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How lacuna in law is aiding misuse of billions under emergency expenditure

 Nancy Gathungu the Auditor-General.

Photo credit: Billy Ogada | Nation Media Group

Auditor General Nancy Gathungu has decried how Ministries, Departments, and Agencies (MDAs) misuse provisions of Article 223 of the constitution to withdraw billions of taxpayers' money from the exchequer to fund projects that are not urgent.

Article 223 of the constitution allows the National Treasury to spend on emergencies without the approval of parliament. The law demands that the treasury seek approval from parliament within two months after the withdrawal of funds from the consolidated fund.

If Parliament is in recess, then the treasury must get the approval two weeks after resumption of sitting.

The current law stipulates that in any particular financial year, the National government may not spend more than 10 percent of the sum appropriated by parliament unless parliament has approved a higher percentage under exceptional circumstances.

However, a special report by Ms Gathungu tabled in parliament has revealed how MDAs resort to the emergency clause to spend money on projects and activities that would ordinarily be included in their budgets.

According to the report, for the 10 year period of former President Uhuru Kenyatta’s reign and his deputy William Ruto and the first financial year of Kwanza administration, the executive withdrew Sh147 billion under emergency clause.

Ms Gathungu has however questioned the projects the billions were used to finance as some have no documentation, others stalled while others did not take off as anticipated leading to queries on prudent management of taxpayers’ money.

National Assembly Public Accounts Committee Chairman John Mbadi told the Nation that they have noticed a trend where MDAs misuse the provision of Article 223 to get money for projects that should either be covered by contingency funds or included in budgets.

“This article 223 has largely been used by the executive to fund corruption and projects of their interest. It is a conspiracy to steal from the public that as a committee we are going to stop through amendments to the PFM Act,” Mr Mbadi said.

“You wonder how buying Ruaraka land, buying shares in Telkom and funding Kenya Airways is an emergency. These are not unforeseen circumstances that require funding as contemplated in Article 223 but just poor planning and budgeting from the executive,” he added.

Section 21 of the Public Finance Management Act, 2012 states that an unforeseen event is one which threatens serious damage to human life or welfare, threatens serious damage to the environment and is meant to alleviate the damage, loss, hardship or suffering caused directly by the event

Mr Mbadi questioned why MDAs avoid getting money from the contingency kitty and instead rush to use article 223 because they know there will be less accountability.

Ms Gathungu says the uptake of contingencies Fund which is authorised to hold up to 10 billion for urgent and unforeseen needs has remained low as MDAs avoid making funding requests from the fund due to the stringent conditions under Section 21 of the Public Finance Management Act, 2012.

The stringent measures provided for in section23 of the Public Finance Management Act, 2012 for the expenditure on contingency funds include provision that Treasury should not later than three months after the end of each financial year prepare and submit to the Auditor-General financial statements for that year in respect of the Contingencies Fund.

The information by the treasury with respect to the expenditure should include date and amount of each payment made from that Contingencies Fund, the person to whom the payment was made, purpose for which the payment was made.

It further states that if the person to whom the payment was made has spent the money for that purpose, a statement to that effect and if the person to whom the payment was made has not yet spent the money for that purpose, a statement specifying the reasons for not having done so.

“Due to the well-defined criteria, there is clarity on the operation of the Contingencies Fund. In contrast, there are no guidelines on the operation of Article 223 of the Constitution.

"For instance, there are no parameters on what should be considered to determine if the appropriated amount is insufficient or what type of needs that arise should be funded under the Article” Ms Gathungu said.

In 2023, Controller of Budget Margaret Nyakang’o told MPs to amend Article 223 of the constitution in order to prevent pilferage of public funds saying the law as it is has been misused by State Officers.

Dr Nyakang’o argued that while her office has powers to give nod to the withdrawal of the funds, her office does not get reports on how the money has been spent and relies on the Auditor General for such reports.

“My responsibility of approval is not full cycled, because I’m not told how the money has been used,” Dr Nyakang’o said.

The proposed changes by Dr Nyakang’o after she narrated to MPs how former Treasury Cabinet Secretary Ukur Yatani invoked the name of former President Uhuru Kenyatta forcing her to authorize expenditure of Sh15.2 billion five days to elections.

The amount included Sh 6 billion paid to Helios Investment partners in Telkom Kenya and another Sh9.2 billion from the annuity fund to finance some road projects that did not qualify to benefit from the kitty.

Mr Yatani has however rejected the claims by Dr Nyakang’o terming them as false.

Treasury CS Ukur Yatani

Former Treasury Cabinet Secretary Ukur Yatani.

Photo credit: Jeff Angote I Nation Media Group

Ms Gathungu pointed out that requests from MDAs do not provide specific information on the project or program items that require funding under Article 223 of the Constitution. This results in expenditure for items that cannot be traced in the funded projects.

The Auditor further pointed out that where funding under Article 223 are commingled with other funds under the normal budget, the risk of lack of accountability is high.