KUSCCO Scandal: How Top Executives Stole Ksh 13 Billion from Sacco Members

KUSCCO SCANDAL- In a shocking revelation, top executives at the Kenya Union of Savings and Credit Co-operatives (KUSCCO) have been implicated in a massive financial scandal involving the misappropriation of over Ksh 13 billion. This breach of trust has left many questioning the integrity of institutions meant to safeguard members’ savings.

Key Findings from the Forensic Audit:

• Forgery of Auditor’s Signature: Executives forged the signature of deceased auditor Alfred Basweti to validate falsified financial statements. This deceit concealed significant financial discrepancies.
• Unauthorized Cash Withdrawals: Between February 2013 and April 2024, there were cash withdrawals totaling Ksh 5.47 billion, averaging Ksh 40.79 million monthly. These withdrawals lacked proper authorization and documentation.
• Suspicious Transfers: Approximately Ksh 318.16 million was transferred to the company secretary of KUSCCO Housing without clear justification.
• Unsupported Loans to Executives: Senior staff and directors received loans amounting to Ksh 61.5 million, including Ksh 50 million to the group managing director. The legitimacy of these loans is questionable.
• Irregular Payments to Insurance Agencies: Transfers totaling Ksh 434.16 million were made to insurance agencies, purportedly as commissions. However, KUSCCO was not licensed to offer insurance services, raising concerns about these transactions.

Government’s Response:

In light of these findings, the Ministry of Cooperatives and Micro, Small, and Medium Enterprises Development has taken decisive action:

• Dismissal of the Entire Board: Cabinet Secretary Simon Chelugui announced the removal of KUSCCO’s entire board, citing systemic deficiencies and unreliable financial records.
• Appointment of an Interim Board: An interim board of 15 members from affiliate cooperatives has been appointed to oversee the union’s rehabilitation and restore trust among members.

Implications for Members:

With KUSCCO holding deposits estimated at Ksh 18.9 billion from about 4,168 Saccos, the misappropriated funds represent a significant portion of members’ savings. The organization’s insolvency, with a deficit of Ksh 12.5 billion, puts these deposits at risk.

 

Reflecting on the Broader Impact:

This scandal raises critical questions about the oversight and governance of financial institutions:

• How can members ensure their savings are protected from such malfeasance?
• What measures should be implemented to prevent similar incidents in the future?
• How can trust be rebuilt in institutions designed to safeguard members’ interests?**

As a member or stakeholder, it’s essential to stay informed and demand transparency and accountability from those entrusted with managing collective resources. Active participation in governance processes can serve as a safeguard against potential mismanagement.

 

The KUSCCO scandal serves as a stark reminder of the importance of vigilance, integrity, and robust oversight in financial institutions. It underscores the need for continuous evaluation and improvement of governance structures to protect members’ interests and maintain trust in cooperative systems.

 

In a startling revelation, a forensic audit by PricewaterhouseCoopers (PwC) has uncovered that top executives at the Kenya Union of Savings and Credit Co-operatives (KUSCCO) forged the signature of deceased auditor Alfred Basweti to validate falsified financial statements. This deceit concealed significant financial discrepancies, putting Ksh 13.3 billion of depositors’ funds at risk.

The audit revealed that KUSCCO, which manages billions of shillings from savings and credit cooperative societies (saccos) for investments, had its 2022 financial accounts endorsed by external auditor Alfred Basweti of Omenye and Associates. However, it emerged that Mr. Basweti had passed away long before the signing of these accounts. Auditors noticed discrepancies in his signatures across documents from 2022 and earlier, leading to the discovery of the forgery.

This forgery is part of a broader pattern of malfeasance at KUSCCO, including cooking of books, large-scale theft by executives, bribery, unexplained bank withdrawals, and conflicts of interest through issuance of contracts to firms owned by top managers. These schemes were masked through manipulation of financial statements to report non-existent profits. In total, Ksh 13.3 billion has been lost, rendering the umbrella body for saccos insolvent to the tune of Ksh 12.5 billion, thereby putting the Ksh 24.8 billion it received from 247 saccos as deposits at risk.

The auditors retrieved incriminating information from emails, computer logs, M-Pesa statements, and documents of at least 23 top managers at KUSCCO. The review placed eight executives in the spotlight, including then managing director George Ototo, finance manager George Owino, and chairman George Magutu.

In response to these findings, the Ministry of Cooperatives and Micro, Small, and Medium Enterprises Development has taken decisive action. Cabinet Secretary Simon Chelugui announced the removal of KUSCCO’s entire board, citing systemic deficiencies and unreliable financial records. An interim board of 15 members from affiliate cooperatives has been appointed to oversee the union’s rehabilitation and restore trust among members.

This scandal raises critical questions about the oversight and governance of financial institutions. As a member or stakeholder, it’s essential to stay informed and demand transparency and accountability from those entrusted with managing collective resources. Active participation in governance processes can serve as a safeguard against potential mismanagement.

The KUSCCO scandal serves as a stark reminder of the importance of vigilance, integrity, and robust oversight in financial institutions. It underscores the need for continuous evaluation and improvement of governance structures to protect members’ interests and maintain trust in cooperative systems.