Auditor General ordered to probe NBK books


Auditor General ordered to probe NBK books
National Bank of Kenya Managing Director Wilfred Musau during his appearance at the Parliamentary Public Investments Committee on Thursday July 4, 2019. PHOTO | CITIZEN DIGITAL

In Summary

  • While making the pronouncement, PIC Chairman Abdullwamad Sheriff gave NBK’s management a window of 14 days to respond to the request for audit while underlining the public interests in the bank’s financial performance.
  • To its defense, the National Bank of Kenya maintained its openness to an audit by the State but for its separation from the purview of the State Corporation Act.
  • The probe into the National Bank of Kenya books is the third such mention on the lender’s books following similar queries in 2003 & 2013 and comes at a time when the bank is now the subject of a 100 percent takeover by the KCB Group, valued presently at Ksh.6.6 billion.

The National Assembly has now ordered the Office of the Auditor General (OAG) to audit the books of accounts belonging to the National Bank of Kenya (NBK) bringing to a close an impasse characterized by a perceived refusal of scrutiny on the lender’s part.

The House’s Public Investments Committee (PIC) on Thursday asked representatives from the OAG to send forth a formal request for the audit of NBK’s financial accounts in what was preceded by a heated exchange between committee members and the bank’s management.

While making the pronouncement, PIC Chairman Abdullwamad Sheriff gave NBK’s management a window of 14 days to respond to the request for audit while underlining the public interests in the bank’s financial performance.

“Public funds were used in the funding of the operations of the National Bank of Kenya, you would be aware that the Auditor General is by law allowed to audit any such entity irrespective of it being a banking institution,” he said.

Validity lingo

In defense, NBK maintained its openness to an audit by the State but for its separation from the purview of the State Corporation Act.

According to the lender, its financial statements remain under the close watch of regulators guided in part by the statutory independent audit warranted by the Central Bank of Kenya (CBK) under the provisions of the Banking Act.

“It is first a limited liability company incorporated under the Companies Act, whose affairs and operations and those of its Board are governed by its Memorandum and Articles of Association. NBK is not a state corporation and as such; the Auditor General has no legal right or basis to seek to audit the books of the Bank,” said NBK Managing Director Wilfred Musau.

Further, NBK tore into the alleged full control of operations by the State pulling aside covers to the supposed majority influence by the government basing its argument on the differentiation of the structure of National Social Security Fund (NSSF) which separates pensioners’ funds from the entities board, elaborated in the report of the Presidential task-force on parastatal reforms.

The NSSF represents NBK’s majority shareholder at 48 percent to leave the State with a shrunk stake of 22.5 percent, a share base held by the National Treasury.

Threats

Members of the PIC were, however, not receptive to NBK’s defense and instead read deceit and contempt on its (NBK’s) part.

According to the members, the bank was arm twisting existing legal provisions to its favor with an aim of escaping the prying eyes of the State auditor’s office.

“If you keep pushing us we will, in our report, recommend the withdrawal of all exchequer funding to NBK. We would further advise that all state agencies withdraw accounts held at the bank,” said an upset Wajir South Member of Parliament Mohamud Sheikh.

NBK was however quick to hit back at the attacks by the committee, warning of the terminal threat to the bank under accusations of un-audited financial statements.

“Let’s be clear, there have been utterances that we have not been audited. We hold over Ksh.100 billion in funds, it would be very unfortunate to the country’s economy if we saw a run on the bank,” said NBK Company Secretary Habil Waswani.

The probe into NBK’s books is the third such mention on the lender following similar queries in 2003 & 2013 and comes at a time when the bank is now the subject of a 100 percent takeover by the KCB Group, valued presently at Ksh.6.6 billion.

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Story By Kepha Muiruri
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