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HomeEDUCATIONSh147 Billion Govt's Debt to Universities exceeds PAYE Debt to KRA

Sh147 Billion Govt’s Debt to Universities exceeds PAYE Debt to KRA

Sh147 Billion Govt’s Debt to Universities exceeds PAYE Debt to KRA

Ezekiel Machogu, cabinet secretary for education, disclosed that the government owes universities Sh147 billion.

In the meeting with the Education Committee of the National Assembly, Machogu stated that the government’s debt to universities is greater than its PAYE debt to the Kenya Revenue Authority.

According to Machogu, the Ministry has taken the step of requesting universities furnish information regarding their existing Pay As You Earn (PAYE) debts.

Machogu highlighted that these debts have primarily accumulated due to the government’s inability to fully fund universities up to the agreed-upon 80 percent of the differential Unit Cost (DUC).

According to Machogu, this funding shortfall has caused a sizable government debt to universities totaling Sh147 billion.

The Ministry has therefore recommended that the outstanding PAYE be waived due to the government’s failure to provide universities with Sh147 billion.

Machogu stated that in the future, universities will ensure the timely remittance of PAYE (Pay As You Earn) taxes in accordance with the projected sustainability resulting from the New Funding Model.

In order for the government to release the universities’ PAYE arrears, he urged the universities to provide information about their current PAYE obligations.

In addition, he stated that universities owe Sh61 billion in outstanding statutory deductions, bank and SACCO loans, and unpaid suppliers.

Our public universities have accumulated a sizable debt load, according to Education Cabinet Secretary Ezekiel Machogu. This portfolio encompasses a range of financial obligations, including outstanding salaries, unremitted statutory deductions, unresolved bank and SACCO loans, and unsettled payments to suppliers.

As of June 2023, the collective debt of public universities had reached a staggering amount of Sh61 billion. Moreover, this debt burden is not static; it is progressively expanding with each passing month.

The government adopted the DUC formula as a university funding model in 2017.

It was agreed that the government would cover 80% of DUC for each student. Based on financial need and family contributions, loans from the Higher Education Loans Board (HELB) were to cover the remaining 20%.

The government’s funding of DUC, however, never reached the agreed-upon 80 percent. The greatest level of funding ever provided was 66.4% of DUC in Academic Year 2017-18.

According to Machogu, the government’s contribution to the DUC has been declining annually, reaching a low of 48% in 2022 and 2023.

In contrast to the DUC model, in which universities received a uniform grant based on the DUC of a program, he stated that under the new student-centered financing model, funding will be distributed to students based on their level of need.

Machogu explained that the introduced Model is designed to achieve multiple benefits, including enhanced financial inflow to universities and TVET colleges.

Additionally, he emphasized that the new approach would mitigate the possibility of universities experiencing underfunding.

This is attributed to the Model’s core principle of being student-centered and its foundation on the accurate assessment of a program’s actual cost.

In order to attract more students in a competitive environment, the CS stated that the model will encourage universities to raise additional funds and improve the quality of education.

However, he suggested that government funding for continuing students be increased to 60% of the DUC.

Funding for continuing students in their second, third, fourth, and fifth years amounts to Sh34.1 billion, or 42.6% of the DUC.

“To aid these students, the Ministry suggests increasing funding for continuing students to 60% of the DUC. This will necessitate an additional Sh11.1 billion for universities to cover salaries and operational expenses, said Machogu.

He stated that without such an increase, universities will continue to face financial difficulties for a prolonged period of time.

Sh147 Billion Govt’s Debt to Universities exceeds PAYE Debt to KRA

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