AUDIT QUERY

Kenya Power holds 90 board meetings against Uhuru directive

Board members were paid Sh31 million for the sittings, one in every four days

In Summary
  • President Uhuru Kenyatta’s directive capped board meetings by state-owned enterprises at between four and six.
  • The Kenya Power board breached the directive by holding 21 full board meetings and 69 by its associate committees.
The Kenya Power logo.
AUDIT QUERY: The Kenya Power logo.
Image: FILE

Kenya Power is on a spot for defying President Uhuru Kenyatta’s directive capping board meetings by state-owned enterprises at between four and six.

The power distributor was found to have held 90 meetings during the year ending June, translating to a board meeting every four days.

Auditor General Nancy Gathungu flagged the anomaly in her latest audit review of the company, saying the high number of meetings was becoming operational in nature.

President Kenyatta in a circular dated March 11, 2020 provided that board meetings should be restricted to a minimum of four and a maximum of six each financial year.

The directive provided that the same principle should apply to respective committees of the boards of the state corporations.

The circular further required that any extra board meetings — including special meetings — be justified and the source of funds, as well as implications, stated.

Such requests are to be approved by the relevant Cabinet Secretary in consultation with the State Corporations Advisory Committee.

Gathungu raised concerns that during the year under review, the Kenya Power board breached the directive by holding 21 full board meetings and 69 by its associate committees.

“Although the justification for approval request to the Cabinet Secretary was submitted and granted, the source of funds and the cost implication due to the high number of extra meetings were not factored as there was no approved budget reallocation,” Gathungu said.

During the June 2020-June 2021 audit period, board members were paid Sh16.7 million in expenses allowances, Sh4.8 million in directors’ fees and Sh9.6 million in chairman’s honoraria and salary for CEO – all adding to Sh31 million.

According to the Kenya Power board remuneration policy, directors are entitled to sitting, lunch, accommodation allowances and mileage reimbursement for every board meeting.

The chairman receives an honorarium of Sh80,000 per month and a company car, while directors fees are paid annually upon approval by shareholders – now at Sh600,000 per year per director.

A sitting allowance of Sh20,000 is paid to each non-executive director as well as the chairman for attending a duly convened and constituted meeting of the board or any of the committees.

An allowance is also paid to non-executive directors for any day of travel away from their regular station to attend to duties of the company.

All non-executive directors are also entitled to medical cover for their individual medical requirements covering outpatient and in-patient services.

Kenya Power pays directors Sh20,000 airtime allowances per month, lunch allowance of Sh2,000, and Sh18,200 accommodation allowance outside Nairobi.

In the audit, Gathungu warned that Kenya Power is broke and may soon default on key obligations amid material uncertainty of its rebound.

The company has its liabilities exceed assets by Sh66.5 billion with the auditor alarmed that the negative working capital has persisted for five consecutive years.

She questioned the viability and feasibility of the strategies taken up by the board and management to turn around the company’s fortunes.

“These initiatives appear not to have yielded the intended results as at June 30. This condition, along with other matters, indicates the existence of material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern,” the auditor said.

She revealed that consumers paid Sh32 billion in system losses during the year from the 12,202 GWh units purchased from power producers.

Of the units bought, only 9,203 GWh were sold to consumers resulting to a loss of 23.95 per cent – approximately Sh39 billion.

Energy Regulator EPRA had approved system losses of up to 19.9 per cent – approximately Sh32.96 billion, which is deemed as a normal loss.

The excess of 4.05 per cent – of about Sh6.7 billion, was met by the company, hence increasing the entity’s operational costs.

“These losses contribute to high power charges to the consumers since the industry regulator allows the company to charge up to 19.9 per cent of the power losses to consumers,” Gathungu said.

(Edited by Bilha Makokha)