• An unexplained Sh7.8 billion variance in statements among incidents flagged.
• Fund also failed to support Sh2.1 billion expenditure reported as interest payments.
The Strategic Food Reserve Fund board is on the spot over suspected irregularities in the management of cash allocated to the grains kitty.
A new audit has revealed that taxpayers may have lost billions of shillings, which Auditor General Nancy Gathungu said could not be traced.
“Because of the significance of the matters discussed in the Basis for Adverse Opinion section of my report, based on the audit procedures performed, I confirm that public resources have not been applied lawfully and in an effective way,” she said.
“I confirm that internal controls, risk management and governance were not effective.”
Top in the fund’s adverse audit query is Sh2.1 billion the food fund management indicated as interest expenses.
The auditor said there was no disclosure in the financial statements giving details of how the interest was accrued.
“No verifiable documents were provided for audit to support these expenses,” Gathungu said in the report for the year ending June 2021.
The report reveals that management indicated that the interest accrued from unpaid pending bills of Sh12 billion.
The auditor said the pending bills itself-of Sh12,380,355,021, was reported as having been brought forward from the previous year but “was not supported by any verifiable records.”
She also flagged an unexplained Sh7.8 billion variance in statements of actual amounts versus statements of financial performance.
Gathungu cast doubt on the expenditure after the financial statements showed that the fund spent Sh2 billion yet the actual amount was Sh9.8 billion.
“The total actual expenditure for the year of Sh9,842,697,213 shown in the same statement differs from the total expenditure figure of Sh2,078,532,937 reflected in the statement of financial performance, resulting in an unexplained variance of Sh7,764,164,275,” the auditor said.
Also in doubt is the Sh2.7 billion revenue which the SFR Fund did not include in the statement of cash flows for the year.
“In the circumstances, the accuracy, completeness, presentation and disclosure of the statement of cash flows for the year ended 30 June 2021 could not be confirmed,” Gathungu said.
The auditor further raised concerns that the fund may not recover Sh7.3 billion which it is to receive from the National Cereals and Produce Board (Sh434 million) and Special Programmes department (Sh6.8 billion).
The Sh434 million owed by NCPB were proceeds from the sale of imported and local maize, which the grain handler did on behalf of the Fund.
“The sales proceeds were not supported by the records on sales of maize and the validity of the amount of Sh434,996,371 owing from proceeds from the sale of maize could not be confirmed,” Gathungu said.
For the monies owed by the Special Programmes department, the auditor said the debt has been outstanding for a long time.
“Its recoverability is doubtful,” Gathungu said, adding that the instances have made it impossible to confirm the accuracy of the outstanding debts.
The auditor queried an expenditure of Sh700 million, being monies paid to New KCC for the purchase of surplus milk from farmers to make milk powder.
The payment stemmed from a memorandum of understanding the Fund entered into with the New Kenya Cooperative Creameries (KCC) in 2016.
Gathungu said that much as KCC confirmed receipts of the cash and recognised it as a liability, it had no stocks of milk owned by the SFR Fund in the New KCC store.
“Although New KCC acknowledged receipt of the funds and recognised the liability as disclosed in their financial statements, it was not holding any stocks of milk powder on behalf of the Fund as of 30 June 2021,” the report reads in part.
“Consequently, the recoverability of receivables from non-exchange transactions amounting to Sh700,000,000 as of June 30, 2021, could not be confirmed.”
The auditor decried the non-action of her past queries in the Fund's books of accounts.