Auditor flags Sh13 billion unsupported ministries' spending

Taxpayers may have lost as much as Sh13 billion in at least 13 state agencies, three national funds and five donor-funded projects in the last financial year.

Auditor General Nancy Gathungu revealed the details in a new report on the national government’s books of accounts for the year ending June 30, 2020.

Of the Sh13 billion, ministries, departments and agencies (MDAs) failed to account for Sh3.1 billion, Sh2.3 billion involving national funds and Sh8.6 billion in donor cash.

“Failure by the entities to fully support payments casts doubt on the authenticity of the reported expenditure,” Gathungu said.

She added, "The failure to support payments could also be an indication of weak internal controls and governance in the entities affected."

The amount was a decrease from the Sh16 billion that state agencies could not explain in the audits for the financial year to June 2019.

Budget experts say there is no excuse for accounting officers not to have receipts and tender documents to back audit queries.

Dr Abraham Rugo of International Budget Partnerships Kenya told the Star even when tenders were rushed, they must be documented.

“For the auditor to give such kind of opinion, it means all the supporting documents were not provided. It is a matter of great concern. When it comes to actual spending, there is no excuse for not being able to show how money was used,” the IBP-Kenya country director said.

“Even during an emergency, an accounting officer has to explain during audit why they chose a particular method of procurement and spending.”

The Health ministry was the biggest violator, failing to explain the expenditure of Sh1.24 billion.

A chunk of the unsupported spending was in variations for leased medical equipment services of Sh1.13 billion.

MOH also failed to support payment of Sh28 million for emergency response and refugees assistance, as well as Sh82 million paid to 15 companies.

The firms' copies of the original certificate of incorporation, tax compliance, PIN certificate and confidential business questionnaire were not provided for audit review.

The Devolution ministry failed to support Sh720 million — being Sh660 million in unconfirmed transfers to 22 counties and Sh60 million on air tickets.

The Livestock department could not support Sh526 million it said was incurred at the counties and on new assets.

No disbursement and expenditure return schedules were provided and Gathungu questioned the validity and accuracy of the payments.

ICT department did not account for Sh220 million used to rehabilitate the Ruaraka Data Centre following a fire.

The money issued to a director was based on a requisition dated November 2019. That was more than one year earlier than December 5, 2020, when it was paid.

In her review of the department’s books, Gathungu revealed that there was no detailed report on the fire outbreak indicating the date, cause, and extent of damage as well as estimated cost of repairs.

The Gender department failed to account for Sh104 million bills paid during the year as well as Sh1.8 million incurred on printing, advertising and information supplies and services.   

At the Crops department, auditors could not trace Sh76 million for insurance costs, Sh11.5 million paid to various saccos and Sh4 million staff imprest.

Auditors could not confirm par payment of Sh90.5 million by the Environment department for an Airborne Lidar Photographic System. It was procured for the remote survey and remote

The Basic Education department failed to account for Sh25 million disbursed to Moiben TTC. 

The National Cohesion and Integration Commission failed to support Sh24.8 million paid for meetings, retreats, workshops, burials and court attendance.

In national funds, Gathungu reported a possible loss of Sh1.96 billion at the National Government Affirmative Action Fund incurred by 47 counties but not supported by expenditure returns.

Auditors could not trace Sh332 million at the National Humanitarian Fund. The Strategic Food Reserve Trust Fund did not account for Sh2.2 million in sitting allowances to board members.

Other unsupported expenditures from donor funds included Sh22 million by Moi University for a World Bank-backed textiles project and Sh13 million at Lake Victoria Environment Project III.

Accounting officers also failed to account for Sh8.5 billion donor cash being transferred to counties for the World Bank-funded Kenya Urban Support Programme.

MPs were also irregularly paid domestic subsistence facilitation and mileage claims amounting to Sh5 million on days they were outside the country and already receiving foreign subsistence allowances.

The report revealed that Covid-19 ravaged the budget for state projects and other expenditures for Sh204 billion.

Details show that Covid-19 caused a shortfall of Sh46 billion for recurrent votes, Sh53 billion for development, Sh72 billion for Consolidated Fund Services and Sh31 billion for county governments.

“The underfunding of the development budget by 12 per cent was attributed to constraints in revenue collection and delayed disbursement of donor funds," the audit report read.

Gathungu raised concerns that the government has continued to incur huge expenditures on projects that had stalled or remained incomplete after contracts expired.

“What is even more glaring," she said, "is that some of these projects are attracting penalties due to delays in payment of completion certificates of milestones already achieved."

The auditor flagged Sh3.8 billion spending on the projects,  adding that “others have been revised to amounts higher than the original contract sum, leading to cost escalations.”

“In addition, payments have been made to projects that appear to have completely stalled, casting doubt on value for money for such expenditure,” Gathungu said.

She cited unwarranted payments for Kimwarer dam and the Sigoi Wei Wei project (Sh3.4 billion), the stalled Nyandarua county headquarters (Sh101 million) and Turkana High Court (Sh101 million).

Also flagged was Sh111 million spent on stalled or terminated drought resilience projects in Turkana, Baringo and Marsabit counties.

The report further revealed that MDAs crossed the financial year ending June 2020 with Sh101 billion pending bills, in defiance of President Uhuru Kenyatta’s directive to clear bills by year's end.

In June 2019, the President had directed state agencies to settle all pending bills approved for payment. Treasury later threatened to stop release of funds to non-compliant agencies.

Pending bills for MDAs in the year ending June 2019 was Sh80.5 billion, an increase of 26 per cent if compared with against the current bills.

“This is the highest amount of pending bills reported in the last five years,” Gathungu said. She revealed the bills totalled Sh46.5 billion in FY 2017-18, Sh16.7 billion in 2016-17 and Sh20 billion in 2015-16.

“The pending bills have continued to put pressure on the scarce resources, with some of these bills attracting penalties thereby putting more strain on the available resources," Gathungu said.

She raised concerns that suppliers of goods and services to public entities may also face unwarranted financial charges from their financiers.

Pending bills amounting to Sh64.1 billion reported under Donor Funded Projects were not settled during the year but were carried forward to the FY 2020-21.

The auditor warned that failure to settle the bills has the effect of withholding circulation of cash in the economy and affects the smooth operations of suppliers and SMEs.

“In addition, failure to pay affects revenue collection due from Value Added Tax and Withholding Tax," she said.

“All these factors viewed holistically call for the Executive to put in place strict measures to minimisze the occurrence of pending bills,” the auditor said.

(Edited by V. Graham)