Moi University audit flags Sh9bn liabilities, liquidity strain and deficit

A deepening financial strain has been uncovered at Moi University after a fresh audit revealed that the institution is struggling under liabilities running into billions of shillings, raising questions about its ability to sustain basic operations and meet financial obligations.

The audit report by Auditor General Nancy Gathungu for the financial year ending June 30, 2025, shows the university is weighed down by long-standing debts, unpaid statutory deductions, and persistent cash flow challenges that have pushed it into a fragile financial position.

The findings indicate that the university’s total liabilities stand at more than Sh9 billion against current assets of Sh4.2 billion, leaving it technically insolvent.

“A large portion (78 per cent) went towards personnel emoluments, highlighting the persistent wage pressure,” the report says.

A significant share of the debt burden, about Sh7.4 billion, is linked to accumulated statutory deductions and pension arrears that have not been settled for several years.

“The university reported material arrears amounting to Sh7.4 billion in unremitted statutory and pension obligations, primarily arising from legacy debt,” the report states.

The audit further warns that the institution is operating under extreme liquidity pressure, making it difficult to meet urgent financial needs.

“Current assets stood at Sh4.2 billion against current liabilities of Sh9 billion, resulting in a current ratio of 0.46, far below the recommended minimum of 1.0,” the report says.

“Cash balances were particularly low, covering only five per cent of current obligations, indicating a serious strain in meeting immediate commitments.”

The report links the crisis to shrinking public funding, rising wage demands, and structural financial weaknesses within the university system.

During the period under review, Moi University generated Sh5.9 billion in revenue against expenditure of Sh6.5 billion, resulting in a deficit of about Sh600 million.

Funding from the exchequer accounted for Sh2.87 billion, while internally generated income, including tuition and commercial activities, contributed about Sh3 billion.

Despite efforts to control spending, the institution still recorded losses and continued to accumulate debt.

“The university implemented a number of cost rationalisation measures, including staff rightsizing and optimisation of operational budgets, which resulted in a reduction of the overall wage bill by 8.5 per cent compared to the previous year,” the report says.

The institution also acknowledged that delayed government disbursements and inherited debts have continued to strain its operations.

The audit further raises concern over the university’s heavy reliance on borrowed funds.

“The university’s debt burden is high, with 91 per cent of assets financed by liabilities,” the audit says.

“Net assets are thin at Sh878 million, translating to a debt-to-equity ratio of 10.55. This demonstrates heavy reliance on creditors and exposes the institution to solvency risks.”

The total asset base stands at Sh10.1 billion, with a large portion tied in buildings and equipment, limiting liquidity.

The report also highlights concerns over rising uncollected debts, which continue to weigh down the institution’s financial stability.