More than Sh970 million that the Business Registration Service - the companies registry, collected in the last financial year cannot be traced, a new audit reveals.
The cash amounting to Sh972,935,504 from the services offered by the companies registry was reportedly transferred from a revenue collection account to the exchequer.
At the same time, the amount of revenue collected during the year could not be confirmed after the service clung to contracts by various service providers collecting revenue on its behalf.
Auditor General Nancy Gathungu reports in the review of the service’s books as of June 30, 2022, that the business registration service did not provide documents to back up the transactions.
She said the service did not provide bank reconciliation, certificate of bank balance and bank statements for audit review.
Gathungu said that she was not provided with details including the Central Bank of Kenya account details, board approvals and bank signatories.
The management also did not provide for audit review, the official receipt from the National Treasury to acknowledge receipt of revenue.
“This was contrary to Regulation 81 (3) of the Public Finance Management Regulations, 2015, which provides that the National Treasury shall issue a receipt to a receiver of revenue to acknowledge the receipt of the revenue thereof,” the auditor said.
Gathungu said in the circumstances, the accuracy, validity and completeness of the revenue transfer of Sh972,935,504 could not be confirmed.
The audit report lists e-Citizen, Kenya Commercial Bank and Safaricom as the service providers contracted to collect revenue on behalf of BRS.
The respective contract agreements were not provided for audit review, the auditor said, saying the circumstances made it hard for her team to confirm the collections.
“It was not possible to establish the legality and performance of the service providers. Further, in the absence of supporting contracts, it was not possible to confirm the basis of the revenue collected,” she said.
In the same vein, the service’s official receiver was found operating an illegal bank account at the National Bank of Kenya contrary to the law.
The law requires the official receiver of revenue to operate a CBKa account – called an "Insolvency Account".
The companies’ registry is further on the spot for failing to open county offices, a situation that forces those seeking its services to travel to the major cities for the same.
BRS was found to only have operational branches in Mombasa and Kisumu, apart from the main office in Nairobi.
Gathungu said this was a violation of the BRS Act, 2015.
The law says in section three that the BRS headquarters shall be in the capital city, but it shall establish branches in every county.
The agency also failed to factor the offices into its strategic plan.
“The strategic plan for the period 2021-26 did not consider the opening of regional offices in other counties contrary to section 3 of the BRS Act, 2015.”
In the circumstances, the management was in breach of the law, Gathungu said.
At the same time, the auditor general wants the business registration service reprimanded for not filing compliance reports.
Gathungu said a review of records provided for audit showed BRS did not submit compliance reports to the State Corporations Advisory Committee.
A Cabinet memo of March 2020 provided that the reports are to be submitted to SCAC for approval.
All state corporations are required to file with SCAC their human resource compliance reports, including payroll reports for all cadres of staff and other stated human resource instruments for approval by July 31 each year.
“The management was in breach of the law,” Gathungu said, detailing non-compliance with laws and guidelines by the board.
The board members, the audit revealed, were engaged in more than two board committees without the Cabinet Secretary and SCAC approval.
The board committee members had served in the same committees without rotations after every 12 months.
Gathungu cited a violation of a March 11, 2020 circular which stipulated that members can only sit in a maximum of two committees.
“In the circumstances, the board committee composition and operations did not comply with Mwongozo Code which may adversely impact on the effective implementation of the board’s resolutions,” the auditor said.
The BRS was also found to be grossly understaffed, with 54 positions unoccupied at the time of the audit out of the existing 162 slots.