List Of KSh 6.5b Suspicious Cash Transfers In New SACCOs Union Scandal Involving Directors

• CS Simon Chelugui fired KUSCCO's board after an inspection and subsequent audit revealed over KSh 6.5 billion in financial misconduct
• An audit by Grant Thornton uncovered significant financial irregularities, prompting the dismissal of top managers and administrators
• The audit reported excessive cash withdrawals, suspicious transfers to staff, and irregular transactions involving land and insurance agencies

Elijah Ntongai, a journalist at TUKO.co.ke, has more than three years of financial, business, and technology research expertise, providing insights into Kenyan and global trends.

Nairobi - CS for Cooperatives and Micro, Small and Medium Enterprises (MSMEs) Simon Chelugui has fired the board of directors at the Kenya Union of Savings and Credit Union (KUSCCO).

The Ministry acknowledged the findings of an inspection conducted by the Commissioner for Cooperative Development in October 2023, which revealed significant discrepancies in KUSCCO's management and operations.

Why CS Chelugui fired KUSCCO board of directors

In response to the findings by the Commissioner, the Ministry took immediate administrative measures, including the dismissal of implicated top managers and administrators, to facilitate a comprehensive audit of the union's operations and financial records.

According to a press release sent to TUKO.co.ke, an exhaustive audit conducted by Grant Thornton, initiated by the Ministry, has uncovered substantial financial misconduct involving more than KSh 6.5 billion.

Given the gravity of the findings and the resultant erosion of stakeholder trust, a consultative meeting with depositor representatives was held on April 25, 2024.

The unanimous decision was reached to dismiss the entire KUSCCO board of directors for failing to prevent these breaches of trust and fiduciary duty.

List of suspicious cash transfers at KUSCCO

Preliminary findings by the appointed auditor unearthed the following suspicious cash transfers:

1. Excessive Cash Withdrawals

Uncharacteristically high withdrawals totaling KSh 5,466,016,687 from February 2013 to April 2024.

2. Suspicious Transfers to Company Secretary, KUSCCO Housing

A total of KSh 318,160,172 was transferred under questionable circumstances.

3. Loans to Senior Staff and Directors:

• Group Managing Director - KSh 50 million.
• Company Secretary, KUSCCO Housing Society - KSh 4.5 million.
• Head, KUSCCO Housing Co-operative - KSh 7 million.

4. Repeated Land Purchases

Double acquisition of the same parcel of land (LR 23269/35) for KSh 80,546,000.

5. Suspicious Transfers to Insurance Agencies

KSh 434,160,379 transferred suspiciously.

6. Transfers from KUSCCO accounts to staff accounts

• Group Managing Director - KSh 67,035,752.35.
• Two other staff members received KSh 118,046,999.90 and KSh 15,986,289.00.

Other discrepancies found

CS Chelugui said that despite incurring losses, the union proceeded to declare bonuses, dividends and interest a practice that cannot be condoned.

The audit also unearthed a series of regulatory and operational failures within KUSCCO’s financial practices.

There were unregulated inter-subsidiary cash transfers that lacked proper oversight.

Additionally, KUSASA, an entity under KUSCCO, operated as a Financial Services Association (FOSA) without the requisite registration, thus bypassing legal and regulatory frameworks governing FOSA and microfinance institutions.

Moreover, KUSASA's account operations raised concerns, as an account was irregularly opened under the KUSCCO Central Finance Institution (CIF), and customer cheques were mismanaged.

Cheques intended for KUSASA were improperly endorsed and deposited directly into KUSCCO's accounts, which not only breached financial handling protocols but also jeopardised the integrity of transaction processing.

To compound these issues, the bank handling KUSCCO’s accounts lacked indemnification for third-party cheques, exposing it to potential financial liabilities and risks without proper safeguards.

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CS Chelugui fires KUSCCO board of directors.

List of KSh 6.5b Suspicious Cash Transfers in New SACCOs Union Scandal

KUSCCO Board Fired By CS Chelugui After Audit Revealed Ksh. 6b Loss