Many jaws had dropped in awe when the Karachi Education Initiative (KEI) unveiled the names of its board members a few years ago.

Being the sponsoring and fund-raising entity of the Karachi School for Business and Leadership (KSBL) – one of the most expensive business schools in the country – KEI brought some of the biggest Pakistani corporate tycoons on its board of directors amidst much fanfare.

Representation of business leaders like Hussain Dawood, Aqeel Karim Dhedhi, Arif Habib, Bank Alfalah CEO Atif Bajwa, JS Group’s Munawar Siddiqui, Lucky Cement CEO Muhammad Ali Tabba and A F Ferguson Partner Syed Shabbar Zaidi on the KEI board inspired aspiring students and their parents with confidence about the upcoming business school.

But one drawback of having such a board is that its members simply do not have the time to attend board meetings to fulfil regulatory requirements. Well into the 11th month of its current financial year already, the KEI board of directors has yet to conduct its annual meeting to approve financial accounts for the last year that ended on June 30, 2014, official records show.

The regulatory framework requires that a not-for-profit entity registered under Section 42 of the Companies Ordinance should hold its board meeting in 120 days of the conclusion of its financial year. This should be followed by an annual general meeting and submission of audited financial accounts to the Securities and Exchange Commission of Pakistan (SECP).

More than six months past the deadline, KEI has still not submitted its financial accounts to the regulator because its board members are apparently too busy. “The directors of KEI are renowned and busy personalities… Gathering them under one roof for a board meeting is a difficult task,” a spokesman for KEI said in a statement emailed to The Banker Pakistan.

A two-year, regular MBA degree at KSBL costs almost Rs1.5 million in case the student does not receive any scholarship/financial aid. The first batch of MBAs graduated from KSBL in May 2014. Around 100 students are currently enrolled in KSBL’s regular MBA programme, according to its spokesman. This number does not include students who are enrolled in executive education and executive MBA programmes at KSBL.

Regulatory action

Taking note of the unusual delay in meeting the regulatory requirements, SECP’s deputy registrar sent a letter to the CEO of KEI on January 7. The SECP directed the KEI CEO to file “all overdue statutory returns/audited accounts within one week from the date of this notice, failing which the licence of the company will be revoked”.

The KEI spokesman says it never received any letter from the SECP regarding the revocation of its licence.

A copy of the SECP letter warning about its licence revocation is available with The Banker Pakistan. According to the SECP spokesman, the January 7 letter was ‘duly approved’ and sent to KEI ‘in compliance with Serial No 3 (ii) of Head Office Instruction No 1 of 2015.’

“We have requested the SECP for directions to hold an annual general meeting and a fee was filed along with the application. We are waiting for the instructions from the SECP,” the KEI spokesman said, adding that the KEI management is “cognisant of the fact that there has been a delay.”

Depleting funds

A review of KEI’s latest audited statements show the organisation underwent financial deterioration in 2012-13 over the preceding financial year. The company’s balance sheet shrank almost 9% with the value of total assets clocking up at Rs210.8 million at the end of 2012-13.

The year-on-year decline in the company’s funds, including general and specific funds, was more pronounced.

From Rs210.3 million a year ago, the company’s funds were worth Rs60.1 million on June 30, 2013, which reflects a plunge of 71.4% in a year.  Similarly, the income and expenditure account of KEI shows the company’s deficit widened over 55% in 2012-13 to Rs154.5 million.

“Since the current donations are not sufficient to meet the school’s expenditures, the funds are showing a gradual depletion. The directors have pledged to support the school,” the KEI spokesman said.

He added that members and directors of the school are well aware of its administrative and financial affairs.

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