University of Nairobi: Sh10bn Pension Deficit in Kenya Sparks Committee Deadline

• The University of Nairobi faces a Sh10 billion pension deficit and unremitted taxes in Kenya.
• The National Assembly Public Investments Committee has demanded documentary evidence within two weeks to explain the liabilities.
• Audit findings revealed Sh1.4 billion in unremitted pension contributions and Sh50 million in PAYE for the 2021/2022 financial year.
• UoN's Vice-Chancellor stated the university is considering using land and other assets to settle the outstanding obligations.
• The government owes the University of Nairobi over Sh3 billion in outstanding funding and HELB payments.

This situation underscores the critical importance for legal and compliance teams in public institutions to ensure timely and accurate remittance of statutory deductions like pension contributions and PAYE taxes, as failure to do so can lead to massive liabilities, parliamentary investigations, and potential pressure to leverage institutional assets, creating significant legal and reputational risks.

The University of Nairobi (UoN) has been given a strict two-week deadline by the National Assembly Public Investments Committee on Governance and Education to provide comprehensive documentation regarding billions of shillings in unremitted pension contributions and taxes. This directive came after the committee, led by Luanda MP Dick Maungu, questioned UoN Vice-Chancellor Prof Ayub Njoroge Gitau and his management team. The parliamentary body emphasized that mere verbal assurances would not suffice to demonstrate the effectiveness of any corrective measures being undertaken by the institution.

During the review of Auditor-General’s reports spanning the 2020/2021 through 2024/2025 financial years, committee members voiced significant concerns over outstanding pension remittances, unremitted Pay As You Earn (PAYE) taxes, and the university’s broader financial recovery strategies. Maungu explicitly instructed the university to submit verifiable records within the stipulated 14 days, asserting that MPs required concrete evidence to ascertain the full extent of the liabilities and to properly evaluate the university's efforts to resolve them. He underscored the committee's position by stating, "There’s nothing to support the good stories," demanding proof of payments made and any agreements reached with statutory agencies.

The financial challenges facing the University of Nairobi are substantial, with the institution's pension deficit now exceeding Sh10 billion, a significant increase from an earlier reported Sh5 billion. This alarming figure was disclosed by Prof Gitau during his appearance before the parliamentary committee. The scrutiny was triggered by audit findings that revealed the university failed to remit approximately Sh1.4 billion in pension contributions and an additional Sh50 million in PAYE taxes during the 2021/2022 financial year alone.

Legislators expressed dismay over why deductions made from employees’ salaries had not been forwarded to the appropriate institutions and questioned the mechanisms that allowed these unpaid obligations to accumulate over several financial years. Kasipul MP Boyd Were highlighted the potential for penalties and interest to further inflate the already substantial amount owed, while Lungalunga MP Chiforomodo Mangale pressed for a detailed explanation of the financial decisions that led to such a massive accumulation. Mangale firmly rejected any explanations not backed by documentary evidence, asserting, "We are not here to sanitise issues. We need to get to the root of what happened."

In response to the committee's inquiries, Vice-Chancellor Prof Gitau confirmed that the university has initiated payments to retiring employees and has recently recommenced the remittance of current pension deductions. Despite these steps, he acknowledged the institution's ongoing financial constraints and indicated that UoN is collaborating with pension scheme trustees to formulate a comprehensive recovery plan. A key component of this strategy involves considering the utilization of university land and other assets as a means to help settle the outstanding financial obligations, an approach aimed at identifying resources beyond the university's regular revenue streams.

Prof Gitau also informed the MPs that the national government itself owes the university slightly more than Sh3 billion. This amount represents outstanding funding and payments linked to the Higher Education Loans Board (HELB), a figure that, while having decreased from nearly Sh5 billion, continues to impede UoN's capacity to meet its financial commitments. Central Imenti MP Moses Kirima called for a thorough examination of the university’s financial records, drawing parallels with previous concerns regarding financial management at Moi University. This situation underscores the critical importance for legal and compliance teams in public institutions to ensure timely and accurate remittance of statutory deductions like pension contributions and PAYE taxes, as failure to do so can lead to massive liabilities, parliamentary investigations, and potential pressure to leverage institutional assets, creating significant legal and reputational risks.

This case underscores the critical importance for legal and compliance teams in public institutions to ensure timely and accurate remittance of statutory deductions like pension contributions and PAYE taxes. Failure to do so can lead to massive liabilities, parliamentary investigations, and potential pressure to leverage institutional assets, creating significant legal and reputational risks.

Source: Original reporting via Kenyan news sources