An alarming audit has cast doubt on the financial stability of the Teachers Service Commission (TSC), revealing a growing deficit, unpaid compensation claims, and irregularities in payroll and insurance schemes impacting over 340,000 teachers.

The Auditor General’s report for the year ending June 30, 2025, warns that TSC’s negative working capital and chronic overspending threaten its ability to meet obligations, leaving the commission struggling to cover short-term liabilities amid rising budget pressures.

Auditor General Nancy Gathungu’s report indicates that TSC recorded a budget deficit of Ksh4.38 billion in the year under review, pushing the accumulated deficit to Ksh7.34 billion. At the time of the audit, TSC had current liabilities of Ksh12.3 billion and current assets of Ksh4.4 billion, leaving a negative working capital of Ksh7.9 billion.

“This is indicative of the commission’s inability to meet its obligations as and when they fall due,” the report reads in part.

The commission, which employs over 340,000 teachers, plays a central role in the country’s education system, meaning any financial distress could immediately affect salaries, benefits, pensions and school service delivery nationwide.

The audit also revealed that TSC exceeded its recurrent budget by Ksh4.48 billion during the period, contrary to the Public Finance Management Act.

“Management has not provided an explanation for the over expenditure,” Gathungu noted, citing weak fiscal discipline.

Unpaid obligations remain a serious concern, with pending bills standing at Ksh12.3 billion. The report also flagged stale cheques and long-outstanding liabilities, warning that TSC risks penalties, interest charges and litigation.

Of particular concern are compensation claims under the Workers’ Injury Benefits Act (WIBA). Claims worth Ksh186 million, some dating back to 2001, remain unsettled.

“In the circumstances, long-outstanding and unpaid WIBA claims may expose the commission to legal cases and accumulation of interest or penalties,” the auditor warned.

The report further highlights problems in TSC’s Ksh53.58 billion medical insurance scheme for teachers over three years. While intended to cover hundreds of thousands of teachers and their families, most government hospitals were excluded from the list of service providers without explanation.

Teachers also faced delays in treatment due to lengthy pre-authorisation processes, forcing many to pay out of pocket.

“Management did not provide explanations for the exclusions or the criteria applied,” Gathungu said. Teachers’ unions have recently protested similar issues.

The commission also failed to produce actuarial reports to confirm whether premiums paid align with the risks covered.

“The absence of these reports undermines the commission’s ability to assess the adequacy of premiums,” the audit report said.

The audit also uncovered serious flaws in TSC’s payroll system, with seven individuals on the payroll missing from the official teachers’ database, fueling fears of possible ghost workers and financial mismanagement.