Parliament has directed Auditor-General Nancy Gathungu to order all parastatals under the Ministry of Energy including Kenya Power #ticker:KPLC and KenGen #ticker:KEGN to stop hiring private auditing firms.
The National Assembly raised the red flag that State corporations under the Energy docket continue to advertise for external audit services in breach of the Constitution, the Public Audit Act and the Public Finance Management Act.
The Constitution and the PFM Act, 2012 require the Auditor-General to “audit and report on the accounts of any entity that is funded from public funds.”
The law, however, allows the Auditor-General to outsource audit services after entering into contracts with private audit firms.
But the committee reckons that the firms in the energy sector have been seeking the private auditors on their own.
Abdulswamad Nassir, chairman of the Public Investment Committee (PIC), directed Ms Gathungu to stop the hiring of private audit firms without consultations and approval of the Auditor-General.
Mr Nassir cited a recent case where PIC had to intervene to stop Kenya Power from contracting private audit firm.
“Did you receive our letter asking you to cancel the advertisement seeking external auditors from private companies?” Mr Nassir asked Kenya Power managing director Bernard Ngugi.
Mr Ngugi said Kenya Power had received and complied with the letter authorised by PIC.
In 2018, PIC directed parastatals under the Ministry of Energy to drop private auditors amid concerns they are not capturing financial statements manipulated by management.
The committee said that private auditors were returning clean accounts (unqualified audit) for State agencies despite outstanding audit queries and procurement irregularities.
The PIC order will affect firms like Deloitte & Touche that handles KenGen and Geothermal Development Corporation and Ernst & Young that looks into Kenya Power and Kenya Electricity Transmission Company (Ketraco).