Taxpayers could be losing more than Sh1 billion to a scheme involving inflating salaries of top government officials, exposing the scale of budgeted corruption.
At the heart of the scandal is the National Treasury, which has been over-budgeting salaries of senior government officials paid through the Consolidated Fund Services (CFS).
The officials include the President, his deputy and state officers in Constitutional Commissions and Independent Offices (CCIOs), only for the amounts to disappear during supplementary budgets.
This week, Controller of Budget Margaret Nyakang’o revealed the issue before the National Dialogue Committee.
She said she had identified an anomaly in which salaries are being budgeted at a rate three times more than what the officers actually receive.
“When I was doing the budget for CFS, where I am paid from, I found out that my salary was budgeted at three times what I am paid. I am the only state officer in my institution and so there is nothing like confusion there. I asked...and have not received the answer to date,” Dr Nyakang’o said on Tuesday.
The Saturday Nation has obtained files with budgeted salaries for state officials paid under the CFS for the 2022/23 and 2023/24 fiscal years, and computed differences between budgeted amounts and the actual pay.
In 2022/23, for instance, the original budget had salaries and allowances for state officers under CFS as Sh4,612,368,337. This would later be reduced to Sh3,916,001,011, after Sh696.4 million (15 per cent) was removed when Treasury presented the second supplementary budget.
But the Controller of Budget – an officer mandated by the Constitution to approve withdrawals by national and county governments – says she does not have sight of the money after it is taken during supplementary budgets.
“I cannot tell where the money goes after it is removed from what was originally budgeted,” Dr Nyakang’o said yesterday.
During the year ending June 2023, Treasury originally budgeted her annual salary as Sh17.82 million, which would translate to a monthly pay of Sh1.485 million. This was above her monthly salary of Sh765,188 that she actually received.
She says Treasury only revised the figure downwards to Sh10.15 million when her office raised concerns, an amount that was still above her actual Sh9.18 annual salary.
In the current financial year, Treasury budgeted her salary at Sh18,357,787, an amount that is 93 per cent above the Sh9.51 million she will be taking home, as per SRC-gazetted salaries for 2023/24. She says she knows the excess amount will vanish, especially when Treasury presents the second supplementary budget.
Treasury has also budgeted President William Ruto and his deputy Rigathi Gachagua’s salaries at Sh42.4 million for 2023/24, yet as per their gazetted salaries they can draw a maximum of Sh32.05 million.
The case spreads across other state officers, including the Auditor-General whose annual salary is over-budgeted by about Sh10 million, Attorney-General (Sh8 million) and Independent Electoral and Boundaries Commission (IEBC) commissioners by Sh28 million.
Across eight institutions analysed for this fiscal year, the over-budgeting is Sh90.8 million.
Ms Nyakang’o says there lacks a format to report issues touching individual officers as she has identified in her case and others, arguing that to identify the extent of the mess requires a comprehensive audit.
“Now that we have seen in the quarter return, what we will do after this is to point out to those who have given us the returns what we have observed and seek explanation,” she said yesterday.
“I have looked through our data and do not seem to get a hold of the issue. I may need to talk to the source of the debate,” Prof Ndung’u said.
“I sent your questions to the Auditor-General because it was raised by the Controller of Budget. We wait for her response.”
The CS did not address the issue of budgeting more salaries than what state officers are expected to draw, a problem recurring even in the budget estimates he presented in June.
Dr Nyakang’o says she only got to know of the mess, having been affected individually and being the official who approves the budgets. She added that other affected state officers may not be aware, recommending an audit on the issue, as this could be a clear case of budgeted corruption.
“Budgeted corruption is a colloquial term. It has to be supported by data and statistics. What I have put before you today is the first set of data for you to believe that there is such a term. It is for you to decide how you want to go ahead to have enough data to prove the term exists,” she said.
The Saturday Nation has been made to understand that highly-placed government officials are not happy with the Controller of Budget’s revelation, which exposed a loophole the National Treasury could have been using to borrow when in reality the government’s budgetary needs are lower than what is presented.
The reality is the government continues to battle huge budget deficits that have been the cause for borrowing to fund expanded budgets, with its debt service costs rising to cross Sh1 trillion for the first time in the 2022/23 financial year.
With the discrepancy in the 2023/24 financial year totalling Sh1.47 billion, it means together with last year’s, the questionable figure is Sh2.1 billion.
“We know that we are in a cash crunch, but it is self-inflicted because we have been borrowing and partying with borrowed money. That is why we are where we are,” the Controller of Budget told the dialogue committee in Nairobi.
President Ruto’s administration has expressed intent to end the vice, with Head of Public Service Felix Koskei reiterating the government’s commitment to zero-tolerance to corruption on several occasions.
Just about two weeks ago, Mr Koskei said the government would commission a study to establish validity of claims by former President Uhuru Kenyatta that more than Sh2 billion is stolen from public coffers on a daily basis.
“The claims may be true or false. I cannot substantiate them. A donor is ready to fund the study to establish the exact figure we are losing. A report will follow. We are almost commissioning the study,” Mr Koskei said, adding on his statements on combating corruption that started about five months ago.
In January 2021, then-President Kenyatta made the shocking statement during a joint radio interview in which he defended his campaign to amend the Constitution, a scheme that was scuttled by the Supreme Court.
“Even those talking about the cost of a referendum, I don’t know where they are getting those figures from. We are waiting for signatures to be verified then take the process to the counties. These people are misleading the public that Sh2 billion will be spent, yet what they steal every day is more than Sh2 billion,” Mr Kenyatta said.
This would total more than Sh730 billion in a year, just short of the amount Kenya has been having to borrow to afford its budgets annually.
But Mr Kenyatta was not the first to make such a claim, since several institutions and government officials had as far as two decades before revealed that up to a third of revenue from taxes was getting lost to corruption.
In 2010, immediate former Head of Public Service Joseph Kinyua, then as the Principal Secretary in the Ministry of Finance, told a parliamentary committee that the government would lose Sh270 billion out of a Sh1 trillion budget to corruption, mainly through flawed procurement.
Former Ethics and Anti-Corruption Commission (EACC) chairperson, Philip Kinisu, also told wire news agency, Reuters, in 2016 that a third of Kenya’s Sh2 trillion budget was being wasted through corruption.
And as recent as 2020, the Kenya Public Policy Research and Analysis (Kippra), in a report focusing on recovery from the Covid-19 pandemic co-authored with the European Commission’s Joint Research Centre, indicated that the country “loses about a third of the national budget through graft and corruption-related activities”.
The Public Service Commission (PSC) in a report on status of compliance with values and principles in 2021/22 indicated that the public service lost Sh1.2 billion to corruption during the year.
In the year ending June 2022, some 338 cases of corruption were reported in 22 public service institutions, 320 of which were reported by state corporations and semi-autonomous government agencies.
“The public service procurement procedures are cumbersome and susceptible to misuse and corruption. This may contribute to inefficiency and ineffectiveness,” the commission said in its report.
“The amount of money lost through corruption in the public service was Sh1,216,543,662, out of which Sh1.18 billion (97 per cent) was lost by public universities. This finding was corroborated by the EACC which indicated that it had recovered assets worth Sh2.1 billion.”
Kenya was last year ranked 123 out of 180 countries in the Corruption perception index, scoring 32/100.
“A country’s score is the perceived level of public sector corruption on a scale of 0-00, where 0 means highly corrupt and 100 means very clean,” the report noted.
