The Kenya Bureau of Standards (Kebs) is now technically insolvent after sinking into a Sh1.5 billion budget deficit, making it the latest institution that will now be fully reliant on the taxpayer to remain afloat, the Auditor-General has said.
Nancy Gathungu says in a report to Parliament that Kebs financial deficit increased by Sh1.39 billion from Sh99.32 million in the year ended June 2020 to Sh1.49 billion in 2021.
Ms Gathungu raised the red flag on the sustainability of services by Kebs saying the financial position reflects current liabilities balance of Sh2.23 billion against current assets of Sh1.06 billion resulting in a negative working capital of Sh1.16 billion.
“In the circumstances, the bureau is technically insolvent and the financial performance has been prepared on the assumption of continued support from the national government, bankers and creditors,” Ms Gathungu said in an audit of Kebs books of accounts for the year to June 2021.
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The Kebs is mandated to check the standards of all imported goods to ensure the safety of consumers.
Kebs also undertakes the provision of testing and calibration facilities and control of the use of standardisation marks.
Ms Gathungu also cast doubt on the budgetary controls and performance of the standards body in the year under review.
She said Kebs' actual revenue was Sh4.38 billion against the final budget of Sh5.74 billion resulting in a shortfall of Sh1.36 billion or 24 per cent of the budget.
“Further, the statement reflects the actual expenditure for the year as Sh5.87 billion against the final budget of Sh5.24 billion resulting in an over expenditure of Sh629 million or 12 per cent of the budget,” Ms Gathungu said.
She said the management attributed the shortfall in revenue to low demand for its services during the Covid-19 pandemic period.
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The management also attributed the over-expenditure of the budget to legal expenses incurred in the year under review.
The Supreme Court last year ordered Kebs to pay a Dubai-based firm Sh1.6 billion as compensation for a breach of a fuel inspection it issued 11 years ago.
The apex court judges rejected a request to review a judgment it passed in December 2020 that found Kebs liable for breach of the contract awarded to Geo-Chem Middle East in 2009.