The Auditor General has flagged suspected irregular financial transactions at Kenya Power that could have cost the electricity retailer billions.
The report by Auditor General Nancy Gathungu on the operations of Kenya Power and Lighting Company PLC for the year ended June 30, 2023, raises questions on procurement and some donor funded projects.
For instance, the auditor general cites a 2021 scenario where a former Managing Director requested to disengage with the Company to pursue other engagements through a letter dated August 3, 2021.
The board considered and approved the request on August 11, 2021 and later approved payment of Sh26, 820,648 as final exit payment comprising of full compensation of the remaining contract period of fifteen (15) months. However, the Sh27 million-exit pay could not be confirmed.
The auditor also cited irregular payment of long outstanding payables where during the year under review, the company paid close to Sh500 million to eight firms despite only seven having been cleared for payment.
“Further, included in the committee recommendation for payment was an amount of Sh11, 625,919 in respect of a supplier who was not among the seven (7) the committee was mandated to verify and validate its invoices and delivery notes. The inclusion of this supplier in the committee report and the subsequent payment is therefore irregular and its validity could not be confirmed,” said Gathungu.
Review of the company's employee records on appointments to acting positions and allowances paid revealed that ninety (90) employees were appointed on acting capacity for long periods and continued to draw acting allowances beyond the stipulated six-month period.
In some instances, some employees held acting capacity for more than five (5) years, without obtaining special approval from Chief Manager, Human Resources and Administration as provided for in the company's policy and contrary to the provisions of staff regulations and procedures.
Gathungu further revealed that some of the employees were appointed to act in positions that were two job groups higher than their substantive positions contrary to provisions of the staff rules and regulations.
Further, acting allowances to employees was paid from the first month of acting contrary to regulations, which provide that no acting allowance will be paid in respect of the first two months during which an employee is acting.
Similarly, an invoice for one of the seven (7) suppliers amounting to Sh 835,200 was paid despite the invoice having not been validated by the verification committee.
The utility firm also failed to prepare financial statements for a donor funded project despite its financial statements reflecting that the company received funding from the World Bank through Credit No.5587-KE to support electricity modernisation projects.
“As at 30 June, 2023, a balance of USD 68,266,159 (Sh9, 592,999,656) was outstanding in respect of the loan. However, since inception of the project in 2015, management of the company have not prepared and submitted financial statements for the project as required,” said the AG.
She also raises concerns over unprocedural purchase of a 10-acre piece of land in Machakos County at a cost of Sh75 million for the construction of a substation to improve reliability and quality of electricity supply in Athi River and its environs.
In the year ending June 30, 2023, the company recorded Sh4.43 billion losses before tax.
Its current liabilities of Sh132.3 billion far exceed its current Sh81 billion assets by a Sh51 billion as at June 30, 2023 revealing that the firm is technically insolvent.
“The Company has remained in a negative working capital position for the seventh consecutive year,” reads the report.
Gathungu said past initiatives by the board management to improve the financial results have not yielded fruits.
