Six counties cannot account for how they spent up to Sh25 billion, a new report shining light on leakages in devolved units has warned.
The latest report by Auditor-General Nancy Gathungu on the 2020/21 financial year has flagged Nairobi, Murang’a, Kisumu, Baringo, Narok and Vihiga as the worst in terms of managing and reporting use of public funds.
The counties got adverse opinions in the report, meaning that “the financial statements exhibit significant misstatement with the underlying accounting records”.
Among key issues the Auditor-General has raised is the counties’ inability to provide evidence for purported expenditures due to lack of documents such as invoices, vouchers and others, breaching procurement laws in spending, salary payments outside the Integrated Payroll and Personnel Database (IPPD) and possible cases of ghost workers.
Nairobi was the worst, with the Auditor-General questioning usage of at least Sh20.9 billion. This accounted for over 81 per cent of the public funds whose usage has been questioned.
“The statement of receipts and payments reflects total payments amounting to Sh29,582,031,455. However, supporting documents for the expenditure such as payment vouchers, invoices, contracts, disbursement details for payments amounting to Sh9,773,905,233 were not provided for audit. In the circumstances, the accuracy and regularity of expenditure amounting to Sh9,773,095,233 could not be confirmed,” Ms Gathungu notes.
The report also indicated that during the year, the county reported Sh836.6 million in respect of legal expenses paid to various firms
“However, the payments to the firms were not supported by formal instructions for representation, details of cases in which the firms represented the county executive and certified copies of the judgements for the respective cases as stipulated in the civil procedure rules,” Ms Gathungu notes, adding that the services were procured directly, against the law.
Out of Sh490 million spent on domestic and foreign travel during the year, the Auditor-General adds, Sh24.5 million could not be accounted for, since the county did not confirm that staff who were paid participated in the events for which the allowances were paid.
On hospitality supplies and services, the Auditor-General observed that payments amounting to Sh38,777,482 were made as meals allowances to staff engaged beyond normal working hours, but “the rates applied differed with approved rates” and “the expenditure was not justified as no basis or reasons were provided for the payments”.
Nairobi also irregularly spent Sh4.36 million on allowances for MCAs, who are resourced by the county assembly that has an independent budget.
“Such payments may pose a risk of double payments for the same services as the applicable controls are independent,” she warned.
The Auditor-General also warns that the capital’s payroll could be having possible cases of ghost workers and other loopholes for leakage of funds, after finding instances of multiple employees being paid through same account numbers.
“Review of payroll data revealed that salaries for several employees were disbursed to accounts whose details were shared between two or more persons. Management did not provide an explanation for the staff sharing bank accounts ... In the circumstances, management was in breach of the law,” the report states.
Baringo was one of the counties that the National Drought Management Authority (NDMA) in March 2021 warned to expect drought. NDMA’s alert said the county would go without rains between July and November.
Perhaps out of disregard for the warning, the county government went ahead to spend Sh11.05 million in August 2021 to buy seeds for distribution to residents in August.
“The distribution of the seedlings was done in the month of August 2021 whereas the early warning bulletin in March 2021 from the NDMA Baringo County had forecasted the months of July, August, September, October and November as long dry spell with no rainfall. It is therefore, unclear what guided the decision of the Management,” states the report.
The report further queries the spending of at least Sh1.05 billion by the county, with among issues put into question being salary payments of Sh61.6 million that were processed manually and non-remittance of Public Service Superannuation Scheme Fund deductions totalling Sh23.4 million.
Ms Gathungu also faults the county’s Sh88 million spending as salary arrears payment to some 2,347 staff members, noting that “review of sampled staff files did not indicate the nature, cause of arrears and the accumulated periods.”
“Included in the domestic travel and subsistence expenditure of Sh144,415,505 is an amount of Sh14,343,133 paid in respect of reimbursements made to staff for various activities undertaken that were not supported by approvals by the Accounting Officer and source of funds applied,” the report also notes.
In Murang’a, the Auditor-General flagged the county’s Sh221.5 million salary payments outside the IPPD, forming part of the Sh1.4 billion that she has questioned.
“Explanation given by management was that these officers did not have personal numbers. This was contrary to the Treasury Circular No.9/2017 that requires personnel emolument to be supported by IPPD. In the circumstances, management was in breach of the law,” Ms Gathungu states.
The Marsabit County executive, the Auditor-General revealed, could not prove a Sh3.63 million spending on purchase of success cards and other school items for candidates during examinations.
Ms Gathungu further indicated that while the county reported spending Sh19.57 million to purchase maize, beans and cooking oil for emergency relief and refugee assistance, it could not provide documents to support the expenditure.
The county also reportedly paid 131 Early Childhood Development Education employees Sh36.9 million in salaries using manual systems without proper reasons as to why the county could not integrate them in to the IPPD.
“Included in the hospitality, supplies and services expenses is an amount of Sh4,903,900 that was spent on per diem for Members of the County Assembly (MCAs) on various occasions to perform various duties including interrogation of the county budget. Although the management explained that the expenditure was budgeted for by the county executive for the purpose for which it was paid, the activities carried out fall under the county assembly. Therefore, it was not clear why the MCAs were facilitated by the county executive to perform their duties and yet the expenditure is budgeted for by the county assembly,” the Auditor-General noted.
In Kisumu, Ms Gathungu revealed that while Governor Anyang’ Nyong’o’s government spent Sh5 million on improvement of the Holo-Huma access road, physical verifications by auditors in November 2021 unearthed poor workmanship on the drainage, resulting in part of the road being cut off.
“Further, construction of roads includes an amount of Sh6,798,047 spent on improvement of Akado-Okiro-Ridore-Achola Junction access road. According to the work plan, the road was to cover 5.7km. However, physical verifications in November, 2021 revealed that the road was improved up to 0.7km. The management has not explained the reason for non-delivery of service by the contractor even though full payment was made,” states Ms Gathungu.
The report further revealed that a review of the monthly payroll data, bank remittance data and master data showed that in July 2020, eight employees shared bank account numbers while in March 2021 two employees shared bank accounts.
While the queries by the Auditor-General do not necessarily imply that the amount in question was stolen or lost, they point to a high possibility of such, forming a basis for further investigations.
The Auditor-General has powers under the law to recommend withholding of funds to public entities that exhibit poor reporting and use of funds, but has been reluctant to make the recommendation since the onset of devolution.
“Where there is a serious material breach or persistent material breaches of the provisions of this Act, the Auditor-General may in his audit report to Parliament or the relevant county assembly pursuant to the Public Finance Management Act, 2012, recommend the withholding of funds to any state organ or public entity,” the Public Audit Act, 2015, states.
Nairobi and Kisumu have continued with the poor reporting on the management of public funds, getting adverse audit opinions over the past three financial years.
Murang’a and Narok, which had qualified opinions in 2018/19 and 2019/20, fell off in the year under review. Vihiga also fell off from the good books of the Auditor-General in 2019/20 when it started getting adverse audit opinions.
The Auditor-General uses audit opinions to classify how public agencies spend funds, with best users getting an unqualified opinion, followed by qualified opinion, while worst users get an adverse opinion and disclaimer of opinion.
Only Kisii County got an unqualified audit opinion in 2020/21, while no county got a disclaimer of opinion.
