Auditor-General Nancy Gathungu

Auditor-General Nancy Gathungu. 

| File | Nation Media Group

Audit flags Sh23bn expenditure in six counties

Six counties have been flagged over high levels of mismanagement, lack of proper structures to encourage growth and failure to serve citizens despite holding billions on behalf of Kenyans.

The Auditor-General’s latest report on county governments (2019/20), exposes Kitui, Nairobi, Kisumu, Nyandarua, Samburu and Vihiga as the worst performing in management of public resources, raising questions on at least Sh23 billion in the six counties.

This raises the red flag that a huge portion of the money could have been lost due to serious and persistent public finance management breaches, including loopholes in revenue and procurement systems, weak human resources and internal audit units as well as huge pending bills, mostly with no proof of services rendered.

Auditor-General Nancy Gathungu gave five counties an adverse opinion and Kitui a disclaimer of opinion in her report on their usage of public funds.

An adverse opinion means that in the course of examining how public funds were spent in the counties, auditors encountered many serious and persistent material breaches, to the extent that they could not fairly present the actual situation.

A disclaimer of opinion means the material breaches, lack of information and inconsistencies were so huge that the Auditor-General could not make any opinion on how money was spent.

Interestingly, of the six, five are run by governors serving their first term and who will likely be seeking another mandate from the electorate – except Samburu’s Moses Lenolkulal.

Kitui - Disclaimer of opinion

Between March 2017 and June 2019, the Kitui County government issued two tenders for construction of mortuaries worth Sh23.6 million.

The projects at Mwingi Level IV Hospital and Kitui County Referral Hospital could have changed the lives of residents, who have suffered a shortage of morgues and poor services at existing facilities, sometimes being forced to cope with a bad stench.

By November 2020, however, the projects had stalled at different stages and lacked critical features such as doors, windows, roofing and morgue machines.

“It was further noted that there was poor workmanship since the ceiling was leaking and the contractor had abandoned the site and works had stalled…The project had stalled at the walling stage, which is approximately 30 per cent level of the construction and vegetation and bushes had grown inside the incomplete building,” Auditor-General Nancy Gathungu says in her report on Kitui County for the year 2019/20.

The county was also flagged over unexplained expenditures, huge pending bills and poorly done projects.

The Auditor-General raises questions on Sh3.2 billion in the county for the FY2019/2020, indicating that much of the money could have been lost through irregular spending, expenses that cannot be proven, lost revenues, poorly done and stalled projects.

Ms Gathungu could not make a conclusion as to whether the county government spent public funds lawfully and had working internal controls, hence the disclaimer of opinion.

The auditor, for instance, questions payment of Sh420 million to temporary workers, indicating that no documents were submitted to support the expenditure.

“A review of human resource records revealed the County Executive had a total of 3,721 employees, of whom 3,142 or 84 per cent were from the dominant local community. This is contrary to the provisions of the National Cohesion and Integration Act, 2008, which stipulates that at least 30 per cent of employees should be from communities other than the dominant one,” the Auditor-General observed.

The Auditor-General also questions Sh100 million expenditure where audit verifications revealed works were done poorly as well as more than Sh60 million spent during the year on projects that had stalled at different levels. She further flags Sh460 million expenditure that could not be supported and more than  Sh800 million in revenues, revenue arrears or discrepancies in revenues that could not be explained.

Nairobi - Adverse opinion

The city county reported that it paid several firms Sh249 million in FY 2019/2020 to collect and dispose of garbage. However, the county could not provide procurement records of the contracts to auditors, whose review later found that “contracts for the same tasks in the same geographical zones were awarded to different firms at different payment rates”.

“In view of the apparent lack of objectivity in pricing the contracts, value for money may not have been obtained on the expenditure totalling Sh248,893,590 spent on collection and transportation of solid waste,” Ms Gathungu observes.

The Auditor-General further faults Nairobi City County for the procurement of 10 motorcycles at Sh3.6 million in August 2018 yet there had been a cheaper offer of Sh1.95 million for the same items.

“However, the same set of officers comprised the Tender Opening Committee, Tender Evaluation Committee and the Inspection and Acceptance Committee, contrary to Section 78(1)b of the Public Procurement and Asset Disposal Act, 2015. As a result of the irregularity, the procurement process lacked adequate internal checks and control. Further, the lowest bidder at Sh1,950,000 was disqualified for, reportedly, not submitting tender security valid for 120 days. However, no records were provided to support the assertion,” the audit report notes.

In Nairobi, Ms Gathungu questioned at least Sh14.4 billion in unsupported expenditures, stalled projects, variances between financial statements and revenue records, irrational costing and unreported revenues.

“Examination of revenue records indicated that the Trade, Industrialization, Cooperative Development and Tourism sector collected Sh2 billion against Sh4.7 billion reported by the Weights and Measures Unit. The resulting variance totalling Sh2.07 billion was not explained,” the report notes under Trade and other Revenues.

