said the university was trying to have the debts cleared by 2018.

“We want to begin actively recovering debt owed to us which is to the tune of Sh800 million. After that, the university will pay them,” said Mr Kanyadudi.

Ninety-four per cent of the students live outside the university, which is not only a unique “day scholar” tag for TUK, but also a huge cost relief, given that over 40 per cent are Module II students who pay higher fees.

Efforts to get a comment on the level of staffing, which is said to be bloated, was futile as the officials wanted copies of records the Nation had.

“Share with us copies of the dossier you have on TUK. Only then can we adequately respond to your questions,” Dr Ramani wrote in an email response.

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Technical University of Kenya students protest outside the Office of the President on November 20, 2014. The university is sinking in debts.

Kwamamaza
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