The Youth Enterprise Fund (YEF) has accumulated Sh2.5 billion loans which have not been serviced for more than three years, signalling financial strains on the revolving fund created to help youth-owned enterprises access low-cost credit.
Defaulted repayments in revolving funds limit their functions because they limit the funds available for disbursement to the next borrower.
Auditor-General Nancy Gathungu said the Fund management did not explain the actions taken to recover the long outstanding amounts.
She said the statement of financial position reflects a balance of Sh2,748,379,102 in receivables from exchange transactions.
“However, a review of records revealed six loan categories with an amount of Sh2,463,644,828 which had not been serviced for a period of more than three years,” Ms Gathungu said.
“In addition, the adequacy of a provision for bad and doubtful debts amounting to Sh395,460,218 could not be established.”
Ms Gathungu said in the circumstances, the accuracy and completeness of the receivables from the exchange transactions balance of Sh2,463,644,828 could not be confirmed.
She also questioned Sh66,138,662 relating to loan repayments from unidentified borrowers, with some remaining unidentified for more than three years.
Ms Gathungu said the Fund’s management did not explain why reconciliations were not done to update and allocate borrowers accounts which could lead to the misstatement of receivables from the exchange transactions balance.
“In the circumstances, the accuracy and completeness of the receivables from exchange transactions balance of Sh66,138,662 could not be confirmed,” she said.
Further, the Auditor -General raised concerns over Sh180,363,789 which was held by a commercial bank and was irregularly paid to a company following the award of a supply contract.
She said this led to the conviction of the company and its directors for conspiracy to commit an economic crime, unlawful acquisition of public property, and falsifying documents.
“However, there was no evidence to indicate that the amount will be repaid to the Fund and therefore its recoverability is doubtful. In addition, no provision for bad and doubtful debts was made for this amount,” Ms Gathungu said.
“In the circumstances, the accuracy and completeness of the receivables from exchange transactions balance of Sh180,363,789 could not be confirmed.”
Ms Gathungu said the statement of financial position reflects an inventory balance of Sh36,600,500 which has been brought forward from the previous financial year.
She said the balance relates to automatic hatching machines that were procured during the financial year 2012/13.
The stocktake report for the period ended June 30, 2023, reflects that 853 and 52 pieces were being held at the National Youth Service (NYS) Ruaraka and NYS Mtongwe respectively, and they have been carried forward throughout the years without being disposed.
Further, Ms Gathungu noted that despite the inventories being slow-moving and likely to be impaired, no provision for impairment has been made.
She said in the circumstances, the accuracy and completeness of the inventory balance of Sh36,600,500 could not be confirmed.
Ms Gathungu drew the attention of management to note 24 to the financial statements which indicates that the Fund has been reporting losses over the past years.
During the year under review, the Fund had an improved performance, reporting a surplus of Sh5,168,982 compared to a deficit of Sh123,233,755 in the previous year.
Ms Gathungu said the poor performance over the last seven years has eroded the capital invested in the revolving Fund and impaired the ability of the Fund to discharge its mandate.
“This also casts significant doubt on the Fund’s ability to sustain its services in the foreseeable future,” she said.
Ms Gathungu said the statement of comparison budget and actual amounts reflect recurrent budget final and actual receipts on a comparable basis of Sh393,379,329 and Sh380,515,075 respectively resulting in an under-performance of Sh12,864,254 or 3 percent of the budget.
She said the Fund similarly spent Sh375,346,094 against an approved budget of Sh393,379,329 resulting in an under-expenditure of Sh18,033,235 or 5 percent of the budget.
“The underfunding and underexpenditure in recurrent vote affected the planned activities and may have impacted negatively on service delivery to the public,” Ms Gathungu said.
