The National Assembly in the past session.
The National Assembly is on the spot for considering the auditor-general's reports outside the provided timelines despite a High Court judgment to be considered in line with the Public Finance Management (PFM) Act.
In the judgment delivered on October 1, 2024, High Court Judge Jairus Ngaah issued a declaration that constitutional timelines spelled out in Article 229 (4) and (8) of the Constitution and sections 48 and 50 of the PFM Act are peremptory, mandatory and must be complied with.
The judge gave the orders as he quashed a report of the Select Committee of the Nairobi City County Assembly on the consideration of the report of the auditor-general on Alcoholic Drinks Control and Licensing Board for the year ended June 30, 2020, dated June 22, 2023.
Auditor-General Nancy Gathungu.
The judge also went on to quash the report of the auditor-general on the Alcoholic Drinks Control and Licensing Board for the year ended June 30, 2020, dated September 28, 2022, citing violation of the Constitution.
“It is common ground that the report of the Select Committee on Auditor General’s audit of the Alcoholic Drinks Control and Licensing Board’s financial accounts for the year ending 30 June 2020 and her subsequent report were done outside the timelines set by the constitution,” Justice Ngaah ruled.
While the Senate has since abided by the court decision and issued a schedule for consideration of the financial year 2024/25 audit reports, the National Assembly is yet to comply as its audit committees are stuck with the audits for the 2022/23 fiscal period and before.
City lawyer David Ochami notes that the National Assembly has, continuously, failed constitutional audit timelines and rejected high court orders to comply, “but this time, it has no choice”.
“The court decision means that its failure to obey the constitution brings the legal force of their reports into question and those summoned to discuss late audit reports can reject the summonses or refuse to honour the unlawful summonses,” says Mr Ochami.
The Judge went on to issue a declaration “that the constitutional timelines are mandatory and must be complied with” and therefore, “the audit and the report of the Select Committee are a nullity to the extent that they were done outside the limitation period.”
Sharable revenue
The judgment will have a significant impact on the prudent use of public funds by the accounting officers as some of the audit queries that may arise will likely slide off without parliamentary action.
It also has an implication on the shareable revenue to the 47 county governments.
Article 223 (3) of the Constitution states that equitable share from the national government to the 47 devolved units shall be calculated on the basis of the most recent audited accounts of revenue received, as approved by the National Assembly.
However, all will not be lost as the lack of parliamentary action may open an opportunity for the government investigative agencies- the Ethics and Anti-Corruption Commission (EACC) and the Directorate of Criminal Investigations (DCI) to come in.
The requirement to audit and submit the reports to parliament or County Assembly for consideration and action, “is a constitutional quest for good governance, integrity, transparency and accountability.”
But on the flipside, the court judgment provides an opportunity to stop MPs from re-opening the audit reports for another round of auditing ostensibly to cut deals with the accounting officers whose books of account have been flagged by OAG and in the process trashing the auditor-general's findings.
“The purported discussion and implementation of the audit report by the County Assembly of the County Government are of no legal consequence. In any event, even assuming the report was presented in time, it was discussed outside the period prescribed by the constitution,” the judgment reads.
Article 229 (4) of the Constitution states that within six months after the end of each financial year, the auditor-general shall audit and report on all accounts, funds, and authorities of the national and county governments and the public debt.
Part 8 of Article 229 goes on to state that within three months after receiving an audit report, Parliament or the county assembly shall debate and consider the report and take appropriate action.
The established that Auditor-General Nancy Gathungu delayed the audit of the Nairobi City County Alcoholic Drinks Control and Licensing Board for the financial year 2019/20 by over nine months.
According to Justice Ngaah, “looking at the application and the response thereto, there is one fact, which is not in contention.”
Milimani Law Courts in Nairobi.
“The financial statements in issue were submitted for audit on June 21, 2022, more than one year and eight months after the constitutional and statutory deadline of September 30, 2020.”
The court also established that it is only on September 28, 2022 that the Auditor General submitted her report to the County Assembly for action. The County Assembly, on the other hand, did not consider and debate the report within three months as required but delayed it until June 22, 2023.
“This violated the constitution,” the judgment reads.
Former executive officers at the Nairobi City County Government sued the Nairobi County Assembly for failing to consider the audit reports within the constitutionally set timelines and listed the Auditor-General as a respondent.
