Postal Corporation of Kenya liabilities were vested in the corporation in 1999 through Legal Notice 156. [File, Standard]
The Postal Corporation of Kenya’s liabilities are almost hitting Sh10 billion. This is as the latest Auditor General’s report on the entity’s financial health shows it still renders services to clients who are unable to pay.
The Auditor General’s report for the 2023/2024 financial year shows liabilities for the cash-strapped parastatal stood at Sh9.6 billion as of June 30, 2023.
The entity also continued its streak of negative working capital. The statement of profit or loss and other comprehensive income, the Nancy Gathungu report says, reflects a net operating deficit of Sh1.09 billion during the period.
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“The deficit reduced the accumulated general reserve from negative Sh6.2 billion reported in the financial year ended June 30, 2023, to a negative of Sh7.3 billion,” the report says.
It notes that while the current assets show a balance of Sh1.8 billion, liabilities stand at Sh9.6 billion. This resulted in a negative working capital of Sh7.7 billion. “These conditions indicate the existence of a material uncertainty, which may lead to significant doubt on the Corporation’s ability to continue as a going concern,” the report reads in part.
“However, this material uncertainty and any mitigating measures put in place by management to reverse the undesirable financial position were not disclosed in a note to the financial statements.”
The Sh9.6 billion liabilities include Sh96.8 million in respect of contingent liabilities. The report states that the management explained that the liabilities were vested in the corporation in 1999 through Legal Notice 156.
The liability arose when the defunct Kenya Postal and Telecommunication Corporation hired the services of consultants for the design and construction of Kisumu, Kericho and Malindi Head Post Offices.
“The defunct corporation failed to pay the debt and the High Court awarded the amount to the consultants. No supporting documents were provided to support the contingent liability,” the report says.
The Sh9.6 billion also includes Sh80.01 million, out of which Sh31.5 million relates to historical payables which have remained unsettled for a long time.
The report notes that management has not provided measures taken to ensure that the long-standing historical pending payables are prioritised. “Failure to settle bills during the year to which it relates distorts the financial statements and adversely affects the budgetary provisions for the subsequent year as they form a first charge,” the report says.
President William Ruto’s administration is keen to reverse the streak of losses in State-owned agencies as one of the ways of reducing overreliance on the exchequer amid a growing public debt obligation.
Postal Corporation of Kenya is one of these entities. A Cabinet dispatch No. 1 of 2025 plans to reform 42 State agencies. The corporation is among six entities earmarked for restructuring according to the dispatch.
Financial statements submitted to the Auditor General also show trade and other receivable balances of Sh1.7 billion. This includes Sh177.7 million in respect to Posta Pay transactions receivable after the termination of the contract between a service provider and the corporation.
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“However, as previously reported, supporting documents for the debt were not provided for audit,” the report says.
These trade receivables also include Sh26.8 million in respect to cash-in-transit fraud committed by the corporation employees, which the insurance company has refused to pay. “Management has not explained the measures taken to recover the same from former employees,” the report says.
The said employees have since been dismissed. “Further, analysis of the receivables schedule revealed that the corporation continues to render services to clients who are either unwilling or unable to pay,” the report says.
“In the circumstances, the accuracy, completeness and recoverability of the trade and other receivables balance of Sh1.6 billion could not be confirmed.”
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