Auditor red-flags Sh3 billion fuel levy spending

She said in the latest audit of the fund that it was impossible to confirm the transaction during her review of the entity’s books.

Part of the queried funds was some Sh2.7 billion that the fund reported having transferred to the State Department for Petroleum during the year.

Gathungu also flagged some Sh250 million which the entity reported as having been sent to the National Oil Corporation of Kenya (NOCK).

She said there was no evidence provided for audit verification “to demonstrate that the transferred funds were used in accordance with the existing regulations.”

“Consequently, it was not been possible to ascertain whether the amount or expenditure of Sh2,921,677,803 included in the transfer to other government entities in the statement of receipts and payments for the year ended 30 June 2021 was properly incurred for the intended purposes,” Gathungu said.

On the Sh250 million transferred to NOCK, the auditor said there were no supporting documents.

She said the budget, the work plan and cost statements for oil and gas exploration activities to support the transfer were not provided for audit verification.

“Further, no documentation including the framework agreement for the transfer was provided in support of this expenditure,” the auditor added.

The Petroleum Development Act, 1991, in Section 4(4) states that the monies paid out of the fund be strictly for the development of common facilities for the distribution or leasing of oil products.

The law further says that the cash is strictly spent on matters relating to the development of the oil industry as the Petroleum Cabinet Secretary may direct.

The Development Levy Order No.24 issued on July 15, 2020, provided that the levy should be used for matters relating to the development of the oil industry - including the stabilisation of local petroleum pump prices.

Expenditure of the petroleum levy has been a subject of audit queries, as was the case in the audit for the year ending June 2020.

In the said year, Gathungu put the Petroleum department on the spot for irregular diversion of Sh2 billion from the levy fund, including to private entities.

The report said the monies were used on activities that are not related to the mandate of the petroleum agency.

Kenya Association of Manufacturers – a private entity - received Sh35 million while the Ministry of Energy received Sh500 million for unspecified activities.

Gathungu has also flagged some Sh1.36 billion that was disbursed to the Rural Electrification and Renewal Energy Corporation for an unspecified task.

The department disbursed Sh130 million to the Nuclear Power Energy Agency while Sh50 million was sent to Kenya Energy Sector – Environment and Social Responsibility Programme.

“All the entities had no responsibility in the oil and petroleum industry,” the auditor said.

Management of the fuel levy funds has been a cause of concern among various stakeholders.

Last April, Parliament opened an inquiry into the total amount collected under the PDL fund.

Details of the total number of Oil Marketing Companies (OMCs), petroleum dealers and small oil dealers benefiting from the kitty are scant.

Lawmakers also demanded details of the OMCs’ network distribution across the county and the percentage market share each of them control.

Gathungu has also queried the use of Sh264 million from the Petroleum Training Levy Fund, including some Sh60 million paid to staff members for training.

The auditor said the fund did not provide supporting documents such as training approval letters, imprest warrants, payment vouchers, invoices and payment schedules.

“In the absence of the supporting documents, the accuracy and validity of the expenditure in respect of training expenses could not be ascertained,” Gathungu said.

Also queried was Sh30 million which was transferred to NOCK for training activities and another Sh23 million which was expended with no indication of when the training was undertaken.

The fund did not give proof of venues used for training to indicate how the funds were utilised.