Audit report: Siaya County lost billions of shillings in dubious transactions

Cornel Rasanga, James Orengo

Siaya Governor James Orengo (right) and his predecessor Cornel Rasanga.

Photo credit: File | Nation Media Group

A preliminary audit report on the Siaya County government has unearthed questionable transactions amounting to billions of shillings transferred to individual accounts between 2021 and 2023.

Transactions amounting to Sh332.8 million made from an imprest account during former Siaya governor Cornel Rasanga’s tenure did not qualify as petty cash.

A report on the county’s financial systems revealed that the transactions did not qualify to be listed as petty cash, pointing to possible misappropriation of funds by some county staff.

It also revealed that irregular transfer of funds from various county bank accounts was made in breach of the Public Finance Management Act.

There were also dubious payments of claims amounting to Sh780 million to staff during the financial year 2021/2022. The money was purportedly paid to staff for training activities that are yet to be verified. The payments were made towards the end of the 2021/2022 financial year.

These findings were revealed in the forensic audit of the financial operations of the devolved government by a task force appointed by Siaya Governor James Orengo.

The team is chaired by former Auditor-General Edward Ouko, while Rowena Stella Ndeda is the secretary. Other members are political analyst Prof Adams Oloo, Dr Grace Ongile, Ms Bella Akinyi, Mr Jared Buoga and Dr Peter Joseph Okoth, the former CEO of Jaramogi Oginga Odinga Teaching and Referral Hospital. The Institute of Economic Affairs provided technical expertise and support.

The team was mandated to carry out an evaluation, assessment and determination of the county’s human resource establishment and revenue administration.

On Thursday, the Mr Ouko-led task force revealed rampant abuse of the imprests account, leading to possible embezzlement of public funds.

While the law requires the county treasury to set limits to imprests paid in that account, the Siaya County government under Mr Rasanga failed to do so.

 The Ouko-led team found out that payments made did not qualify to be classified as petty or emergency funds as required by the Public Finance Management (PFM) Act.

“This is an irregularity as transfer of funds from the development and recurrent account. This is done to avoid legal payments and without scrutiny by the Controller of Budget. This creates a window for embezzlement of funds,” said Mr Ouko.

He pointed out that among the reports they went through, Sh332, 842, 954 made from the imprest bank account did not qualify as petty cash.

He added: “There is rampant abuse of the imprest system and lack of standardisation of the standing imprest of office operations and instances where application and use of said imprests to officers could not be determined.”

He said Sh96, 021, 578 was paid as other staff allowances in a short period. This implies that monies that should have been paid through the Integrated Financial Management Information System (IFMIS) were made through imprests account. This, according to Mr Ouko, is an example of abuse of the imprest account system.

The report also raised questions on the project management committee funds which is usually 5 per cent of the project’s cost. The money usually goes towards the payment of allowances to the members of the committee.

The money is deducted automatically through the IFMIS and goes to the members who monitor the projects on the ground.

The report, however, showed that between 2015 and 2019 the actual amount collected was Sh173 million. This figure is five per cent of the money retained from all the projects during this period.

“However, out of Sh173 million, the Project Management Committees were only paid Sh35 million. This was an abuse of quite a huge amount of money,” said Mr Ouko.

He added that the previous government made contractors pay the projects management committee members as opposed to deductions being made directly from the money paid by the county to contractors. This created room for manipulation.

On pending bills, the task force found out that there were disparities in the figures. Records at the Controller of Budget’s office by the CEC sub-committee on pending bills reported Sh697 as pending bills as of June. The committee also quoted Sh1 billion around November, a difference of about more than Sh300 million.

He stated that analysis of the report of the sub-committee indicated that for a large number of projects, the contract sum at the time of the award exceeded the budget available.  

The report also revealed Mr Rasanga’s administration had specific individual contractors who were benefiting from most of the tenders awarded by his government.

“The county appeared to have a preferred set of contractors who accounted for at least 70 per cent of the total amount of the pending bills. Projects are clustered and advertised as a single project to compromise competition and limit access to a few preferred individuals,” said Mr Ouko.

Mr Ouko said while the process of the budget making is largely adhered to by Siaya County, challenges occasioned by poor working relationships between the executive and the legislative arm of the devolved system has sometimes led to the latter taking a long time to pass budget.

“The approval of the financial year 2021/22 was delayed by three months. The county has been in breach of deadlines provided in the regulations leading to disruption of county operations,” said Mr Ouko.

The report also put the Siaya County Assembly on the spot for altering the budget brought to the House from the executive.

While the principle of budgeting is that the executive prepares and presents proposals to the assembly, the law allows the assembly to propose adjustments to reasonable levels.

“Our review revealed that the assembly adjusts the budget without reference to the executive and in making the changes, it overhauls the budget and appears that they have usurped the executive’s role in the budget-making process,” said Mr Ouko.

This, he said, leads to the delay in the completion and monitoring of projects that are supposed to be completed in one year.

Of the unexplained Sh406 million suspicious transfer of cash a few weeks before the August 8 General Election and transition period, only Sh277 million was in question as established by the report.

While the taskforce is yet to complete the Human Resource audit, preliminary reports showed that out of a head count done by the Siaya County government, anomalies such as double payments and falsified identification numbers by suspected ghost workers were revealed. 

When the county decided to use the cheque system to pay salaries so as to weed out ghost workers, between 110 and 141 unknown people failed to collect their cheques

The report comes at a time when former governor Rasanga asked Mr Orengo not to be hard on him. But while reacting to the report, Mr Orengo exuded confidence that the task force led by Mr Ouko will do a good job.   

“I know what’s typical of Mr Edward Ouko. He neither spares anybody nor hides facts. He is a man of integrity and so is the team. There should be no sacred cows,” said Mr Orengo.

Mr Ouko said the final detailed report will be released on January 20, 2023.