The report by Auditor General Nancy Gathungu found years of cash flow struggles, unremitted deductions and mounting debt obligations.
The review for the financial year ending June 30, 2025 paints the picture of a university battling severe liquidity problems amid struggles to sustain operations and meet statutory obligations.
The audit shows the university’s liabilities stood at more than Sh9 billion against current assets of Sh4.2 billion, leaving the institution technically insolvent.
“A large portion (78 per cent) went towards personnel emoluments, highlighting the persistent wage pressure,” the report says.
A chunk of the liabilities, amounting to about Sh7.4 billion, relates to unpaid statutory deductions and pension obligations accumulated over several years.
“The university reported material arrears amounting to Sh7.4 billion in unremitted statutory and pension obligations, primarily arising from legacy debt,” the report states.
The audit further notes that the university is broke, with its liquidity position remaining ‘critically weak’.
“Current assets stood at Sh4.2 billion against current liabilities of Sh9 billion, resulting in a current ratio of 0.46, far below the recommended minimum of 1.0,” the report says.
“Cash balances were particularly low, covering only five per cent of current obligations, indicating a serious strain in meeting immediate commitments.”
The findings lay bare the financial turmoil facing one of the country’s oldest public universities in the wake of shrinking government funding, declining enrolment and huge wage obligations.
The institution recorded total revenue of Sh5.9 billion during the year under review against expenditure of Sh6.5 billion, resulting in a deficit of about Sh600 million.
According to the report, exchequer funding accounted for Sh2.87 billion, while internally generated income, including tuition fees and commercial ventures, contributed about Sh3 billion.
But despite various cost-cutting measures, the university continued to sink deeper into debt.
“The university implemented a number of cost rationalisation measures, including staff rightsizing and optimisation of operational budgets, which resulted in a reduction of the overall wage bill by 8.5 per cent compared to the previous year,” the report says.
The institution admitted that delayed exchequer releases and historical debts continued to expose it to liquidity risks.
The report also points to growing concerns over the university’s dependence on debt financing.
“The university’s debt burden is high, with 91 per cent of assets financed by liabilities,” the audit says.
“Net assets are thin at Sh878 million, translating to a debt-to-equity ratio of 10.55. This demonstrates heavy reliance on creditors and exposes the institution to solvency risks.”
The university’s total asset base stood at Sh10.1 billion, with more than half tied up in fixed assets, such as buildings and equipment, limiting its flexibility in raising immediate cash.
Another concern flagged in the report is the high amount of money tied up in uncollected debts.
“Receivables totalled Sh3.7 billion, representing 36 per cent of total assets,” the report says, “This not only delays cash inflows but also increases exposure to collection risk.”
The financial troubles come even as the university attempts to project an image of recovery and institutional reform.
In the chairman’s statement, council chair Prof Noah Midamba acknowledged the difficult operating environment facing the institution.
“The council remains acutely aware of the financial constraints that public universities in Kenya continue to face,” he said.
“This funding shortfall underscores the urgent need for sustainable financing models within the higher education sector.”
Acting vice chancellor Prof Kiplagat Kotut also admitted that underfunding and rising wage obligations had placed the university under immense strain.
“The university operated under a constrained fiscal environment due to underfunding, rising wage obligations and inflationary pressures,” he said in the report.
The institution says it has initiated a structured repayment plan to address the historical arrears and has engaged the National Treasury and the Ministry of Education in seeking a debt resolution framework.
Measures being pursued include diversification of revenue streams through commercial ventures, consultancy services, research grants and alumni support.
The university has also embarked on restructuring initiatives, digitisation of services and staff rationalisation as part of efforts to cut operational costs.
Despite the financial turmoil, Moi University says it continued implementing major projects during the year.
It cited the completion of the Africa Centre of Excellence in Phytochemicals, Textiles and Renewable Energy (ACEII PTRE) centre and the expansion of digital learning infrastructure.
The audit nevertheless warns that the institution remains exposed to major risks, including declining government capitation.
Gathungu further cited increasing dependence on tuition fees, litigation risks arising from statutory arrears and cybersecurity threats linked to increased digitisation.
“The university’s financial position is characterised by severe liquidity constraints, high leverage and limited financial flexibility,” the auditor general said.
“To restore financial stability, priority actions should include securing structured debt resolution frameworks with Treasury and the Ministry of Education.”
