Audit flags Kenya Forest Service’s bloated wage bill, financial rot

An audit has revealed severe financial mismanagement at the Kenya Forest Service, including a wage bill consuming 61 per cent of its revenue, exceeding the recommended 35 per cent threshold.

The review, covering the fiscal year ending June 30, 2024, also uncovered unaccounted receivables, unresolved legal disputes, and systemic inefficiencies.

Auditor General Nancy Gathungu has raised questions in a damning audit report about the agency’s governance and use of public funds.

KFS’s employee costs of Sh5.69 billion, accounted for 61 per cent of its total revenue of Sh9.34 billion.

“This was contrary to the public finance management law,” Gathungu said.

Regulation 26 of the Public Finance Management Act, 2015, caps employee compensation at 35 per cent of revenue for national government entities.

An inflated wage bill risks crippling the agency’s operational capacity, diverting funds from critical forest conservation and community programmes.

The audit reveals a striking contradiction where exorbitant wage bills consume over half of revenues, yet critical staff shortages cripple service delivery.

At KFS, while employee costs devour a chunk of revenue, the agency operates with 1,647 fewer staff than authorised. 

Despite excessive spending on salaries, KFS faces a 20 per cent staff deficit, with some departments critically understaffed as others enjoy bigger numbers.

“The staff were unevenly placed as some positions or departments had an excess number of staff while others had fewer than the required number,” Gathungu said.

The report further highlights unresolved financial irregularities and exposes glaring discrepancies in KFS’s financial records.

Among those flagged is an unaccounted revenue of Sh209 million, which was collected through point of sale gadgets.

The gadgets were not integrated with the service’s revenue collection system, casting doubt on the integrity of the collections.

“The accuracy and integrity of the revenue collected is doubtful. In the circumstances, the completeness of the revenue amounting to Sh209 million couldn’t be confirmed,” the auditor general said.

She further flagged an unsurrendered imprest of Sh82.7 million and doubtful Sh371.8 million in long-outstanding receivables.

The latter lacked documentation, suggesting potential misuse or poor accountability.

“No recent demand letters for settlement of the debts or any action taken were provided for audit.”

On the imprest, Gathungu said, “All these amounts had not been surrendered or accounted for the individual expenditure amounts and were not expended under their respective expenditure items.”

KFS is further on spot for failing to remit taxes amounting to Sh1.7 billion, thus risking penalties and legal action from the Kenya Revenue Authority.

“The interest accruing from the non-remittance of the taxes has not been included in the amount. In the circumstances, the accuracy and completeness of the withheld taxes couldn’t be confirmed,” Gathungu said.

The auditor has also taken issue with the unrefunded licence fees of Sh12 million, which was collected for a stalled Ngong Forest sewer project.

The fees were neither refunded nor disclosed as a liability.

“The licence was granted, but the works were halted due to stakeholder complaints. The amount was not refunded to the agency and has not been disclosed as a liability,” the report reads.

On governance and operational failures, the audit criticised KFS’s weak internal controls, citing a delayed financial system rollout.

It emerged that only 10 of 36 planned forest stations were integrated into a financial management system, causing reconciliation delays and cash flow mismanagement.

The case of 13 staff who were reinstated after wrongful termination, while three other dismissal cases remain in court, exposing legal vulnerabilities, has also sparked an audit query.

KFS further faces 179 unresolved legal cases, some dating back to 2008, including land disputes and compensation claims.

Notably, Sh8.18 million was paid to plaintiffs in cases where KFS failed to defend itself in court, resulting in losses of taxpayers’ cash.

“The regularity and value for money of the amount incurred of Sh8,175,009 could not be confirmed,” the audit report states.

“Further, all fees payable to the external counsel or consultant were not approved and authorised by the Attorney General.” 

While Gathungu found no evidence of outright fraud, the report emphasised “significant deficiencies” in compliance, risk management, and governance.

Management had also neither resolved past audit issues nor provided reasons for the delay in resolving the outstanding issues as required by public sector accounting rules. 

INSTANT ANALYSIS

A number of public institutions are plagued by exorbitant wage bills consuming over half of revenues, even as critical staff shortages cripple service delivery. The solution lies in merging fiscal discipline with strategic staffing. KFS can achieve the set threshold by slashing its wage bill to 35 per cent by eliminating redundancies, then reallocating savings to hire rangers and officers at departments with shortages.