During the year, the Auditor-General notes, stalled projects, particularly in the roads and public works sectors gobbled up to Sh6.9 billion.

The report also notes that while records on approvals for advertising activations for billboards, wall wraps and sky signs were not provided for audit verification, the county reported a Sh671 million (48 per cent) revenue shortfall from the revenue stream.

“As a result, it was not possible to confirm whether all revenues due from the activations were received and properly accounted for. Further, the revised budget framework for 2019/2020 indicated that the County Executive had estimated to collect revenue totalling Sh1.4 billion from billboards and advertisements. However, records in the Finance Department indicated that only Sh753,996,503 was collected,” the report stated.

Kisumu - Adverse opinion (Sh1.49B)

Prof Anyang’ Nyong’o’s Kisumu government reported that it spent some Sh5 million on renovation of his deputy’s house, beginning June 2019.

“However, the Bills of Quantities were not signed, had no preparation date and tender reference numbers. The contract agreement did not disclose the contract timeframe and the contract amount. Further, the works done under payment certificate number One (No. 1) dated 17 June, 2019 amounting to Sh5 million were not supported by an inspection and acceptance report and letter of appointment of the inspection committee. There was no document provided to support certified works and hence it was difficult to confirm the extent of the works which were done while the tender advert, regret letters and other procurement documents were not produced for audit review,” Ms Gathungu observed.

The Auditor-General further found that while the county had Sh2.3 billion in pending bills by June 2020, Sh86 million could not be supported due to lack of documents such as delivery notes, invoices and other procurement records, while Sh278 million reported as medallion awards and gratuities to staff lacked dates.

The report also noted that Governor Nyong’o’s government has employed 86 per cent of staff from a single community and had a weak internal audit unit with only four technical officers.

“Further, although the Audit Committee was formed on May 17, 2018, there was no evidence that it held any meetings in the year. In the circumstances, it has not been possible to confirm existence of  effective internal controls and governance mechanism of the operations,” the report observed.

Vihiga - Adverse opinion

Out of Sh810 million, the Auditor-General questioned Sh219.7 million reported as part of pending bills, but which the county could not support with documents such as delivery notes and invoices.

This means that if such money is paid, there is a likelihood that it could be payment for services never rendered and thus loss of public funds.

The Auditor-General also noted the county was among the worst in human resource terms, with 91 per cent of the 1,774 workforce drawn from the dominant community.

“Further, it was noted that the County Executive had no staff establishment in place and recruitment of staff for different positions is not informed or based on any standard document(s),” the report observed.

While Governor Wilbur Ottichilo’s county had budgeted Sh30 million for payments to temporary workers during the year, the Auditor-General noted that the county ended up spending Sh292 million, overspending by Sh262 million.

Ms Gathungu flagged a payment of Sh3.8 million reported as legal fees but which lacked documentary proof on cases in which the county had been represented, Sh46 million variances in payments for various goods and services, and Sh11 million reported as support to farming communities, but which could not be accounted for.

Nyandarua – Adverse opinion

In Nyandarua, the county reported that it spent some Sh2.2 million on 11,230 assorted seedlings for onward distribution and planting. But while examining county records, the Auditor-General reports that while the seeds were procured on June 22 and paid for on June 25, 2020, distribution had already taken place over a month before.

The Auditor-General queried at least Sh1.18 billion in the county, including Sh263 million reportedly owed to suppliers in construction, civil works and supplies but with no supporting documents, Sh41 million payments for supply and installation of transformers but no deliveries and Sh43.5 million in other unsupported expenditures.

“Further, the balance includes construction and civil works balance of Sh1.366 billion, which includes Sh59.5 million paid to 38 firms for civil works carried out in the previous years. However, the bills were not listed under pending bills in the respective periods and there is no evidence of the bills having been authenticated for payment,” the Auditor-General added.

Ms Gathungu also faulted Governor Francis Kimemia’s government for employing 74 workers during the year, all from the same community, and having a weak internal audit department, with no access to critical systems such as procurement and payroll database.

“Consequently, the department may not make an impact in its role to review the effectiveness of the financial and non-financial performance management systems of the county,” the report noted.

Samburu - Adverse opinion

While the county indicated it spent Sh412 million to settle pending bills during the year, audit verifications confirmed actual payments of only Sh22 million.

“As a result, the unpaid bills totalling Sh737.9 million disclosed in the financial statements as at June 30, 2020 may have been understated by Sh389.67 million. Therefore, the actual unpaid bills may have totalled Sh1.1 billion as at 30 June, 2020,” Ms Gathungu reported.

The Auditor-General flagged spending and variances amounting to at least Sh1.88 billion, constituting different figures reported as the county’s own generated revenue, variances in figures reported as payment to employees, uncollected revenues and delayed and poorly done projects.

“Audit inspection of a sample of 29 development projects valued at Sh328 million revealed delays in completion, poor quality workmanship and failure to put completed projects to use. In view of these issues, value for money on the public funds spent on the projects may not be realised,” the Auditor-General observed.