A forensic audit has uncovered that top executives at the Kenya Union of Savings & Credit Co-operatives Ltd (Kuscco) allegedly forged the signature of a deceased auditor to approve falsified financial statements, placing Sh13.3 billion of depositors’ funds at risk.
The audit, conducted by PricewaterhouseCoopers (PwC), revealed that Kuscco’s 2022 financial accounts were endorsed using the signature of external auditor Alfred Basweti of Omenye and Associates. Investigations revealed that Mr. Basweti had passed away prior to the signing, indicating a clear case of forgery.
This forgery is part of a broader pattern of malfeasance at Kuscco, including financial misreporting, large-scale theft by executives, bribery, unexplained bank withdrawals, and conflicts of interest through contracts awarded to firms owned by top managers. These fraudulent activities were masked by manipulating financial statements to report non-existent profits.
The PwC audit identified eight executives at the center of these activities, notably former managing director George Ototo, finance manager George Owino, and chairman George Magutu. The auditors gathered incriminating evidence from emails, computer logs, M-Pesa statements, and documents from at least 23 top managers.
The fraudulent activities have left Kuscco with assets totaling Sh5.2 billion against liabilities of Sh17.7 billion, resulting in a Sh12.5 billion insolvency. This financial instability jeopardizes the Sh24.8 billion received from 247 savings and credit cooperative societies (saccos) as deposits.
The audit also revealed that Kuscco concealed expenses worth Sh3.7 billion, including interest expenses (Sh2.4 billion) and marketing commissions to staff (Sh710 million), thereby overstating net earnings. PwC concluded that this systematic understatement of expenses suggests deliberate manipulation of financial statements to report non-existent profits.
In response to these findings, Co-operatives and Micro, Small, and Medium Enterprises Cabinet Secretary Wycliffe Oparanya has handed the 208-page forensic audit report to Inspector-General of Police Douglas Kanja for investigation and possible prosecution of those culpable.
Speaking at a press conference accompanied by high-ranking officials from the Ministry, KUSCCO and the regulatory body SASRA, the Cabinet Secretary (CS) for MSMEs Development Dr. Wycliffe Oparanya announced that the Inspector General (IG) Mr. Douglas Kanja, who was present at the conference, and his team would commence investigations immediately.
The Inspector-General assured that the police would conduct a thorough investigation, adding “Anyone involved in the misappropriation of members’ funds will face the full force of the law.” Kanja pledged to establish a specialized team within the Directorate of Criminal Investigations (DCI) to examine the report in detail. “This is just the beginning. Any institution found culpable will be held accountable,” warned the Inspector General
Despite the damning findings the CS stated that KUSCCO remains operational albeit under significant restructuring. Mr. Oparanya emphasized the need for recovery of the lost billions and restructuring Kuscco to focus on its original mandate of advocacy and training.
He said the Ministry has confirmed that KUSCCO’s role would be narrowed to focus solely on advocacy and capacity building for SACCOs as all financial activities of the organization currently stand suspended until the institution regains public confidence.
The PwC audit also highlighted that Kuscco’s 2022 financial statements were allegedly forged, as the signatures of the 2021 and 2022 audited financial statements differed despite the signing partner being CPA Alfred Basweti of Omenye and Associates. Kenneth Kimaiyo, the former internal auditor, informed PwC that CPA Alfred Basweti had died before the signing of the Kuscco 2022 financials.
The audit further revealed that between 2018 and 2023, Sh206 million may have been stolen through withdrawals from Kuscco Sacco savings bank account in the name of replenishing cash at Kuscco Fosa branches. The PwC audit shows that Sh839 million was withdrawn from Kuscco’s bank accounts, but only Sh633 million was received physically in the Fosa’s strongroom, indicating a loss of Sh206 million.
Do you have any story or press releases you want to share? Send tips to editor@envestreetfinancial.com
Follow us on Twitter, Facebook, or LinkedIn to ensure you don’t miss out on any