- Funds were refunded after an in-depth review of the project by the World Bank.
- Management has not explained how the ineligibility occurred and action taken to ensure culprits face consequences.
The government was forced to refund the World Bank Sh388 million after the lender raised a red flag over contracts awarded for a community development project.
A report of the Auditor-General Nancy Gathungu for the year ended 30 June 2021 said the State Department for Devolution returned the money after the financial institution questioned some of the contracts awarded.
The money was meant to finance the Western Kenya Community Driven Development and Flood Mitigation Project.
Gathungu said the money was refunded after the lender conducted an in-depth review of the project and prepared a report that it submitted to the government.
She said the report, submitted in March 2017, revealed potentially ineligible expenditure amounting to Sh388,689,257 affecting 61 contracts.
She said the review of the contracts evidenced “probable fraud through submission of forged documents such as bid securities, performance bonds, National Construction Agency registration documents, tax compliance as well as prior working experience.”
The objective of the project was to empower local communities to engage in wealth creating activities, lower poverty and reduce the vulnerability of the poor to adverse floods.
Gathungu noted that another 19 contracts for the project had significant red flags of fraud and corruption.
The report said another 54 contracts exhibited red flags of fraud but with significant gaps in the available evidence.
“Management has not explained how the ineligibility occurred and what action it has taken to ensure the culprits face consequences,” report reads.
Executive Order No 1, of 2013 created the State Department for Devolution which existed to spearhead devolution process, implement special programmes and coordinate development of Arid and Semi-Arid Lands.
This however changed through Executive Order No 1 of 2018, which established State Department of Devolution focusing on devolution policy, intergovernmental relations, capacity building and technical assistance to counties.
The audit report further noted that financial statements showed Sh4.6 billion was transferred to 38 counties as investment grants.
“However, only five counties confirmed having received the funds totalling Sh689,429,163 leaving a total of Sh3,910,570,837 from 33 counties not confirmed,” the report reads.
The auditor general further cited unsupported acquisition of assets at the government agency.
She said the statements of receipts and payments reflects a balance of Sh10,335,141 in respect of acquisition of assets out of which expenditure amounting to Sh7,649,441 had not been supported with verifiable audit evidence.
“Consequently, the accuracy and completeness of expenditures amounting to Sh7,649,441 included under acquisition of assets of Sh19,335,141 for the year ended June 30, 2021 could not be confirmed,”Gathungu said.
She noted that in her report of the previous year, several issues were raised under the Report on Financial Statements, Report on Lawfulness and Effectiveness use of Public Resources and Report on Effectiveness of Internal Controls, Risk Management and Governance.
“The management has not resolved the issues or given any explanation for failure to adhere to the provisions of the Public Sector Accounting Standards Board templates and the National Treasury’s Circular Ref: AG4/16/2 Vol.3 (72),” she said.
Gathungu said the department did not maintain a fixed assets register as required under the Public Finance Management Regulations 2015.
All public entities are required to maintain a comprehensive register to protect public assets.
The report further said the department did not have an independent audit committee and public finance committee as required by law.
An audit committee forms a key component in the governance process by providing an independent expert assessment of the organisation’s activities.
(Edited by Tabnacha O)