How staff salaries are draining varsity coffers

MOST public universities spend way too much money on salaries in violation of the law, highlighting the cash flow crisis plaguing the institutions.

An audit covering the financial year ending June 30, 2024 reveals how employee costs consume more than a third of university income.

The situation is severe in many of the institutions of higher learning, with one, the Technical University of Kenya, shockingly exceeding its total annual revenue.

The Public Finance Management (National Government) Regulations, 2015 require that employee salaries should not exceed 35 per cent of total revenue.

Auditor General Nancy Gathungu, in a report tabled in Parliament, reviewed salaries across the 42 public universities and found that 39 institutions, accounting for 93 per cent of the sector, were in breach.

In exceeding the 35 per cent threshold for wages, it begs the question how the universities pay for other administrative expenses.

The most outstanding case was at the Technical University of Kenya, which spent Sh3.27 billion on salaries against Sh2.81 billion revenue, translating to a wage bill of 116 per cent of its revenue.

This means the university is in the red before it even pays for electricity, water, teaching materials or books, let alone development projects to accommodate its student population.

TUK is not an isolated case. Taita Taveta University followed closely, with its wage bill consuming 87 per cent of its revenue (being Sh463 million out of Sh533 million income).

The Technical University of Mombasa paid out 83 per cent of its revenue, Pwani University 82 per cent, and the University of Eldoret 79 per cent.

The top five most affected institutions spent over 75 per cent of their income on salaries, underscoring their struggle to stay afloat.

Even the country's largest and most established universities are not immune to cash flow challenges.

Jomo Kenyatta University of Agriculture and Technology recorded a 77 per cent wage-to-revenue ratio, while Kenyatta University's stood at 71 per cent.

Gathungu’s report revealed that during the year under review the universities made Sh100 billion cumulatively but the wage bill for the sector stood at Sh62.2 billion.

This means that, on average, Sh62 in every Sh100 earned by a public university is spent on salaries.

The situation, the auditors observed, has seen the institutions end up with little left for core academic functions, research, maintenance and development.

From the findings, the universities may have a bloated workforce. The wage bill cost could go higher, following the recent Sh4.3 billion raise negotiated by the Universities Academic Staff Union.

Maseno University had total revenue of Sh3.94 billion. Its spending on personnel emoluments was recorded at Sh2.46 billion, which equates to 62 per cent of the total revenue.

Egerton University spent 59 per cent of its revenue on salaries, limiting funds to other critical areas, while Masinde Muliro spent 66 per cent.

Despite its vast revenue streams, the University of Nairobi in the year under review spent at least 53 per cent of its Sh16 billion earnings on personnel emoluments.

The Open University of Kenya was the only unique case, having spent 19 per cent of its revenue on salaries, while Tom Mboya University kept its employee expenditure at 30 per cent of earnings for the year.

The Kenya Advanced Institute of Science and Technology kept its rate of salary costs to revenue earnings at 35 per cent, while Turkana used 40 per cent, and Kirinyaga and Tharaka universities spent 44 per cent.

Rongo, the National Defence University, Bomet and Jaramogi Oginga Odinga used between 55 and 58 per cent of their revenues to pay employees.

The report comes hot on the heels of findings about the dire financial situation of public universities, with a number of them defaulting on key obligations.

Treasury Cabinet Secretary John Mbadi recently said the government had no means to sustain the institutions and asked their managers to downsize.

He asked universities to consider closing satellite campuses over sustainability challenges and to reduce unnecessary administrative costs.

“We have been living a lie in the sense that we give universities our children to teach for free. We must ask ourselves whether we want to continue living the lie or do it differently,” Mbadi said.

The implications of the salaries and recurrent expenses stranglehold are dire, as universities are unable to fund critical areas when such a huge amount of revenue is locked into salaries.

Essential maintenance of facilities – hostels, lecture halls and laboratories - is deferred, leading to dilapidated infrastructure.

Gathungu revealed in the report that at least 21 universities had a Sh43 billion negative working capital at the time of the review, meaning they are unable to pay their bills.

“These substantial deficits reflect serious liquidity challenges, with implications on creditor payments, staff remuneration, and overall service delivery,” the auditor said.

Observers say the situation could turn for the worse with a state directive to reduce tuition fees without a corresponding and guaranteed increase in funding to cover the revenue shortfall.

The audit raises urgent questions about the management and sustainability of the higher education sector.

The big question is: How have university councils and the Ministry of Education allowed this situation to arise and persist?

The crisis points to deeply entrenched issues, including possible over-staffing and bloated administrative structures.

It also points to the challenge of collective bargaining agreements that have awarded salary increases without a corresponding growth in revenue streams.

It further highlights over-reliance on government funding and student capitation, which have proven insufficient to cover the escalating wage bills.

Universities are required to innovate and create alternative, sustainable revenue streams through endowments, research grants, and competitive business ventures.