KQ auditors query Sh54m payout to board members

Kenya Airways’ #ticker:KQ auditors have queried Sh54 million payments made to undisclosed directors last year, an amount that the airline’s board now wants refunded to the financially-troubled company.

The national carrier in its annual report for 2018 states that out of Sh254 million dues classified as “other receivables”, it expects to recover Sh54 million from directors.

“Included in other receivables are amounts due from directors amounting to Sh54 million (2017 – Nil),” says Kenya Airways in its 2018 annual report.

This implies that there was overpayment or advances to directors during the year.

The loss-making KQ, which is majority-owned by the Treasury, has over the years received billions of shillings of taxpayer bailouts to help it stay afloat.

CEO Sebastian Mikosz, who also sits in the airline’s board, abruptly announced his resignation last Friday, saying he would be leaving office five months before the expiry of his three-year contract.

KQ declined to disclose the specific directors who owe the company money and the circumstances under which they ended up in debt to the airline, only stating that the matter is subject to an ongoing audit.

“At the time of publishing this (annual) report, the ongoing audit classified the subject line under the directors’ receivables. These amounts will be reclassified back to the profit and loss (account) in the next statements once the audit is complete,” said KQ in a response to Business Daily queries on the matter.

At the close of the 2018 financial year, the airline had eleven directors on its board, which is chaired by former Safaricom #ticker:SCOM CEO Michael Joseph.

Mr Mikosz, who is the sole executive director on the board, was paid a total of Sh62.9 million as salary and allowances in the year, while Mr Joseph earned Sh18 million in fees during the period. The other directors on KQ’s board were paid between Sh526,000 and Sh2.24 million during the year.

They included Treasury permanent secretary Kamau Thugge, Transport PS Esther Koimett and Public Works PS Paul Maringa, all who serve as non-executive directors.

Other non-executive directors include Dutchman Jozef Veenstra, Ms Carol Musyoka and Dr Martin Oduor-Otieno.

The company also has three independent non-executive directors— Mr Jason Kap-Kirwok, Ms Caroline Armstrong and Major General (Rtd) Michael Gichangi.

Companies have since July 2017 been required to disclose directors’ pay in their annual reports, after the government moved to enforce the previously-resisted measure. The regulatory requirement is meant to deepen transparency and strengthen corporate governance.

KQ has been in the red for the past six years, with a net loss of Sh7.55 billion in the 12 months to December 2018.

It reported a net loss of Sh6.4 billion in nine months to December 2017, according to its audited results.