- Also flagged is underfunding of the development budget by 13 per cent due to constraints in revenue collection and delayed disbursement of donor funds.
- Public debt management remains a problem in the face of variances between figures reflected in the loan registers, other supporting schedules and the financial statements
Taxpayers may have lost as much as Sh16 billion in at least 23 state departments and agencies in the last financial year, a new audit report has revealed.
The details emerged in a dossier by the Auditor General following a review of the national government’s accounts for the financial year ending June 2018.
The findings point to a pervasive problem of missing funds, dealing a blow to development projects.
Outgoing Auditor General Edward Ouko in his last report said the failure by the ministries, departments and state agencies (MDAs) to fully support payment with documentation casts doubt on the authenticity of the expenditures reported as having been incurred.
The ICT ministry led with an unsupported expenditure of Sh3.6 billion followed by the Special Programmes department which failed to account for Sh3.4 billion.
The Infrastructure department could not provide documents for Sh2.5 billion.
Broadcasting and telecoms could not support the reported expenditure of Sh1.1 billion.
The Public Service and Youth Affairs department did not provide documents to support the expenditure of Sh951 million.
The Judiciary did document Sh876 million spending);, Livestock (Sh866 million), National Land Commission (Sh712 million) and Correctional Services (Sh508 million).
The Attorney General’s office did not account for Sh445 million; the State Department of Agriculture did not support the expenditure of Sh360 million.
More trouble was cited with the Sports departments’ unexplained Sh330 million spending, the Health ministry's (Sh201 million), Planning's (Sh196 million), Trade's(Sh113 million) and Labour's (Sh110 million).
The State Department for Devolution did not account for Sh88 million. Arts and Culture was on the spot over Sh48 million.
The Independent Electoral and Boundaries Commission was flagged over Sh36 million, while the Irrigation department was not clear about Sh21 million.
The National Treasury, the custodian of the country’s resources, did not explain how it spent Sh20 million.
Edward Ouko, who has left office after his final term, also flagged pervasive irregularities in the management of public funds amid revenue-raising challenges posed by a Sh126 billion deficit.
IEBC SPENDING
The Independent Electoral and Boundaries Commission was flagged over Sh36 million, while the Irrigation department was not clear about Sh21 million.
Debt, he said, was ubiquitous in government entities that have still failed to comply with laws, regulations and policies on public spending.
A number of MDAs did not provide tender documents, used non-competitive procurement, irregularly varied contracts and received goods without their being inspect6ed.
State agencies were also found to have idle cash in bank accounts, delayed projects, unapproved over-expenditure and officers still earning unauthorised allowances.
Generally, the entities lacked fixed-asset registers — putting state assets at risk of pilferage. There was also a lack of audit and IT committees.
Ouko further flagged an increase in state entities with bloated books of accounts, being an increase of adverse opinions to 20 from the previous 11.
He also flagged accounts of the departments for Arts and Culture, Housing and Urban Development, Irrigation, Public Works, Infrastructure, Transport and the State Law Office.
Others include accounts of the Ministry of Lands and Physical Planning, the National Government Affirmative Action Fund, National Land Commission, Pensions and Gratuities, as well as the Rural Enterprise Fund.
Also concluded as adverse are financial statements from the Agricultural Information Resource Centre Revolving Fund, Asian Officers Family Pension Fund, Consolidated Fund Services, European Widows and Orphans Fund, Statement of Expenditure-Subscriptions to International Organisations and the State Law Office.
Only 42 out of 124 units which spend money, were given a clean bill of health. That includes the presidency.
Some 48 entities were given a qualified opinion — meaning they kept good books of account save for a few missteps — while no opinion was raised for 14 state bodies.
In what could slow down the implementation of President Uhuru Kenyatta’s Big Four agenda, the report flagged an alarming decrease in the absorption of funds.
The auditor attributed the situation to failure by MDAs to factor in the absorption of funds when making subsequent budgets, generally an indication of an inadequate budgeting mechanism.
Amid the cries over the National Treasury’s huge appetite for borrowing, the report raised the red flag over Sh132 billion that was not absorbed.
The government budgeted to spend Sh649 billion from the borrowed monies but only spent Sh516 billion at the close of the financial year.
“The summary statement of public debt did not, however, disclose amounts of disbursements and repayments during the period under review, making it difficult to confirm the correctness of the closing balance,” the report reads.
Ouko has also raised the flag about state agencies that continue receiving government loans, yet they are underperforming, thereby casting doubt on the criteria used to advance the loans.
Following this, the government is unlikely to recover Sh47.5 billion, which has fallen due for redemption over the years.
The Rural Electrification Authority owes the government Sh13.6 billion, followed by the Coast Water Board’s Sh7 billion.
Cash-strapped Mumias Sugar’s Sh2.5 billion bailout cash, which was to be recovered had it revamped operations, is still pending.
Other big debtors are the National Irrigation Board (Sh2.3 billion), Lake Victoria South and North water boards (Sh5.8 billion), Tanathi Water (Sh4.4 billion), Northern Water Services Board (Sh5.3 billion), NWCPC (Sh2.5 billion) and Tana Water at Sh1.8 billion.
“Non-repayment of the loans has led to continued write-offs of the loans as bad debts and eventual loss of public funds,” Ouko concluded.
Uhuru’s administration has been further exposed in the face of revelations that state agencies cannot provide back up for cash balances amounting to Sh142 billion.
Ouko reprimanded accounting officers for the disorder, reporting pervasive weaknesses in their management of books of account.
The critical issues are not limited to poor maintenance of cash books, unanalysed entries, unreconciled bank statements, unsurrendered deposits as well as unsupported cash and cash equivalents’ balances.
The Public Finance Management Regulations, 2015, demand that any discrepancies noted during the bank reconciliation exercise be investigated immediately and appropriate action is taken.
Of concern is that most accounting officers do not adhere to the law requiring they present complete bank reconciliation statements to the National Treasury and a copy to the Auditor General by the 10th of every month.
Pending bills remain a matter of concern for auditors, with the figures having risen dramatically to Sh46 billion in 2018 compared with Sh16 billion the previous year.
The increase brings to the fore Uhuru’s June 1 directive that all pending bills without audit queries be settled as the debts adversely affect subsequent years' budgets.
Ouko said the Defence ministry held the biggest share at Sh12.6 billion, followed by Correctional Services at Sh6.2 billion — some of which have been declared non-payable.
At the time of the audit, the Interior ministry owed suppliers Sh4.8 billion; Health (Sh4.4 billion); Broadcasting (Sh3.2 billion); Foreign Affairs (Sh2 billion) and IEBC (Sh1.7 billion).
As counties reel under a cash crisis, the audit revealed that those that are entitled to Equalisation Funds have only received Sh7 billion disbursed so far of Sh21 billion entitlements.