NAIROBI, Kenya – SACCO members could get an additional layer of financial protection under proposed reforms that would establish independent cooperative audit offices in all 47 counties to scrutinise financial reports and flag suspected mismanagement.
The proposal is contained in the mediated version of the Cooperatives Bill, 2024, which seeks to strengthen oversight of cooperative societies following major financial scandals, including the collapse of the Kenya Union of Savings and Credit Co-operative Organisations (KUSCCO).
Under the proposed framework, county-level cooperative audit offices would independently review reports prepared by external auditors before the financial statements are presented to members at annual general meetings.
The offices would examine the findings against available financial records and recommend action where irregularities are identified.
The National Assembly approved the mediated version on November 5, 2026, after lawmakers from both Houses resolved disagreements over the Bill. However, the Senate deferred its vote on the same proposal, meaning the legislation had not completed the parliamentary process as of November 15.
How the proposed county audit offices would work
The reforms would establish county cooperative audit offices to provide an additional review of financial reports submitted by external auditors.
SACCOs and other cooperative societies would still be required to engage external auditors to examine their accounts. However, the new county offices would independently scrutinise those reports before members are asked to approve the financial statements.
The mediation committee argued that the additional oversight would help expose possible collusion between cooperative management teams and external auditors, which could allow financial misconduct to go undetected.
The proposed offices would also be able to recommend appropriate action where their reviews reveal serious financial irregularities, including cases where a cooperative may be at risk of collapse.
The framework is designed to introduce another layer of accountability without replacing the role of external auditors.
New national audit office proposed
The Bill also proposes establishing an Office of the National Auditor for Cooperatives to oversee financial accountability among cooperative federations and the Apex Cooperative.
The national office would review audit reports from those institutions and forward its findings to the Commissioner for Cooperative Development for consideration and further action.
Technical officers would be appointed through the Public Service Commission to support the office’s operations.
At county level, the proposed County Commissioner for Cooperatives would oversee cooperative registration, supervision and regulation, while working with the county audit office on matters involving financial irregularities and possible dissolution.
The mediation committee also agreed to replace the designation County Director for Cooperatives with County Commissioner for Cooperatives, with appointments subject to prescribed professional qualifications.
Bill seeks to bar leaders linked to financial misconduct
The proposed legislation also introduces restrictions intended to prevent individuals previously implicated in cooperative mismanagement or corrupt practices from returning to leadership positions.
Under the provision, a person would be disqualified from serving on a cooperative’s board if adversely named by the Commissioner or County Commissioner in an inquiry or inspection report concerning mismanagement or corruption while serving on a previous board.
The reforms further seek to strengthen procedures for dissolving cooperatives.
Instead of allowing dissolution without sufficient scrutiny, the mediated version provides for independent review, recommendations and remedial measures before a society is wound up.
Members who disagree with a dissolution decision would have the right to appeal to the Cooperative Tribunal, with a further appeal to the High Court.
The committee said the safeguards would help prevent premature dissolution and protect members’ investments where corrective action could restore a cooperative to financial stability.
KUSCCO collapse exposes weaknesses in cooperative oversight
The proposed reforms follow the financial crisis at KUSCCO, one of Kenya’s largest cooperative umbrella organisations, which suffered extensive losses linked to alleged fraud, mismanagement and manipulation of financial records.
A forensic audit by PricewaterhouseCoopers exposed financial irregularities estimated at Sh13.3 billion, including allegedly falsified accounts, unexplained withdrawals and other questionable transactions.
The institution’s financial position deteriorated further, with liabilities estimated at about Sh17 billion against recoverable assets of approximately Sh5.4 billion.
KUSCCO members subsequently approved its liquidation in August 2026, and the Commissioner for Cooperative Development cancelled its registration through a Gazette notice issued on August 31.
The crisis left SACCOs that had invested funds in the umbrella body facing significant potential losses, raising concerns about the effectiveness of existing oversight arrangements.
During the National Assembly debate on November 5, lawmakers cited KUSCCO as one of the reasons for introducing stronger audit controls and governance requirements in the cooperative sector.
