Four former officials of the Kenya Union of Savings and Credit Co-operatives (KUSCCO) have been charged with stealing Sh82.8 million. This is part of a larger investigation into a Sh13.3 billion fraud that has affected many savings and credit cooperatives, known as Saccos.
The accused are a former national chairman, a finance manager, a legal officer, and the head of the radio project.
Investigations revealed that these officials manipulated financial records and made unauthorized cash withdrawals.
A forensic audit by PricewaterhouseCoopers (PwC) found that KUSCCO’s financial statements were falsified, even using the signature of an auditor who had passed away.
This forgery was part of a broader scheme involving theft by executives, unexplained bank withdrawals, and conflicts of interest. The audit showed that KUSCCO is now insolvent by Sh12.5 billion, putting the savings of 247 Saccos at risk.
The organization’s financial records were manipulated to hide losses and show fake profits. Executives withdrew large sums of money without proper explanations, and some funds were transferred to companies owned by top managers.
In response to these findings, the Cabinet Secretary for Co-operatives and Micro, Small and Medium Enterprises, Wycliffe Oparanya, handed over the 208-page audit report to the Inspector-General of Police, Douglas Kanja. He called for investigations and possible prosecution of those involved. Mr. Oparanya also emphasized the need to recover the lost funds to protect the savings of Sacco members.
The PwC audit uncovered various fraudulent activities, including the creation of false financial records, large-scale theft by executives, unexplained bank withdrawals, and conflicts of interest.
For example, executives withdrew Sh1.6 billion in commissions, but only Sh1.1 billion was accounted for, leaving Sh0.5 billion unaccounted for. Additionally, there were overpayments to insurance brokers, including Baobab Insurance Agency, which was majority-owned by a former KUSCCO managing director. Baobab received Sh821 million in overpayments, with top officials allegedly instructing the firm to overquote via phone calls and WhatsApp messages.
The audit also revealed that between 2018 and 2023, Sh206 million may have been stolen through withdrawals from KUSCCO’s 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The PwC audit shows that Sh839 million was withdrawn from KUSCCO’s bank accounts, but only Sh633 million was received physically in the Fosa’s strongroom, indicating a loss of Sh206 million.
In light of these revelations, the government has taken steps to restructure KUSCCO. The organization has been ordered to stop unlicensed financial activities, including receiving deposits and issuing loans.
The audit placed blame on former managing director George Ototo, finance manager George Owino, and chairman George Magutu. The PwC audit also revealed that KUSCCO concealed expenses worth Sh3.7 billion, helping it overstate net earnings.
As KUSCCO expanded into insurance and real estate, it came up with a scheme for paying commissions for marketers to bring in business, who were paid an average of 1 percent of the value of work brought to the firm.
Records unearthed by PwC indicated false entries of commissions of up to 3 percent. As a result, the executives withdrew Sh1.6 billion but paid out Sh1.1 billion. Separately, Mr. Ototo and Mr. Owino received a combined Sh107.3 million as advance payments for bringing business that is in doubt.
