Lawmakers investigating spending by State corporations summoned managers of one agency, only to be informed that it does not exist.
The revelation by the Public Investment Committee on Social Services, Administration and Agriculture has exposed briefcase government entities that could be conduits for stealing public money.
Members of the parliamentary watchdog were shocked on being told that the Kenya Sports Authority is a ghost, though it was listed among the agencies lined up for inspection of their accounting books.
The MPs found that at least Sh4 billion cannot be accounted for by the agencies that have evaded scrutiny for years.
A total of 23 agencies have been indicted for failing to prepare and submit financial statements to the Office of Auditor-General.
The Kenya Sports Authority was created under Executive Order 1 of 2018 through the Kenya Sports Act, 2012. Lawmakers had invited the director-general of the authority to shed light on spending.
Worse still, the Kenya Sports Authority is not the only phantom parastatal.
The Agricultural Information Resource Centre and the Kenya National Commission for Culture and Social Services are also ghosts.
There are genuine fears of a deliberate scheme by parent ministries to set up these agencies with the sole purpose of stealing taxpayers’ resources.
Over the years, the committee said, some Sh2.6 billion allocated to these non-existent firms was “unabsorbed and there was no documentary evidence availed to show that the unspent money was returned to the National Exchequer Account”.
Yet the revelation is only a tip of the iceberg, as lawmakers reported that just a handful of agencies were cooperative during the investigation, “yet there are more than 400 state corporations undertaking different mandates in their respective sectors”.
Even in instances where the entities are operational, their budgetary allocations and the money generated are placed under the illegal control of parent ministries, the MPs say in their report.
The committee uncovered opaque operations in which some entities lack designated accounting officers.
The investigation found that despite the corporations being established as Semi-Autonomous Government Agencies (SAGAs), deliberate micro-managing by the parent ministries undermine their operations and misuse their budgets.
Failure to keep proper books of account means some entities do not have separate bank accounts and payment vouchers are prepared by their parent ministries’ finance departments, hence no clear distinction as to which payments relate to the agencies and the ministry.
It is also not clear how agencies that collected revenue, including from the public through member registration and subscription fees or received donor funding, accounted for the cash.
There have been reports of budgets of these nondescript state corporations being diverted to fund unorthodox programmes.
As a result of that, lawmakers want Parliament to reprimand 10 Cabinet Secretaries for failing to make operational dozens of corporations in their ministries and flouting several laws and the country’s Constitution.
They want Ms Susan Nakhumicha (Health), Mr Salim Mvurya (Mining and Blue Economy), Mr Mithika Linturi (Agriculture), Prof Njuguna Ndung’u (National Treasury), Mr Moses Kuria (Trade and Industry), Ms Peninah Malonza (Tourism), Mr Eliud Owalo (Information, Communication and the Digital Economy), Mr Zachariah Mwangi (Lands), Prof Kithure Kindiki (Interior) and Mr Ababu Namwamba (Sports) censured.
In its first report, the committee also recommends the Directorate of Criminal Investigations to scrutinise a reported grabbing of part of land belonging to Mathari National Teaching and Referral Hospital in Muthaiga, which is earmarked for transfer to Ngong, Kajiado County.
The 15-member team, chaired by Navakholo MP Emmanuel Wangwe, was also informed that the hospital is owed Sh800 million by the government for psychiatric examination of individuals facing cases in court.
Due to the large number of state corporations, the previous Public Investment Committee could not conclude the examination of the Auditor-General’s reports of these firms.
The National Assembly then took the decision to split PIC into three committees.
The 10 Cabinet Secretaries, according to the committee report tabled in the National Assembly last month, have had a tight grip on the 23 state corporations, whose spending is questionable.
“For the various financial years, a total Sh3,917,052,096 for the few state corporations that complied with the committee’s request for evidence, had not been appropriately accounted for due to failure to prepare and submit statements for audit,” the report states.
This has raised questions over the prudent use of taxpayers’ money the National Treasury has been channelling to these corporations.
The committee report says the parent ministries are micro-managing the corporations, hence denying them funding for the intended public services.
“The committee noted that the listed state corporations have their financial books of account incorporated into their parent ministries or departments,” the report goes on.
The Mr Wangwe-led team added that despite the state corporations receiving money from the public through member registration and subscriptions, the money was not audited as they failed to prepare financial statements.
“The parent ministries or state departments are hesitant to grant the semi-autonomous status as envisioned in the establishing Acts,” reads the report.
Section 67 (3) of the Public Finance Management Act, 2012, provides that the Cabinet Secretary ensure that at any given time, there is an accounting officer in a national government entity.
Ms Nakhumicha, according to the report, faces sanctions for failing to make operational 11 SAGAs.
They include the Clinical Officers Council, the Counsellors and Psychologist Board, the Physiotherapists Council of Kenya, the Public Health Officers and Technicians Council and the Kenya Health Human Resource Advisory Council.
Others are the Kenya Health Professions Oversight Authority, the Tobacco Control Board, the Kenya Nutritionists and Dieticians Institute, the Health Records and Information Managers Board and Mathari Hospital.
Mr Mvurya faces sanctions for failing to make operational the Kenya Fish Marketing Authority and the Kenya Fishing Industries Corporation.
The report accuses Mr Linturi of failing to make operational the Animal Technicians Council and the Agricultural Information Resource Centre.
The state corporations in the Lands Ministry identified in the report are the Estates Agents Registration Board and the Valuers Registration Board.
Mr Owalo has failed to allow the Media Complaints Commission and the Universal Service Advisory Council to operate.
The report says Mr Kuria has failed to make operational the Kenya Consumers Protection Advisory Committee while Prof Kindiki has been sanctioned for putting hurdles in the functions of the Refugees Appeal Board.
Prof Ndung’u is in trouble for failing to declare corporations and authorities whose functions fall under the government.
“The committee noted that state corporations have been receiving funds as itemised budgets in the line ministries rather than getting grants directly. Consequently, the entities lack autonomy to control their budgets as payments are basically made by the line ministries as and when the need arises,” the report continues.
According to the parliamentary team, some of the entities do not have separate bank accounts and payment vouchers are prepared by the parent ministries’ finance departments, thus there is no clear demarcation between the ministry’s account and that of the corporation.
“The state corporations were merely an extension of the parent ministries or state departments. This hampers the independence and governance of the corporations to make strategic and binding decisions,” reads the report.
According to the report, some state corporations such as the Communication Authority of Kenya, the Media Council of Kenya, the Media Complaints Commission and the Universal Service Advisory Council are managed by sister state corporations rather than being autonomous.
The committee also noted that some corporations are managed by staff seconded from parent ministries or state departments.
The committee found out that some Executive orders establishing the corporations did state their mandate and operational autonomy.
The committee wants Mr Namwamba to ensure the Sports Authority is operational.
The MPs want the Attorney-General to develop legal instruments that specify, define and prescribe functions of these corporations.
The committee recommends that CSs still micro-managing the corporations grant them semi-autonomy within three months upon adoption of the report by the House.
The state corporations being managed by their sister corporations should also be granted their semi-autonomous status with the AG directed to ensure they have well-defined functions.