Auditor-General Nancy Gathungu.
Thirteen county governments could have irregularly diverted up to Sh24 billion in public funds after cancelling thousands of payments that had already been approved by the Controller of Budget (CoB), a new report by Auditor-General Nancy Gathungu has revealed.
The audit raises serious questions about how the money was ultimately spent, warning that the counties failed to provide documents explaining why the payments were cancelled or where the funds were redirected.
The audit, covering the period between July 1, 2024 and June 30, 2025, found that the 13 counties cancelled 13,979 transactions that had already received approval from the Controller of Budget.
“They did not provide explanations or documents to justify why the payments were cancelled. Due to the lack of supporting documents and approvals, it was not possible to verify where the public funds actually went,” Ms Gathungu says in the report.
The county administrations cancelled payments that had already been approved by the Controller of Budget but failed to produce payment vouchers, written requests to cancel the payments or the necessary approvals to justify the reversals.
The findings raise concerns that funds intended for legitimate suppliers or other approved beneficiaries may have been diverted or spent on activities that had not been approved in the budget.
The latest audit points to persistent weaknesses in financial controls through the Integrated Financial Management Information System (IFMIS), 13 years after the advent of devolution.
Although IFMIS was introduced to improve accountability by providing accurate, reliable and timely financial information, the audit suggests significant loopholes remain.
The audit shows in Kwale County, scrutiny of IFMIS records revealed that transactions worth Sh1.9 billion were initiated but later voided without proper justification or approvals.
“Crucial supporting documents, including voided payment vouchers, requests to void payments, approvals from the National Treasury and exchequer requisitions to the Controller of Budget, were not submitted for audit review," the report states.
In Tana River County, analysis of IFMIS data revealed payments amounting to Sh1.1 billion that were allegedly made outside the IFMIS system.
“The county did not provide explanations on which bank accounts these payments were made from and how they are reflected in the financial statements,” the report says.
The audit also found that 1,229 transactions worth Sh1 billion had been voided despite having already been approved by the Controller of Budget.
No supporting documents were provided to explain the cancellations.
The county was also flagged for Sh80 million in expenditure on items that had not been budgeted for.
“A total of 17 transactions amounting to Sh80 million were paid despite the respective expenditure items not having been budgeted for. The county did not explain why the prescribed chart of accounts was not used to process the transactions," the report says.
Auditors further identified 290 IFMIS transactions amounting to Sh403.8 million, yet the actual payments reflected were only Sh12.8 million, leaving an unexplained variance of Sh391 million.
In Kilifi County, the administration of Governor Gideon Mung'aro voided 651 transactions worth Sh3.2 billion.
No documents explaining the cancellations were provided.
The audit also found that 181 Local Purchase Orders (LPOs) had been raised without corresponding values.
In addition, 54 invoices worth Sh705 million exceeded the amounts reflected in the corresponding LPOs.
A further review showed 2,653 transactions worth Sh5.4 billion had been paid but were not captured in the IFMIS payment details as of June 30, 2025.
County officials attributed the discrepancies to system synchronisation and timing differences, saying the transactions had since been reconciled.
However, no evidence of the reconciliation was provided to auditors.
In Wajir County, auditors found 75 transactions worth Sh38.7 million had been voided before reaching the final payment stage.
Governor Ahmed Abdullahi's administration failed to provide supporting documents, approvals or evidence that the Controller of Budget had been notified.
Meru County voided 496 transactions worth Sh766.8 million during the financial year.
Controller of Budget Margaret Nyakango,
The county did not provide reconciliations to show whether the payments were eventually made or whether the Controller of Budget had been informed.
In Tharaka-Nithi, 546 payment transactions worth Sh441.5 million were processed before being cancelled.
"No documents or evidence were provided to confirm that the Controller of Budget was notified of the cancelled payments," the report states.
Embu County voided 62 transactions worth Sh313.7 million during the 2024/25 financial year without providing any justification.
Nyandarua County administration cancelled 1,998 transactions valued at Sh1.2 billion.
Auditors said no payment vouchers, cancellation requests, approvals or supporting documents were submitted.
In Nyeri County voided 283 transactions worth Sh230.4 million.
No evidence was provided to show that the Controller of Budget had been notified to facilitate the necessary adjustments, while Samburu County processed and later cancelled 1,955 transactions worth Sh1.6 billion.
Auditors said there was no documentation supporting the authorisation, justification or approval for the cancellations despite the payments having already been approved by the Controller of Budget.
In Nakuru County, auditors identified 708 transactions worth Sh787.4 million that appeared as paid in IFMIS but were missing from the IFMIS payment details report as of June 30, 2025.
Governor Susan Kihika's administration did not explain the discrepancy.
Siaya County voided 2,323 transactions worth Sh4 billion during the review period, while in Kisii County, auditors found 693 transactions worth Sh1 billion had been cancelled.
No supporting documents or explanations were provided.
The findings come months after Ms Gathungu raised concerns over weaknesses in IFMIS despite it being presented as a tamper-proof financial management system.
In her 2023/24 Popular Report on the National Government, released last year, the Auditor-General disclosed that numerous transactions had been cancelled in IFMIS without evidence of approval.
The report also found that some payments processed through IFMIS could not be traced in financial statements, while others appearing in financial records had not been captured in the system.
"Override of internal controls was noted where an account was created in IFMIS under an individual's name, occasioning loss of public funds. This indicates that internal controls within IFMIS were not effective," the report stated.
The Auditor-General also found instances where balances reflected in financial statements differed from those contained in IFMIS supporting schedules, raising further concerns over the integrity of the government's financial management system.
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