A newly released report by the Auditor General Nancy Gathungu has shockingly revealed that Kenya Post Office Savings Bank, popularly known as Postbank, is in deep financial distress.
Its management has used investors’ money to the tune of more than Sh10 billion.
The state-owned savings banks’ books of accounts show it cannot account for up to Sh1.7 billion in customers’ savings and deposits.
The report tabled in Parliament demonstrates that cashiers may have stolen more than Sh35 million in customers’ savings.
This paints a bleak future for the bank, with its dependence on government support now looking untenable.
The audit further shows that the bank made a loss of Sh1.4 billion in the year ending December 2019, pushing its revenue reserves downwards to negative Sh14 billion.
Even worse, the customer savings and deposits have exceeded the bank’s assets by Sh7.3 billion.
The situation suggests the bank has a cash flow crisis, hence technically insolvent.
According to Ms. Gathungu, the situation may not change unless the government assists the bank in managing its fixed costs, which the management has failed to do in the past.
She further noted that the bank’s management failed to explain a variance of Sh1.7 billion in customer savings and deposits.
Financial statements reported a balance of Sh21.8 billion, but the supporting schedules reflected a balance of Sh20.1 billion.
There was also a reported variance of Sh26 million in comparison with the reported balances in the financial systems.
The unreconciled variances point to weaknesses in the internal controls on the accuracy of data maintained by the bank.
As a result, she noted that the accuracy of the customer’s savings and deposits balance reflected in the statement as of December 2019 could not be confirmed.
Ms. Gathungu argues that on the lost Sh35.2 million customers’ savings, the bank should have recovered the cash shortages in 48 hours as spelled in its human resource policy.
This shows that the board and management have not implemented the policy to safeguard the customer’s savings and deposits.
Additionally, the report indicates that Postbank was defrauded of Sh81 million during the year under review, with the auditor noting that management has undertaken no meaningful efforts to recover the money so far.
The audit further reveals that Postbank was over-staffed by at least 64 employees.
As of the time of the audit, there were 674 employees, exceeding the staff establishment of 610.
This has contributed to the high cost of compensation to staff and, hence, the bank continues to record operating deficits.
Postbank has also been flagged for failing to collect some Sh47 million that it is owed by tenants, who have since vacated the bank’s premises.
The audit shows that there was no recourse exercised on the tenants as provided for in the lease agreements.
As things stand, the likelihood of the amount being collected is doubtful.
Informal settlers have also invaded the bank’s parcel of land in Dandora Phase Two, with the auditor querying why the asset has been neglected.
A physical visit to the land, she said, revealed that it remains unfenced and there was no evidence management made efforts to secure the land.
The auditor is also concerned that the bank did not report the potential loss in a suit over its disputed land in Nairobi’s Upper Hill, Mara Road.
The land valued at Sh550 million is registered in the name of Postbank but has an encumbrance following a suit by a developer.
The report states that the ownership of the two parcels of land could not be confirmed.
