Sh381bn taxpayers money 'lost' by government - Auditor

Loss arose from material misstatements and unexplained discrepancies.

In Summary

• Only 35 per cent of state ministries, departments and other agencies were given a clean bill of financial health.

• Most national government entities have continued to report huge unsupported and un-analysed cashbook balances.

Auditor general Dr Edward Ouko.
Auditor general Dr Edward Ouko.
Image: John Chesoli

The government cannot account for about 65 per cent of Sh2 trillion spent by state departments during  2016-17.

Only 35 per cent of state ministries, departments and other agencies were given a clean bill of financial health.

An audit reveals that of the accounts studied, 46 per cent had a qualified audit opinion, 10 per cent an adverse opinion, while no conclusion could be reached for eight per cent. 


The latest dossier by Auditor General Edward Ouko further reveals that President Uhuru Kenyatta’s administration may have lost Sh381 billion in suspected irregularities.

The report said the loss — pervasive in about 10 state agencies — arose from material misstatements, unexplained discrepancies and omission of expenditure documentation.

At the same time, most national government entities have continued to report huge unsupported and un-analysed cashbook balances.

The Judiciary is among state entities adversely mentioned in the latest consolidated audit report.

State departments for Correctional Services, Infrastructure, Irrigation, Labour, Livestock, Public Works, Social Protection, Trade and Transport also had adverse audit opinions.

The accounts of the Rural Enterprise Fund, Outstanding Loans and Subscriptions to International Organisations were also found to be wanting.  

The auditor further flagged an unexplained use of Sh922 billion incurred by state agencies whose accounts received a qualified opinion.

The auditor further flagged Sh5.2 billion that was not remitted to the Exchequer as of June 30, 2017.

Also queried is Sh8.2 billion in unsupported expenditures by ministries and independent commissions.

The National Treasury and the Independent Electoral and Boundaries Commission did not produce documentation to support expenditure amounting Sh4.6 billion and Sh2.7 billion, respectively.

The Health ministry failed to explain how Sh9.1 million was spent on the East Africa Centres of Excellence for Skills and in Biomedical Sciences projects.

I was unable to confirm whether the expenditure was incurred effectively and lawfully as required by Article 229(6) of the Constitution of Kenya.
Auditor General Edward Ouko

The State Law Office was cited over Sh9.3 million spent on stipends to staff, while the Mining ministry failed to account for Sh10 million spent from donor accounts.

The Trade department, the audit showed, presented unsupported expenditure of Sh89 million by officials on foreign trips.

The Department for Social Protection was also cited for failing to submit documents backing Sh135 million spent by subcounty treasuries manning the cash transfer program for Orphans and Vulnerable Children.

For the Judiciary, the auditor’s adverse opinion followed the institution’s failure to account for Sh9.4 billion spent on projects including court construction.

 During the year under review, the judiciary had on its roll 55 construction projects countrywide valued at Sh6.7 billion.

They comprised 28 projects valued at Sh5.3 billion funded by the World Bank and another 27 funded by the Kenyan government at Sh1.3 billion.

“An audit of a sample of six of the construction projects revealed that all of the sampled projects had stalled despite payments made to the respective contractors,” Ouko said.

Audits of works showed stalled law court projects in Siaya (Sh342 million), Hamisi (Sh44 million), Nakuru (Sh347 million), Eldoret (Sh38 million), Eldama Ravine (Sh65 million) and Narok (Sh65 million), despite the extension of the contract period.

“In view of the foregoing, the projects may not be completed in time even after the extension of the respective contract periods.

“This could cause project costs to escalate and impede the attainment of value-for-money on the investments made,” Ouko said.

For the Rural Enterprise Fund, the auditor reprimanded the National Treasury for failing to close the Fund’s books despite a legal notice that recommended it be wound up.

He revealed that the Treasury has continued to prepare and submit the Fund’s financial statements for audit five years after the winding-up decision was made.

No evidence was provided to confirm the existence of Sh3.3 million appropriated to the defunct District Commissioners' offices.

The National Treasury CS Henry Rotich holds the ceremonial Briefcase for Kenya's 2019/20 Budget in Nairobi on June 13, 2019.
The National Treasury CS Henry Rotich holds the ceremonial Briefcase for Kenya's 2019/20 Budget in Nairobi on June 13, 2019.

The Correctional Services department is in trouble over irregular payment of pending bills amounting to Sh304 million, most of them for inexistent supplies of food and other supplies.

“Indications are that the payments were irregularly made to recipients who did not supply food to the prison,” the auditor said.

Cases of double payments totalling Sh22,579,752 were unearthed in supplies to Naivasha, Eldoret and Kakamega Prisons and Shikusa Borstal.

On stalled projects, the auditor said the government continued to incur huge expenditure for projects that had either stalled or remained incomplete for a long time, even after expiry of their contracts. 

“In other instances, payments were made for work not done. This casts doubt on value for money for such expenditure," Ouko said.

An unexplained suspense clearance account balance of Sh1.2 billion and another referred to as district suspense of Sh110 million was cited at the Infrastructure department.

“Management has not carried out any investigations on the cause of the suspense and clearance accounts. It is not clear the effects the figure may have on the financial statements,” Ouko said.

The Public Works Department was also in violation of regulations because of delayed completion of works at Lamu Port police station and Mathare Nyayo Hospital.

The Lamu police station project was to be completed by February 2014 while Mathare was to be done by August 2015. These delays caused concerned departments to pay Sh58 million in interest.

Ouko also queried the failure by the Public Works department to recover two vehicles stolen from its premises.

The Irrigation department is also on the spot over Sh865 million that the auditor says he couldn’t authenticate without an inventory of all the water pans and small dams.

“Consequently, it has not been possible to confirm the validity of the expenditure in the absence of information detailing the dams’ physical location, the contractor and when they were constructed and their status," the auditor said.

The money was spent on telecoms services that Ouko says were irregularly procured through direct tendering.

The tenders were for dedicated Hosted Hardware Infrastructure (Sh68 million), implementation of Framework Contracts and Shared Services Platforms (Sh615 million), Hardware Licenses-Shared Services Platform (Sh834 million) and supply of a Geographical Information System and Cloud Hosting for ICTA (Sh178 million).

The audit revealed that the contract was not included in the annual procurement plan and therefore was not budgeted.

“The contract was awarded through a direct procurement method as opposed to open tendering as required by Section 91(1) of Public Procurement and Asset Disposal Act, 2015,” Ouko said.

The Trade ministry was found in breach of the law after it issued Sh89 million to commercial attaches in foreign missions.

The expense was charged under various account items,  instead of being reported as accounts receivables.

Seventeen vehicles irregularly disposed of by the Labour ministry were also cited, some selling for as little as Sh10,000.

Ouko blamed accounting officers for failing to rein in on weaknesses contributing to the audit queries over the years.

He cited poor maintenance of cashbooks, unreconciled bank statements, variances in cashbook and IFMIS balances, unsurrendered deposits and unsupported cash balances.

Accounting officers are to ensure that bank reconciliation statements are completed and submitted to the National Treasury, with a copy to the Auditor General not later than 10th of the subsequent month.

Regulation 90(3) requires that Accounting Officers should ensure that any discrepancies noted during bank reconciliation are investigated immediately and appropriate action taken.