Local authorities under scrutiny over flawed accounting

Chief officers who fail to provide documents for certification by the auditor-general will be barred from holding public office if new proposals meant to enhance governance in local authorities come into force.

MPs are also proposing that councils which fail to submit accounts for auditing be denied grants channelled through the Local Authorities Transfer Fund (LATF). In its first report on accounts of the 175 local authorities, Parliament’s Local Authorities and Fund Accounts Committee said chief officers were not sending documents to the auditor-general for verification at the time of audits.

“The committee noted that such failure to produce documents could lead to concealment of possible fraud,” said the committee chaired by Wundanyi MP Thomas Mwadegu.

MPs have recommended that the newly appointed Transitional Authority on Local Authorities carries out an inventory of assets and liabilities of councils before devolved governments become operational. The team said very few local authorities have had their accounts tabled for scrutiny in Parliament as required by the law.

“The LATF Act should be amended to ensure that councils only receive further disbursements upon production of certified audited accounts,” the MPs said.

The committee also recommended that private accounting firms that help councils to prepare accounts without following due process be prosecuted, barred from practice, or denied government tenders.

The committee scrutinised books of account for councils such as City Council of Nairobi, Municipal Councils of Mombasa, Kisumu, Nakuru, Thika, Eldoret and County Council of Narok. However, only the accounts of Nakuru Municipal Council for 2004/05 and 2005/06 were completed.

“The City Council of Nairobi has never produced its accounts for audit verification since 2001. Kisumu and Mombasa municipal councils also have several years’ outstanding accounts, despite handling massive resources. This is an indication that financial management and accountability in the councils is wanting,” Mr Mwadegu said.

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The committee also found out that the chief officers who appeared before the team produced accounts forwarded to the auditor-general without books of accounts. They also presented unsigned accounts and failed to respond to audit queries when asked by the auditor-general.

MPs said virtually all local authorities did not kept proper books of accounts. “There were no books of prime entry such as cash books, expenditure, revenue, bank balances, creditors and debtors, meaning that there were no trial balances and therefore no audited accounts.
The omission led to production of abstracts of accounts which could not be supported for audit.