NAIROBI, Kenya – The Postal Corporation of Kenya (Posta), once a symbol of prestige and stability, now finds itself in a precarious financial situation, according to a new audit report.
The corporation has plunged into a staggering debt of Sh9 billion, raising serious concerns about its future viability.
The audit, conducted by Auditor General Nancy Gathungu, highlights a series of financial missteps and mismanagement within Posta.
The report reveals that the corporation has a negative working capital of Sh6.7 billion, with current assets valued at only Sh2.4 billion.
This alarming disparity suggests a significant risk to Posta’s ability to operate as a going concern.
“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,” stated Gathungu in the report for the year ending June 30, 2023.
One of the critical findings is Posta’s default on paying statutory deductions, including a Sh1 billion pay-as-you-earn (PAYE) tax.
Additionally, the corporation has failed to remit excise duties to the Kenya Revenue Authority.
This non-compliance has resulted in accumulating penalties and interest, further exacerbating Posta’s financial woes.
The report also highlights the plight of Posta’s employees, who are defaulting on sacco and bank loans due to the corporation’s failure to remit their contributions.
Outstanding remittances amount to billions of shillings, including Sh96 million owed to cooperatives and Sh326 million in bank loans.
This breach of the Employment Act, 2007, which mandates timely remittance of deducted amounts, has led to Sh146 million in interest on unpaid pensions.
The audit reveals longstanding debts totaling Sh31 million that remain unpaid despite previous recommendations for prompt settlement.
This delay distorts financial statements and adversely impacts budgetary provisions for subsequent years.
Adding to the corporation’s challenges is the unresolved issue of Sh26.8 million stolen by former employees.
An insurance company has refused to compensate for the loss, and Posta management has yet to recover the funds.
Furthermore, the audit casts doubt on the recoverability of Sh204 million, including Sh177 million related to PostaPay transactions, following the termination of a contract with a service provider.
The report also uncovers disputes over the ownership of 34 parcels of land, valued at Sh1.7 billion, with issues such as encroachment, double allocation, and alienation.
Additionally, 55 parcels of land valued at Sh210 million lack title deeds, further complicating Posta’s asset management.
Gathungu criticized Posta’s management for failing to disclose the dire financial situation in the financial statements presented for audit.
The lack of transparency and mitigating measures to address the financial distress was not documented, raising questions about the management’s accountability.
“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,” Gathungu noted.
