How Auditor General plans to enforce financial reports

Auditor General CPA Nancy Gathungu. PHOTO | FRANCIS NDERITU | NMG

pol-auditorPrincipal Secretaries and parastatal bosses who fail to implement the recommendations of the Auditor-General will face sanctions if Parliament approves changes to the law seeking to enforce compliance.

This is after the Auditor-General tabled in Parliament a proposal to review the Public Finance Management Act, 2012, to make the implementation of audit recommendations mandatory for all public entities.

The proposals further seek to introduce and enforce sanctions on accounting officers in ministries, departments and agencies of government who fail to comply.

The Public Audit Act, 2015 requires the Auditor-General to state in audit reports how responsive a state organ or public entity has been in implementing past audit findings.

The Auditor General says Parliament and county assemblies’ have made several recommendations arising from the audit reports which are required to be implemented by constitutional commissions and independent offices.

“More specifically, over the years, a total of 827 recommendations made with respect to constitutional commissions and independent offices in their oversight capacity from Public Accounts Committee (PAC), Special Funds Accounts Committee (SFAC) and Public Investment Committee (PIC) and for which none has had its implementation status reported to respective legislative arms of government,” said Nancy Gathungu, the Auditor-General.

Ms Gathungu wants the PFM law changed to enforce action on the recommendations that are given every financial year but go unimplemented.

“We continuously propose audit recommendations to enhance the accountability, transparency and effective, economic and efficient collection and utilisation of resources,” she told a forum of constitutional commissions and independent offices.

“However, the accounting officers have not been implementing the recommendations which would have mitigated some of the current issues we are experiencing as a country.”

She cited the lack of an effective mechanism for follow-up on the implementation of audit recommendations and the lack of consequences or requisite sanctions for non-adherence as some of the reasons accounting officers do not implement audit recommendations.

“This has led to perennial failure by some accounting officers to adequately account for the management and use of public resources entrusted in their care,” Ms Gathungu said.

“It has also led to fiscal indiscipline including misallocations, wastage of resources, theft and corruption which in turn has affected development programmes thereby threatening the sustainability of service delivery and the wellbeing of the citizens.”

Ms Gathungu said her office has noted an increase in unsupported expenditures where the auditor has over the years recommended to entities to improve their record keeping in support of financial transactions.

“Although, there has been an improvement in the MDAs, with unsupported expenditures decreasing from Sh8.2 billion in the financial year 2016/17 to Sh3.35 billion in 2020/21, a lot still needs to be done because these are significant amounts that may indicate loss, wastage or misuse of public funds,” she said.

Ms Gathungu noted that the value of payments made for stalled projects implemented by government entities has been increasing each year. She said in 2016/17, Sh2.5 billion had been paid to incomplete projects or projects whose duration had been exceeded.

“This amount increased to Sh3.18 billion in 2020/21 despite the office of the Auditor General recommending that MDAs complete existing projects before embarking on new ones to ensure there is an adequate budget for the projects,” Ms Gathungu said.

She said pending bills have become a national issue as both the national and county governments owe suppliers.

“As at June 30, 2021, the national government presented information that it owed Sh359 billion to suppliers out of which MDAs owed Sh36.4 billion and State Corporations Sh323.2 billion," she said.

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