• Gathungu said the excess spending mainly occurred under acquisition of non-financial assets—property, plant, and equipment.
• The entity also failed to meet its revenue targets by Sh784.6 million, which management attributed to contractual issues and delayed payments from KenGen.
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The Geothermal Development Corporation is on the spot over unexplained pending bills, unauthorised expenditure and borrowings.
The cash amounting to Sh1.3 billion was flagged by Auditor General Nancy Gathungu in her latest review of the entity’s spending.
The queries for the financial year ending June 2020 include an unauthorised over-expenditure of Sh286 million, which was above the entity’s approved budget of Sh2.4 billion.
Gathungu said the excess spending mainly occurred under acquisition of non-financial assets—property, plant and equipment.
The entity also failed to meet its revenue targets by Sh784.6 million, which management attributed to contractual issues and delayed payments from KenGen.
Gathungu says the management of GDC has not explained measures they have put in place to avoid recurrence of the deficits.
GDC was also found to have borrowed Sh562 million against the provisions of the Public Finance Management (National Government) Regulations, 2015.
The law provides that official government bank accounts shall neither be overdrawn, nor shall any advance or loan be obtained for purposes beyond the limit authorised by the National Treasury.
“In the circumstance, the project management was in breach of the law,” Gathungu said in the report tabled in Parliament.
GDC has further been reprimanded for failing to open and operate a project bank account as required by section 76 of the PFM regulations.
The law requires that for purposes of disbursement of project funds, a project account should be opened and maintained at the Central Bank of Kenya for every project.
The accounts serve as the place where funds are kept in the name of the project for which it is opened, and applies to all projects unless exempted by the Treasury Cabinet Secretary in writing.
For the case of the GDC’s Menengai project, the audit revealed that the project funds were commingled with funds for the company’s general operations.
“The management had indicated in the prior year that the process of separating the project’s and the general company’s bank accounts were underway. However, the separation of the accounts is still pending,” the auditor said.
The management, in briefs attached to the audit, said it would complete the separation of the project’s bank accounts by June 30 this year.
The team told auditors they have nominated focal persons to resolve the issue within the stated time frame.
The same query was raised in the Bogoria Silali project, which the GDC’s is implemented alongside the one at Menengai.
“This may lead to difficulties in reconciling funds received and accurate reporting,” Gathungu said.
The auditor general further flagged a Sh418.7 million pending bills, being Sh389 million due to suppliers and Sh29 million due to staff—mostly temporary employees.
“The project is likely to incur significant interest cost and penalties with continued delay in making the payments,” the auditor warned.
The Bogoria Silali project has Sh137 million pending bills which the management couldn’t explain why they were not settled.
GDC undertakes to develop steam fields from which it generates geothermal steam for electricity generation to KenGen and private investors.
The queried project is expected to generate 465 megawatts of power, tipped to go a long way in increase the national electricity generation capacity.
The project was started in July 2012 and is expected to run until June 30, 2026.
Some 56 wells have been drilled at the Menengai site, with 196MW of steam available, and the transmission line completed.