A fresh audit has placed Kenyatta University at the centre of serious financial concern, revealing a widening gap between what the institution owes and what it owns, alongside weak controls that continue to affect how billions of shillings are managed.
The review by Auditor General Nancy Gathungu for the year ending June 30, 2025, paints a picture of financial strain, reporting weaknesses and governance gaps in one of the country’s largest public universities.
The report shows the university is technically insolvent, with current liabilities amounting to Sh13.86 billion against current assets of Sh2.5 billion. This results in a negative working capital of Sh11.35 billion.
It further reveals that KU recorded a deficit of Sh370.9 million during the year under review, extending a pattern of losses that raises questions about its financial stability.
“In the circumstances, the university is technically insolvent and may not be able to meet its current obligations as and when they fall due,” she said.
Budget execution also emerged as a key concern. The audit indicates that actual expenditure was Sh930 million below the approved budget, reflecting a 10 per cent shortfall in implementation. At the same time, Sh158 million meant for development projects was spent outside approved plans, while some repair works were carried out without proper authorisation. These weaknesses, the report warns, could affect delivery of planned programmes.
Questions were also raised over the reliability of financial reporting. Revenue from services amounting to Sh6.07 billion could not be fully verified, leaving doubts over the completeness of the records.
Staff expenditure presented another area of concern. While financial statements show Sh7.14 billion spent on employee costs, payroll records indicate Sh5.72 billion, leaving an unexplained gap of Sh1.42 billion. The audit links this to irregular payments, including excess acting allowances and unauthorised health risk allowances. It also warns that weak verification systems increase the risk of ghost workers and improper payroll entries.
The wage bill was also found to be far above legal limits, standing at 71 per cent of revenue instead of the required 35 per cent threshold.
In addition, the report flags Sh1.23 billion transferred to research projects that was not properly disclosed, raising questions over transparency and accountability in research funding.
“This casts doubt on the accuracy and nature of the respective projects,” Gathungu said.
A major compliance issue was also noted in statutory deductions. The audit shows Sh9.72 billion deducted from employees had not been remitted to agencies including the Kenya Revenue Authority and pension schemes. The Kenya Revenue Authority has demanded more than Sh7.5 billion in taxes, penalties and interest linked to the unpaid amounts.
The report further highlights weak integration between human resources and payroll systems, with reliance on manual data entry increasing the risk of errors. It also notes there is no clear approval process for payroll inclusion, raising concerns over data integrity and possible fraudulent entries.
Concerns were also raised over staff management, including cases of disciplinary action taken without clear evidence of due process.