Economy

Ouko faults cash-to-poor deals with Equity, KCB

elders

Elderly residents during a past launch of a cash transfer programme in Nyeri. PHOTO | JOSEPH KANYI | NMG

Two commercial banks are on the spot for levying disproportionately high charges on the cash deposited in their accounts for onward transfer to extremely poor citizens.

Auditor-General Edward Ouko says the agency agreements that the Social Protection ministry signed with Equity #ticker:EQTY and KCB Group #ticker:KCB are skewed in favour of the lenders.

Under the agency agreements, the ministry paid a commission of Sh167,745,360 to KCB in the year to June 2018 to distribute Sh13 billion to the vulnerable groups under the three cash transfer programmes.

The ministry did not earn any interest on a balance of Sh2.86 billion that remained unpaid to the beneficiaries beyond the stipulated 14 day-period.

Similarly, a commission of Sh75.79 million was paid to Equity to disburse Sh4.5 billion to beneficiaries yet the State did not earn any interest on the Sh2.9 billion that remained unpaid to the beneficiaries beyond the stipulated 14-day period.

“State Department of Social Protection did not earn any interest on the balances as the agency agreements only provided for commissions payable to the banks but had no clause on interest accruing on the funds held by the two banks,” said Mr Ouko.

He said the State department continues to be deprived of interest, which could have been earned.

Transactions cycles

He said a review of the cash transfer records for the year ended June 2018 showed that in the six transactions cycles for July 2017 to June 2018, a total of Sh13 billion was sent to KCB for onward transmission to beneficiaries out of which Sh11.3 billion was paid leaving a balance of Sh1,774,948,000 translating to absorption rate of 86 per cent.

In the same period, Sh4.5 billion was sent to Equity Bank out of which Sh3.4 billion was paid to the beneficiaries leaving a balance of Sh1.1 billion translating to an absorption rate of 76 per cent of the total funds disbursed.

“No reasons were given for the low absorption rate of cash transfers to the beneficiaries yet the cash payments were based on registered beneficiaries,” Mr Ouko said in qualified opinion tabled in Parliament.

Postal Corporation

He also revisited an earlier audit query on unpaid cash transfers balances still held by a service provider, Postal Corporation of Kenya.

Mr Ouko said the department contracted Posta as an agent to deliver cash to vulnerable beneficiaries.

“However, after the expiry of the contract between the State department and the agent PCK, a balance of Sh169.3 million remained unpaid. As of June 30, 2017, the agent had not refunded the unpaid balances,” he said.

Mr Ouko said a review of the matter during the year 2017/18 audit revealed that the status had not changed.