Parliament has given the management of Rural Electrification and Renewable Energy Corporation (Rerec) five days to furnish Auditor-General Nancy Gathungu with documents to clear a number of audit queries.
This is after the Auditor General told MPs that Rerec had not furnished the office with documents to clear unexplained and unreconciled variances of Sh8.59 billion in its books of accounts.
The National Assembly’s Public Investment Committee on Energy and Commercial Affairs directed the Rerec Chief Executive Rose Mkalama to provide documents to the auditor by Friday and appear before the MPs on Tuesday next week.
“Going forward, do not wash your dirty linen before us. The office of Auditor-General must receive your final audit responses two days before you appear before this committee,” David Pkosing, who chairs the committee, said.
“You must ensure that the documents are with the auditor by Friday and you appear before us at 10am on Tuesday next week.”
The committee was not able to proceed with the scrutiny of Rerec books of accounts for the last three financial years after Dr Mkalama tabled fresh documents that the auditors had not perused.
The committee adjourned for two and a half hours to allow the auditors and the Rerec management to go through the voluminous documents.
But when they reconvened at 2.30pm, the representative of the Auditor-General said they were unable to proceed given that some documents were missing.
The auditors said they were unable to collaborate the information and that there are still missing documents that need to be provided by Rerec.
Dr Mkalama told the committee that there is need for more time to provide documents and information that they have in the office.
“We have certain documents and schedules that we need to retrieve from the office to enable the auditors to verify and clear some audit queries,” Dr Mkalama said.
The Auditor-General had questioned the comparison of balances reflected in the financial statements with those in ledgers which reflect unexplained and unreconciled variances of Sh8,595,681,628
In a report on Rerec financial statements for the year to June 2022, Ms Gathungu said the financial statements reflects computers net book value of Sh59,307,000 while re-computation revealed Sh55,483,000 resulting in an unexplained and unreconciled variance of Sh3,824,000.
The auditor said the financial statements reflect intangible assets net book value of Sh61,212,00 while re-computation revealed Sh37,981,000 resulting in an unexplained and unreconciled variance of Sh23,231,000.
Ms Gathungu said the corporation’s Escrow US Dollar cash book was adjusted by Sh46,172,436 to cater for exchange rate gain which was not reported as exchange gain in the statement of financial performance.
“In the circumstances, the accuracy and completeness of the financial statements could not be confirmed,” Ms Gathungu said in an adverse audit opinion.
“Note 32 to the financial statements reflects capital work in progress balance of Sh16,252,778,000 which includes misclassified amounts of Sh419,290,463 for staff costs, Sh48,406,107 for rent and Sh20,521,543 for security of yards.”
The auditor further questioned an amount of Sh571,062,727 that was paid to three firms for land survey services to unspecified projects.
“In addition, there was no evidence of budgeting for the services, their inclusion in the annual procurement plan and competitive procurement. This was contrary to Section 45(3)(a) of the Public Procurement and Asset Disposal Act, 2015 which states that all procurement processes shall be within the approved budget of the procuring entity and shall be planned by the procuring entity concerned through an annual procurement plan,” Ms Gathungu said.
“Further, the services were not supported by local services orders, contract agreements and reports by the three firms indicating the topographical maps and way leaves. In the circumstances, the regularity of the expenditure of Sh571,062,727 paid to three firms for land survey services could not be confirmed.”
Ms Gathungu said the intangible assets balance of Sh61,212,000 includes misclassified expenditure of Sh38,446,015 for annual maintenance cost software support and SAP cloud platform subscriptions.
She said the financial statements reflect interest receivable of Sh335,406,000 classified under receivables from non-exchange transactions instead of receivables from exchange transactions.
“In addition, Sh303,599,495 had been paid and, therefore, should not have been classified as a receivable. Note 28(a) reflects other accrued revenues of Sh10,437,436,000 being five percent Rural Electrification Projects Levy due from Kenya Power Company Limited classified under receivables from exchange transactions instead of receivables from non-exchange transactions,” Ms Gathungu said.
“Note 8 to the financial statement reflects revenue five percent- Rural Electrification Projects Levy of Sh5,201,872,000 which includes a misclassified amount of Sh393,105,574 for financial year 2019/2020.”
In the circumstances, Ms Gathungu said the presentation and disclosure of the financial statements is inaccurate in respect of various transactions and balance.
She also questioned Rerec books of accounts which reflects intangible assets net book value of Sh61,212,00 while re-computation revealed Sh37,981,000 resulting in an unexplained and unreconciled variance of Sh23,231,000.
The Auditor-General said the corporation’s Escrow US Dollar cashbook was adjusted by Sh46,172,436 to cater for exchange rate gain which was not reported as exchange gain in the statement of financial performance.
“In the circumstances, the accuracy and completeness of the financial statements could not be confirmed,” Ms Gathungu said in an adverse audit opinion.
“Note 32 to the financial statements reflects capital work in progress balance of Sh16,252,778,000 which includes misclassified amounts of Sh419,290,463 for staff costs, Sh48,406,107 for rent and Sh20,521,543 for security of yards.”
The committee questioned an amount of Sh571,062,727 that was paid to three firms for land survey services to unspecified projects.
“In addition, there was no evidence of budgeting for the services, their inclusion in the annual procurement plan and competitive procurement. This was contrary to Section 45(3)(a) of the Public Procurement and Asset Disposal Act, 2015 which states that all procurement processes shall be within the approved budget of the procuring entity and shall be planned by the procuring entity concerned through an annual procurement plan,”
“Further, the services were not supported by local services orders, contract agreements and reports by the three firms indicating the topographical maps and way leaves. In the circumstances, the regularity of the expenditure of Sh571,062,727 paid to three firms for land survey services could not be confirmed.”
The committee also scrutinised the intangible assets balance of Sh61,212,000 which includes misclassified expenditure of Sh38,446,015 for annual maintenance cost software support and SAP cloud platform subscriptions.
The committee said the financial statements reflect interest receivable of Sh335,406,000 classified under receivables from non-exchange transactions instead of receivables from exchange transactions.
