By CPA Daniel Mureithi
There was an unprecedented catch 22 situation in the United States when Donald Trump, became president. Although the law does not prohibit, many US presidents before him had chosen to resign from all directorships and ownership of their business entities to purely concentrate on running the affairs of the United States. Most commonly described as, ‘building a wall’ between business interests and presidential duties. It is common knowledge that the Trump Empire is characteristically enormous, spanning from the US, Russia, China, Germany and many other countries. The quest for him to follow the traditions were met with his typically audacious response, “the president can’t have a conflict of interest; I can be President of the United States and run my business 100 percent.” The other alternative he offered, was to establish a type of “blind trust” in which his sons and daughters and his business executives would run the Trump Empire without his involvement. This amazed many government, transparency and advocacy groups. They claimed that the solution offered by the POTUS was not a ‘true blind trust’ and would inevitably end up in ugly conflict of interest situations. The same situation relates to many public sector and private sector organizations closer home. Arguments of whether officials can do business with the organisation they have been appointed to run cannot disappear from various social forums and news headlines. Most intriguing headlines include county and national government officials supplying goods and services at exorbitant prices either through their companies or those of closer relatives or cronies. Others include senior executives and directors influencing some actions or inactions that would simply be concluded to have taken place under conflict of interest circumstances. Regulatory authorities therefore continue to pursue these officials, current and former in an effort to restore sanity and public confidence. One of the undisputed contributors to the wellbeing of Kenya’s economy, are Savings and Credit Cooperative Societies. Kenya’s co-operative movement is rated among the best in Africa with over 22,000 registered co-operative societies controlling more than Kes 1 trillion. They employ more than 500,000 Kenyans directly and another 1.5 million indirectly. They are nevertheless not immune to controversy, bad publicity and at times, a clear disregard for proper stewardship. If recent headlines touching on mismanagement and eventual public uproar in some Saccos is anything to go by, there is a lot to be done in this sector to ensure sustainability and guarantee credibility of the movement. At present, the following are some sure ways that can make any Sacco end up on its knees, irrespective of its breadth and depth.
1. Conflict of interest
Sacco boards are ultimately responsible for the smooth running of Saccos which include ensuring that they are well staffed with functional secretariats. This implies that they may in one way or another influence who holds which positions in the secretariat, and it is therefore not surprising to find members of the secretariat being closely related to a sitting director(s). This undoubtedly makes impartial decision making on employment related matters a hard nut to crack. Over time, this cycle may result in creation of camps in the boards as well as the secretariats, turning into intractable institutions. The other area of protracted conflict of interest is in procurement. Since Sacco directors are the elected officials to run the Sacco’s, they also oversee most, if not all aspects of procurement. The decisions on who supplies what at what price thus rests with them. One of the most commonly cited situations that illustrates poor procurement processes in some Saccos is nepotism i.e. the appointment of a supplier with a close personal connection with a director. Although it is not necessarily a bad thing, it’s not an ideal situation and it can easily lead to accusations ranging from simple favoritism or unfairness to fraud or collusion. The guiding principles of our Constitution (in Chapter Six) on leadership and integrity include “selfless service based solely on the public interest, demonstrated by, the declaration of any personal interest that may conflict with public duties”. And state officers always behave “in a manner that avoids any conflict between personal interests and public or official duties. Furthermore, we have the Public Officers Ethics Act (2003) and the Leadership and Integrity Act (2012). Both say that state or public officers must not, for example, “hold shares or have any other interest in a corporation, partnership of other body, directly or through another person, if holding those shares or having that interest would result in the public officer’s personal interests conflicting with his official duties.” They must not award contracts to themselves or immediate family members or businesses with which they are associated. The second Act says they must disclose any offers of future employment that might create conflict of interest. This, though not expressly stating the inclusion of Sacco officials’ best describes what Sacco members would expect of them
2. Nonfunctional internal controls
Well defined and established internal controls are meant to assure an organization’s operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. Internal challenges stemming from the inability or unwillingness to establish working internal controls in some Saccos has rendered them inefficient and ineffective in many ways. A Sacco with non-functioning internal controls would be characterized by;
a. Lack of separation of duties among employees
b. Lacking policies and procedures to guide in consistent decision making
c. Employees having more access rights than they need to, of the Sacco’s information system.
d. Lack of proper documentation
e. Ineffective oversight and review programs