KUSCCO Scandal Rocks Sacco's

The Kenya Union of Savings & Credit Co-operatives Ltd (Kuscco) is facing a crisis after losing billions of shillings, putting Sh. 13.3 billion belonging to 247 deposit-taking Saccos at risk.

Officials from the union face arrest for falsifying financial statements and theft. A 208-page audit report by PricewaterhouseCoopers (PwC) reveals that the amount lost by Kuscco has left it insolvent by Sh. 12.5 billion.

The audit report further exposed foul play, revealing that Kuscco’s falsified financial records were signed by a deceased auditor, Mr. Alfred Basweti of Omenye & Associates.

Kuscco has also been linked to several fraudulent activities, including embezzlement by top executives, bribery, suspicious bank withdrawals and awarding contracts to companies owned by senior officials.

To cover up these schemes, financial statements were manipulated to reflect profits that did not exist. Some of Kuscco’s top managers now under police scrutiny, as identified in the audit report include Managing Director George Ototo, Finance Manager George Owino and Chairman George Magutu.

As a result, Kuscco has lost Sh. 13.3 billion and is facing insolvency amounting to Sh. 12.5 billion, putting a total of Sh. 24.8 billion from various Saccos at risk.

Cooperatives and Micro, Small, and Medium Enterprises Cabinet Secretary Wycliffe Oparanya stated that the intricate network of fraudulent dealings, which often involved cash transactions and manual record-keeping, has left minimal bank trails.

Due to this complexity, recovering the billions lost in the scheme may not be possible.

“We have already met Kuscco members and pointed out to them that they are unlikely to recover this money. And even if the recovery process is undertaken, it will take too long,” he said.

He stated that Kuscco previously had a share capital of Sh. 3.3 billion, savings and deposits worth Sh. 15.3 billion and a Sh. 14 billion loan book.

However, its diversion into financial and investment services without proper structures, regulatory oversight and investment policy frameworks opened loopholes for theft and mismanagement.

“Kuscco is being restructured so that it becomes a lean institution that can undertake its mandate of training and advocacy,” Oparanya added.

The audit report further revealed that Sh. 3.7 billion was stolen by top executives from Kuscco’s investments in insurance and real estate.

It is alleged that as the business was growing, Kuscco introduced a plan to pay marketers a 1% commission based on the value of the work they brought in.

Additionally, the audit revealed that between 2020 and 2023, Sh. 206 billion was stolen from Kuscco Sacco’s savings bank account in the name of replenishing cash at its Fosa branches. A total of Sh. 839 million was withdrawn from the bank accounts, but only Sh. 633 million was received at the Fosa’s strongroom.

Kuscco’s cashier informed PwC that Mr Ototo and Mr Owino had directed him to hand over Sh. 135 million to them over seven years. Additionally, he issued a Sh. 20 million ‘loan’ to Mr Ototo, which was never repaid.