Although Parliament- National Assembly and Senate- was not a party to the case, the judgment binds it because it considers the reports of auditor-general on all accounts of the national and the county governments entities.
The parliamentary watchdog committees- Public Accounts Committee (PAC), Public Investment Committees (PIC), Special Funds Accounts Committee and the Decentralized Funds Accounts Committee in the National Assembly are charged with considering audit reports of the Ministries Departments and Agencies (MDAs) at the national government level.
The Public Debt and Privatisation Committee of the National Assembly considers audit reports on the public debt.
September 30
In the Senate, the County Public Investments Committee and Special Funds Committee (CPIC-SFC) and the County Public Accounts Committee (CPAC), consider audited accounts of entities of the 47 county governments.
The implication of the court judgment is that by now, the National Assembly, the Senate and the 47 county assemblies should have concluded the consideration of the audited accounts of public entities for the 2023/24 fiscal period as they await the 2024/25 audit reports to be tabled by December 31, 2025.
Given the audit timelines, by September 30 every financial year, which is three months after the end of a financial year, the Auditor-General should have received the financial statements from entities that get exchequer funding.
Within three months or by December 31st every financial year, the Auditor-General is required to have concluded the audit and submitted the reports to parliament and county assemblies for consideration and action.
Parliament and the county assemblies are then required to consider the audit reports and take appropriate action within three months, which is by March 31st every financial year.
However, while the Senate seems to have complied with the court judgment, the National Assembly committees are yet to comply.
For instance, the Public Investments Committee in charge of Social Services, Administration and Agriculture (PIC- SSAA) chaired by Navakholo MP Emanuel Wangwe, is still considering the audited reports dating back to the 1986/87 financial year.
The House Public Accounts Committee (PAC) chaired by Butere MP Tindi Mwale is yet to conclude consideration of the audited accounts of government MDAs for the 2022/23 fiscal period, which is well behind the schedule.
City lawyer David Ochami notes that “as long as the court judgment has not been appealed and stay orders granted” what the National Assembly committees are currently engaged in insofar as failure to observe audit timelines, is an exercise in futility.”
“The audit timelines as stipulated in the constitution and affirmed by the court judgment present an opportunity to accounting officers in government to ignore invitations by the audit committees without being sanctioned,” says Mr Ochami.
A section of Parliament Buildings, Nairobi.
Article 125 of the Constitution gives Parliament and its committees, the power to summon any person to appear for the purpose of giving evidence or providing information.
The sanctions for those failing to appear with a compelling reason are provided for in the Parliamentary Powers and Privileges Act.
The judgment portends a serious implication on the human resource capacity at the Office of the Auditor-General (OAG).
The 2021-2026 OAG strategic plan shows that the current staff establishment at OAG is over 1700, which includes approximately 1300 audit staff and 400 non-audit staff, with an audit client base of over 20,000 being entities that receive exchequer funding.
Given the volume of reports generated by the OAG for action, the MPs may not consider all of them, given the nature of their legislative calendar.
The House committees, avenues that parliament transacts its business before reports are tabled in the House, break for their long Christmas recess in mid-December.
They are then required to resume their sittings towards the end of January every year. By this time, according to the audit cycle, the House committees should be considering the audit reports.
“Article 229 (4) of the constitution is couched in such mandatory terms that leave no room for any other interpretation that the audit and the report of the select committee can, and must be done within a specific timeframe,” the judgment reads, locking out any possibility of extending the exercise.
“It has been submitted that timelines set out in the constitution are neither negotiable nor can they be extended by the courts. Where constitutional timelines are violated, any decision arising out of the same should be considered to be invalid, null and void.”
The court went on to describe these constitutional imperatives with respect to time as “the tyranny of time”.
The Select Committee of the county assembly had found that the Alcoholic Drinks Control and Licensing fund collected Sh427.3 million during the financial year 2019/20 and Sh515.9 million during the financial year 2018/19.
“However, deposits made by the applicants were lacking in supporting documentation such as the receipts and the ledger. Further, the revenue collected by the applicants was not consistent with the schedule of liquor license applicants,” the committee established.
The judgment cites Article 259 (8) of the constitution which “affirms the position that where a specific time is prescribed for certain action, that action must be taken within that time.”
“If a particular time is not prescribed by this Constitution for performing a required act, the act shall be done without unreasonable delay, and as often as occasion arises.”
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