The Jomo Kenyatta University of Agriculture and Technology (JKUAT) is on the spot for sinking millions of shillings in a dead venture, Industrial Park, according to a report by Auditor-General Nancy Gathungu.
The report on the audited accounts of JKUAT for the 2022/23 financial year exposes an institution wrought with wastage of public funds at a time the government is finding it difficult to raise revenue to finance its operations.
This comes as it emerged that the JKUAT Enterprise Limited registered losses for the fourth consecutive year and that it is technically insolvent as assets stand at Sh277 million against the liabilities of Sh295.7 million, hence a deficit of Sh18.75 million.
The report shows that the negative working capital was an increase compared to the Sh14.3 million deficit recorded during the 2021/22 financial year.
“The company’s current ratio of 0.94 percent is below 1 percent, which indicates that the company may not be able to settle all its debt obligations when they fall due,” the audit says adding, “The company has reported negative working capital for the fourth consecutive year.”
“The board and management, in the past and current financial statements, have taken strategic initiative to improve the financial performance, including working capital of the company. However, these initiatives do not appear to have yielded the intended results,” the audit reads.
Part of the wastages flagged by the Auditor-General include the excess number of staff at the Industrial Park, the awarding of the insurance tender to the highest bidder, unsupported board expenses and irregularities in using the Quotation method of procurement.
Procurement documents submitted to the auditors revealed that services were procured from various consultants who were paid Sh27.3 million.
This is notwithstanding that the companies contracted were not in the pre-qualified list of registered suppliers “provided for audit verification and no valid reason was given by the management”.
The Auditor-General notes that this violated the Public Procurement and Asset Disposal (PPAD) Act of 2015.
Section 71 (4) of the PPAD Act provides that the list of registered suppliers shall be applied on the alternative procurement methods as specified and appropriate.
An examination of the procurement documents revealed that JKUAT Enterprise Limited awarded the tender for the insurance and Work Injury Benefit Act (WIBA) to a local insurance company at Sh5.4 million, overlooking the lowest bidder, another local insurance firm that had quoted Sh4.9 million.
“No reason was provided for not awarding the tender to the lowest bidder. In the circumstances, the management was in breach of the law,” the report reads.
It was also revealed that the notification to the unsuccessful bidders did not include the tender price contrary to regulations 82 (3) of the Public Procurement and Asset Disposal Regulations of 2020.
Examination of the human resource records revealed that the company has an approved salary structure showing the lower and upper limit salary points. But the structure does not show salary progression or annual salary increments.
Further, no information was provided on how long an employee takes to move from the lowest salary level to the highest level in various job groups.
This, the auditors say, is contrary to the Human Resource Policies and Procedures Manual for the Public Service, which states that the public service salary structure will be based on the grading levels spelt out in the various career progression guidelines.
But assessment of the authorised number of staff in various departments within the organisation against the actual number of staff in position as at June 30, 2023, revealed an excess of 26 staff members.
For instance, the Institute for Biotechnology Research (IBR) department had approved a staff establishment of 24, but the actual number, according to the auditors, was 41, hence an excess of 17 staff.
The Enterprise Development Centre had approved two staff but had three instead; the Products-Horticulture had approved staff of 42 but the actual number recorded by the auditors on the ground is 47. Under the KRA department, the audit established 18 staff members instead of the approved staff of 15.
“The needed analysis for the extension of contracts for the excess staff in the various departments as well as explanations for recruitment of the new staff above the authorised establishment were not provided,” the audit reveals.
The excess staff is contrary to section Human Resource Policies and Procedures Manual for the Public Service of 2026. Section B 2 (1) (2) of the manual requires every ministry or state department to prepare human resource plans to support achievement of goals and objectives in their strategic plans.
The audit notes that the board expenses were Sh1.42 million for the period under review but there were no records showing attendance of the meetings.
“The appointment records of the serving board members were not provided. As a result, the dates and terms of appointment as well as their respective duration of service could not be confirmed.”
The report further notes that a review of payment details for the board of directors' meetings, revealed that some board members were paid sitting allowances on various sittings within the year but there was no record of appended signatures in the respective meetings attendance register.
“The appointment details of the representative from the National Treasury is dated November 24, 2017 with no indication of the ending period.”
The motor vehicle records and physical addresses of the members paid mileage allowances were also not provided for audit.
The financial statements under the board of directors reflects the directors who served during the year under review.
However, examination of board expenses records revealed a member not included in the list of Board members who was included in payment of board allowances, and similarly, his appointment records were not provided for audit.
“The available information indicates that the company board charter, which is an important policy document that sets out the roles and responsibilities of the board members, chair and other key roles to ensure clarity and alignment was not prepared contrary to the provisions of Mwongozo,” the audit says.
