The legitimacy and management of two funds under the State Department for Co-operatives have come under sharp scrutiny, after a parliamentary committee demanded answers over missing audit records and questionable governance structures.

The Special Funds Accounts Committee has given the department two weeks to provide all pending audit documents to the Office of the Auditor-General, following an inquiry into the Cooperative Societies Liquidation Fund and the Management Supervision Fund.

During the session held at Parliament Buildings, the Committee, chaired by Fatuma Zainab (Migori), questioned how the two funds had been operating in the absence of key oversight mechanisms.

Appearing before the Committee, Principal Secretary Patrick Kilemi revealed that the funds lacked both a Chief Executive Officer and a functioning board, and were instead being run from the audit section of the Commissioner’s office.

“Are these really funds? There is a structure stipulating what it takes to constitute a fund,” he stated, insisting that it was up to the committee to assess whether the arrangements met the legal threshold.

MPs demanded clarity on the administration and viability of the funds. Kivasu Nzioka (Mbooni) asked for a breakdown of the number of SACCOs in the country, while Tom Odege (Nyatike) questioned the effectiveness of the cooperative system.

He cited cases where retired civil servants had saved for years only to leave empty-handed, saying, “until today, they have not received anything.”

In response, PS Kilemi defended the role of SACCOs in the economy, stating that Kenya had over 7,000 financial cooperatives, making it the leading country in Africa and sixth globally. “SACCOs finance 65% of school fees in this country,” he said, noting their contribution to education, housing, transport, and investment.

He added that legislative reforms and new insurance guidelines were being developed to improve governance in the sector.

However, the committee’s concern deepened after it emerged that the Liquidation Fund had failed to keep separate accounts between 2004 and 2012. Mary Emaase (Teso South) condemned the delays in filing financial statements and blamed the problem on unqualified finance and audit staff.

The session also saw the partial submission of documents related to the Management Supervision Fund. Chairperson Fatuma instructed the PS to provide all the outstanding records within 14 days. “We must uphold transparency and safeguard public funds,” she said.

The committee is expected to table a full report in the National Assembly outlining its findings and recommendations.