- Senators questioned Cooperative Commissioner David Obonyo over oversight failures after KUSCCO’s loan book was found overstated by more than Ksh7.6 billion.
- Obonyo said an inspection triggered by member complaints led to forensic investigations that pointed to alleged collusion among senior KUSCCO officials.
- The committee also flagged regulatory gaps, audit oversight concerns, inadequate funding and staff shortages affecting supervision of cooperative societies.
The Senate Standing Committee on Trade, Industrialisation and Tourism has stepped up scrutiny of the cooperative sector, questioning Commissioner for Cooperative Development David Obonyo over governance and oversight failures at the Kenya Union of Savings and Credit Cooperatives (KUSCCO).
Senator Jackson Mandago pressed the Commissioner on how significant financial misstatements at KUSCCO went undetected, despite his office holding an ex officio seat on the Union’s board.
“KUSCCO is the apex of the cooperative movement and its board should be the best of the best. If the Commissioner’s representative was on the board to strengthen governance, where was that oversight when these failures occurred?” Mandago asked.
Obonyo told the committee he appointed Anne Mutinda as his board representative after taking office in September 2021. KUSCCO appeared compliant on paper, holding annual general meetings, conducting elections and submitting financial statements. However, member complaints over inaccessible investments prompted him to deploy an inspection team in 2023.
That inspection found KUSCCO’s loan book had been overstated by more than Ksh 7.6 billion, against reported deposits of over Ksh 18.9 billion and a loan portfolio of roughly Ksh 13.9 billion.
Regulator’s audit oversight questioned
Busia Senator Okiya Omtatah challenged the adequacy of the Commissioner’s audit oversight, arguing that a regulator cannot simply receive audited accounts at face value.
“As a regulator, you don’t just receive audited accounts, you must go out of your way to undertake proper oversight,” Omtatah said.
Obonyo responded that the Directorate of Audit reviews accounts submitted by licensed firms for compliance, but the KUSCCO case involved deliberate manipulation that could only surface through verification of primary source documents.
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Committee Vice Chairperson Esther Okenyuri also sought clarity on whether the Directorate had met its obligations under the Accountants Act to request source documents during verification.
Obonyo clarified that the Institute of Certified Public Accountants of Kenya regulates audit firms directly, while the Ministry’s role is limited to vetting firms seeking approval to audit cooperative societies.
Lawmakers also examined how KUSCCO’s statutory auditors were appointed, noting that Omenye & Associates CPA(K) audited the union for the 2020, 2021 and 2022 financial years. Seeking to establish whether similar risks existed elsewhere, senators asked for a list of other Saccos audited by the same firm.
The committee further probed the Commissioner’s statutory role in liquidating cooperative societies and service delivery timelines. Obonyo cited overlapping functions between national and county governments, inadequate funding for inspections, a shortage of technical personnel and weak ICT infrastructure as ongoing constraints. He noted that reviewing audited accounts takes an average of eight days, while registering a Sacco takes about two weeks once full documentation is submitted.
The committee reaffirmed its commitment to strengthening the legislative and regulatory framework governing cooperative societies, with the aim of enhancing accountability, protecting members’ savings and restoring public confidence in the movement.
By Benedict Aoya
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