Government plans to remove Auditor-General as head of national audit office
National Assembly Majority Leader Kimani Ichung’wah during the interview at his home in Kikuyu on January 3.
What you need to know:
The Auditor-General is the current head and accounting officer of the national audit office.
A government-sponsored Bill is before parliament, seeking to empower the Audit Advisory Board to be responsible for providing advisory on budget plans and estimates, human resource management and “any other matter that might be referred to the board by the Auditor-General.”
The government has proposed a raft of changes at the Office of the Auditor-General that if enacted into law, will drastically affect operations at the national audit office.
This is as it seeks to push for zero-fault audit reports of institutions that receive public funds.
The government-sponsored Public Audit (Amendment) Bill 2024 before parliament, seeks to empower the Audit Advisory Board to be responsible for providing advisory on budget plans and estimates, human resource management and “any other matter that might be referred to the board by the Auditor-General.”
The Auditor-General is the current head and accounting officer of the national audit office.
“The office shall comprise the Auditor-General, who shall be the accounting officer and the staff appointed by the Auditor-General,” the Bill reads adding; “in the performance of administrative functions, the Auditor-General may, where he or she deems fit, seek the advice of the Audit Advisory Board.”
The Bill is in the name of Kikuyu MP Kimani Ichung’wah, who by virtue of his position as the leader of the majority in the National Assembly signs government bills before they are introduced in the National Assembly.
Section 4 (2) of the Public Audit Act that is earmarked for repeal states; “the office shall comprise of the Auditor-General as its statutory head and all other staff appointed by the Auditor-General as may be delegated in accordance with Article 234 of the Constitution.”
The Audit Advisory Board shall include the Auditor-General, who shall be the chairperson, the Attorney-General or a nominee and a representative of the Institute of Certified Public Accountants of Kenya (ICPAK).
There is also the chairperson of the Budget and Appropriations Committee of the National Assembly or his/her nominee and two representatives from parliament- one from the National Assembly and the other from Senate committees in charge of public finance and audit.
This means that nominees of the Association of Professional Societies of East Africa, the Law Society of Kenya (LSK) and the chairperson of the Public Service Commission (PSC), the current members of the board, will not be represented if the Bill becomes law as proposed.
If the Bill becomes law, the Auditor-General shall be guided by Article 47 (1) and (2) of the constitution in the performance of his or her administrative functions over the audit subjects.
Subsection 1 of this Article provides that every person has the right to administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair.
Subsection 2 states that if a right or fundamental freedom of a person has been or is likely to be adversely affected by administrative action, the person has the right to be given written reasons for the action.
Section 7 (1) of the Public Audit Act states that the Auditor-General shall give assurance on the effectiveness of internal controls, risk management and overall governance at national and county government.
However, this has been proposed for replacement with “the Auditor-General shall satisfy himself or herself that public resources have been applied or used in an economic, efficient, effective, transparent and sustainable manner.”
The Bill limits the qualification of an individual to be appointed Auditor-General to a practicing member “of good standing of a professional body of accountants recognised by the Accountants Act.”
This will likely open the door for the appointment of foreigners to head a crucial office that audits the expenditures of State security agencies like the Kenya Defense Forces (KDF), National Intelligence Service (NIS) and the Kenya Policy among other critical security installations.
The law provides that a person shall be qualified for appointment as the Auditor-General if one is a citizen of Kenya, holds the respective qualifications for the office, and holds a degree in finance, accounting or economics from a university recognized in Kenya.
The person must also demonstrate a “verifiable and logical progression in the attainment of his or her educational qualifications,” and must also meet the requirements on leadership and integrity and is a practicing member of good standing of a professional body of accountants recognized by law.
The Bill also seeks to create the office of the Deputy Auditor-General, who shall be the principal assistant to the Auditor-General and the secretary of the Audit Advisory Board.
“The Deputy Auditor-General shall deputise the Auditor-General in the execution of functions save for the express powers provided under the constitution,” the Bill reads.
The law provides that there shall be a Senior Deputy Auditor-General who shall be competitively recruited by the Advisory Board and appointed by the Auditor General.
Although the Head of Public Service (HoPS) Mr Felix Koskei has demanded that all accounting officers in government ensure they get zero-fault audit reports from the Office of the Auditor-General as an indicator of Kenya Kwanza performance, Auditor-General Ms Nancy Gathungu is uncomfortable.
Auditor-General Nancy Gathungu during a past event.
Ms Gathungu, while appearing before the Public Accounts Committee (PAC) of the National Assembly towards the end of last year, noted that she will not be told how to do her work.
“There is nothing in the auditing standards that requires the office of the Auditor-General to issue clearance certificates on audit reports. That is the work of parliament,” said Ms Gathungu.
“What they need to do is to spend the public funds within the law, prepare the financial statements well and you will not have audit queries. Those are the standards. I will issue audit opinions based on the financial statements submitted to us,” she added.
The audit report on the national government expenditures under the 2022/23 financial year indicates that Ms Gathungu has not gone against the auditing standards to issue her audit opinions just so as to comply with the HoPS directive.
But even as Ms Gathungu spoke before PAC, she acknowledged that her office is inundated with “documents that were needed long ago” for audit queries that parliament has considered by way of reports that have already been adopted.
“Once they submit the documents, they claim the matters have been resolved. But you cannot clear this at the entry level,” she said, noting that her desire to stick to the law and the auditing standards has seen the government accounting officers “become mad with me.”
More proposed changes
In a determined move to push for zero-fault audit, the Bill seeks to rework the audit process such that for all audits or investigations, the Auditor-General shall inform the accounting officer of an entity to be audited or investigated before the commencement of the audit.
The Bill wants that at the beginning of the audit of a state organ or public entity, an entry meeting “shall be held to deliberate on the scope of audit between Auditor-General and the accounting officer.”
The Auditor-General shall then prepare and issue a report to parliament and the relevant county assembly.
Within 14 days from the receipt of any audit report, the accounting officer shall submit a response to the Auditor-General including remedial actions undertaken to address the audit findings, in what would likely usurp the powers of the audit committees of the legislature at the national and county levels.
“Where an accounting officer fails to address issues raised by the Auditor-General to the satisfaction of the Auditor-General, the accounting officer is liable to disciplinary action in accordance with the terms and conditions of that accounting officer’s appointment or employment,” the Bill says.
The Public Finance Management (PFM) Act of 2012 provides that all the accounting officers shall be required to prepare and submit financial statements to the Auditor-General within three months of the end of every financial year.
The Auditor-General shall within three months of receipt of the financial statement, audit, and report to parliament or county assembly on the expenditure of public funds.
Within three months after receiving an audit report, Parliament or the county assembly shall debate and consider the report and take appropriate action.
The other three months are for the executive at the national or county level to implement the recommendations of parliament or county assembly on the reports of the Auditor-General.
