• Posta workers are defaulting on sacco and bank loan obligations.
• Cash-strapped corporation paid Sh146 million as interest on unpaid pensions
Image: FILE
The once giant and prestigious Postal Corporation of Kenya is on its financial knees, the Star can report.
A new audit report shows that the corporation has sunk into a Sh9 billion debt.
Popularly known as Posta, the organisation has defaulted in paying statutory deductions such as pay-as-you earn to the turn of Sh1 billion.
The corporation employees have also defaulted in servicing their sacco and bank loans. The arrears are running into billions of shillings.
Posta was once one of the most prestigious employers in Kenya.
However, the latest findings by Auditor General Nancy Gathungu shows that the agency has a negative working capital of Sh6.7 billion considering its current assets are valued at Sh2.4 billion.
“These conditions indicate the existence of a material uncertainty, which may lead to significant doubt on the corporation’s ability to continue as a going concern,” she said in the report for the year ending June 30, 2023.
Gathungu reprimanded the management for failing to disclose the sorry situation in books of accounts presented for audit.
“This material uncertainty and any mitigating measures put in place by the Management to reverse the undesirable financial position were not disclosed in a note to the financial statements,” she said.
Gathungu said the corporation’s financial statements were thus prepared on the “assumption that it will continue to receive financial support from the government, bankers, creditors and other stakeholders.”
The report says Posta has defaulted in remitting key statutory deductions including pay-as-you-earn of Sh1 billion.
The amount includes excise duty that the corporation should remit to the Kenya Revenue Authority.
Gathungu raised concerns that the unremitted deductions continue to attract unnecessary interest and penalties.
Posta Kenya workers are defaulting on sacco and bank loan obligations with the fresh details showing that about Sh2 billion was pending in remittances, including for pension and gratuity schemes.
The monies not remitted to financial institutions include money owed to cooperatives (Sh96 million) and bank loans (Sh326 million).
“This is contrary to Section 19 (4) of the Employment Act, 2007, which requires an employer who deducts an amount from an employee’s remuneration to pay the amount deducted and remit within the stipulated time. In the circumstances, management was in breach of the law,” the auditor general said.
Following the delays, Posta paid Sh146 million as interest on unpaid pensions, triggering an audit query on the expenditure as wasteful.
“The accumulated interest would have been avoided had the corporation remitted the pensions dues in time. In the circumstances, value for money to be realised from the expenditure of Sh146 million could not be confirmed,” Gathungu said.
The audit says Posta’s longstanding debts of Sh31 million remained unpaid, despite earlier audits recommending that they be settled promptly.
“Management has not provided measures taken to ensure the long outstanding historical pending payables are prioritised,” the auditor general said, warning about dangers of debts on budgets.
“Failure to settle bills during the year to which they relate distorts the financial statements and adversely affects the budgetary provisions for the subsequent year as they form a first charge,” she said.
The new details further show that Posta is yet to recover Sh26.8 million stolen by some employees.
It was established that an insurance company has since declined to compensate for the loss, putting the recovery in doubt.
“Management has not explained the measures taken to recover the same from the former employees,” the report reads.
Posta Kenya, Gathungu said, may not recover Sh204 million including Sh177 million in respect of PostaPay transactions.
The money was to be paid to the corporation after the termination of the contract between it and a service provider that managed PostaPay.
“In the circumstances, the accuracy, completeness and recoverability of trade and other receivables balance Sh204,483,238 could not be confirmed.”
Auditors have also cast doubt on a bill of Sh96 million presented as owed to consultants who designed the Kisumu, Kericho and Malindi post offices.
The liability, the report shows, was awarded by the high court, but the corporation allegedly failed to pay the debt.
“Although the management indicated that the service was irregular, no documentary evidence was provided to support the unpaid liability,” the report reads.
“In the circumstances, the accuracy, completeness and validity of the contingent liability of Sh96 million could not be confirmed.”
Posta’s 34 parcels of land are also a subject of ownership dispute, making its declaration that it had land worth Sh1.7 billion doubtable.
The land parcels had either been encroached on, are on double allocation, or alienated.
At the same time, auditors established that 55 parcels of land valued at Sh210 million had no title deeds.