The Postal Corporation of Kenya, popularly known as Posta, is grappling with severe financial instability as it faces a staggering debt of Sh9 billion. Once a prestigious and leading employer in Kenya, Posta’s financial woes have become more pronounced, as highlighted in a recent audit report by Auditor General Nancy Gathungu.
The audit for the fiscal year ending June 30, 2023, reveals that Posta has a negative working capital of Sh6.7 billion, with its current assets valued at a mere Sh2.4 billion. This alarming situation raises significant doubts about the corporation’s ability to continue as a going concern. The Auditor General criticized Posta’s management for failing to disclose this dire financial state in the books of accounts presented for audit.
Among the critical issues identified is Posta’s default in remitting statutory deductions, including pay-as-you-earn (PAYE) taxes amounting to Sh1 billion. These unpaid dues have resulted in accumulating interest and penalties, further exacerbating the financial burden. The corporation has also failed to remit excise duty to the Kenya Revenue Authority, adding to its mounting liabilities.
In addition to statutory defaults, Posta employees have defaulted on their sacco and bank loan repayments, with arrears running into billions of shillings. Approximately Sh2 billion is pending in remittances, including pension and gratuity schemes. Specifically, Sh96 million is owed to cooperatives, and Sh326 million is outstanding in bank loans. This contravenes Section 19 (4) of the Employment Act, 2007, which mandates employers to remit deducted amounts from employees’ remuneration within the stipulated time. The Auditor General condemned the management for breaching this legal requirement.
The audit also revealed that Posta incurred Sh146 million in interest on unpaid pensions, which could have been avoided if the corporation had remitted the pension dues on time. This expenditure was flagged as wasteful, questioning the value for money derived from such payments.
Another area of concern is the long-standing debts of Sh31 million that remain unpaid despite previous audit recommendations for prompt settlement. The failure to settle these bills distorts financial statements and adversely impacts budgetary provisions for subsequent years, posing a risk to financial stability.
Additionally, Posta is struggling to recover Sh26.8 million stolen by some employees. The recovery is in doubt as an insurance company has refused to compensate for the loss. The management has not provided clear measures taken to recover the funds from the former employees.
The audit further highlighted a Sh204 million receivable, including Sh177 million related to PostaPay transactions, which remains unrecovered. The termination of the contract with the service provider managing PostaPay has put the recoverability of these funds in question. The accuracy and completeness of trade and other receivables amounting to Sh204,483,238 could not be confirmed.
Moreover, auditors cast doubt on a Sh96 million liability presented as owed to consultants who designed post offices in Kisumu, Kericho, and Malindi. The high court awarded this liability, but the corporation allegedly failed to pay the debt. The management’s claim that the service was irregular lacked documentary evidence, questioning the accuracy and validity of this contingent liability.
Posta’s land assets are also under scrutiny, with 34 parcels worth Sh1.7 billion involved in ownership disputes due to encroachments, double allocations, or alienation. Furthermore, 55 parcels of land valued at Sh210 million have no title deeds, raising doubts about their declared value.
In conclusion, Posta Kenya’s financial mess is deepening, with mounting debts, statutory defaults, and unresolved liabilities. The audit findings paint a grim picture of a once prestigious corporation now struggling to stay afloat amid significant financial uncertainties.
