Auditor General Nancy Gathungu has questioned Sh2.2 billion spent by the Energy and Petroleum ministry as administration costs for the fuel levy.
The amount was paid in the period ended June 30, 2023, putting Energy PSs and Energy and Petroleum Regulatory Authorities bosses on the spotlight.
“There was no justification for including the administrative costs in the pump price build-up,” Gathungu said in a brief to the National Assembly’s Budget and Appropriations Committee.
She disclosed to the committee that while managers enjoyed, customers bore demurrage costs to the tune of Sh3.1 billion.
“Demurrage charges amounting to Sh3,182,427,410 were passed on to the customers through pump prices,” the auditor said.
Further, the auditor flagged some Sh5.3 billion paid as stabilisation for advance sales of local volumes, saying it had no framework.
The amounts were paid through supplementary budgets, begging the question on whether public funds were applied prudently as required by the law on emergency spending.
The auditor said that from the foregoing, it could be concluded that there was no justification to withdraw the amounts under supplementary budgets.
“We can conclude that these expenditures did not justify the need for their withdrawal under Article 223, and there was no value for money,” Gathungu said.
She highlighted among others Sh3 billion that was withdrawn three years ago to settle pending bills for the national fibre optic backbone infrastructure project.
“The withdrawals were not supported with details of the expenditure incurred,” Gathungu told the Kiharu MP Ndindi Nyoro-led committee.
The brief also cited challenges with the implementation of the budgets, with the auditor saying there was need for the concerned to ensure credibility of budgets.
“When the government doesn’t collect revenue or spend resources as approved by the Legislature, this diminishes trust and confidence in government and public institutions,” the auditor said.
“It also increases the risk of wastage of public resources and corruption, thereby affecting budget credibility.”
She raised concerns that over the years budget absorption rate for ministries, state departments and agencies has been declining – the last year being at 79 per cent.
Latest Controller of Budget data – covering the first six months - shows that the current administration absorbed only 36 per cent of the allocations.
“If the trend continues, there is a likelihood that the national government will be unable to fully absorb the budget which will affect the rate of development and provision of timely, quality, and sustainable service delivery,” Gathungu said.
She said the budget was wrought with numerous problems including inaccurate data of revenue and expenditure estimates.
“There is need to give due consideration to performance in revenue collections for prior years before setting the revenue projections for subsequent years and ensure that underlying assumptions projecting revenue growth are sound.”
The auditor also cited delays in exchequer funding as impeding budget implementation, putting the National Treasury on the spot.
“This cuts across both the National and County Governments and negatively impacts on programme performance,” Gathungu said, decrying that the underfunding has been increasing over the years.
She said her review revealed that more than 30 per cent of exchequer funding is provided in the fourth quarter of the financial year.
The auditor also raised concerns about amounts that are disbursed after the close of financial year then backdated to June 30.
“If there is no significant change from prior years’ disbursements, the budget may not be fully implemented thereby denying citizens essential public goods and services.”
IFMIS downtime has also emerged as an impediment to budget implementation, with details showing the system went down for three weeks in October 2023.
Gathungu said the downtime affected implementation of planned activities, adding that there were instances when the IFMIS procurement module was updated without informing the users.
“The users only become aware when they face challenges in undertaking procurement,” the auditor general pointed out.
She also cited budgeting for multi-year projects, non responsiveness of tenders, delays in delivery of goods and services, and fluctuating market prices as causing distress to budgets.
On supplementary, which have been a cause of concern for watchdog teams, the auditor said there was the need for guidelines to define what projects or programmes qualify.
She said the situation where MDAs source for funding for new programmes or projects without going through public participation must be discouraged at all costs.
“These new programs/ projects do not necessarily qualify to be funded under Article 223(1)(a) of the Constitution. This also gives the National Treasury the discretionary power to approve additional expenditures that should have been factored in during the initial budget process.”