How taxpayers lost billions to public officials, politicians

Kenyan taxpayers lost more than Sh2 billion in irregular payments to politicians and senior civil servants in the past financial year, a new report by the Auditor-General indicates.

The report, which was tabled in Parliament on Tuesday, shows that up to Sh2.1 billion may have been lost after it was advanced to senior public officials in the form of imprests but no paper trail left to confirm its use.

Edward Ouko, the Auditor-General, says a large chunk of the money was lost in unauthorised cash handouts and in projects that did not have parliamentary approval.

“The audit of imprests across ministries revealed major weaknesses that resulted in long outstanding imprests not cleared,” the report says, adding that some of the officials who took imprests have since died, left service or retired.

Mr Ouko says a large segment of the expenditure lacks supporting documentation, making it difficult to identify the holders of the balances.  

Imprest is money that is advanced to public officials for use in official functions and documents supporting the expenditure surrendered to the accounting officers.

The audit report says most of the imprests appeared to have been diverted to personal use, pointing to gross misuse of funds in government.

Mr Ouko’s findings on imprest add to the puzzle of Sh304 billion that government departments failed to account for in the year under review.

(READ: Audit shock at Sh304 billion that cannot be explained)

The Ministry of Agriculture tops the list of irregular users of imprest cash, having failed to account for Sh773 million. It is followed by the Ministry of Finance (now the National Treasury) with Sh490 million and Public Works with Sh224 million in disbursed allowances that are not accounted for.

Pending bills or expenditure that has not been authorised by Parliament also rose to a massive Sh4.5 billion in the year to June 2012, leaving the Treasury with the task of regularising the payments.

No documents

Though it is recognised that situations may arise that necessitate such expenditure, the audit report says most departments that spent such money had no documents to show for it.

Analysts said the persistence of and a deepening of the pending bills problem nearly four years after the government introduced a new law to resolve it reveals the extent to which systemic theft of public funds is rooted in public service.  

The Ministry of Provincial Administration and Internal Security (now Interior) topped the list of departments with the highest pending bills, having spent Sh1.6 billion that is yet to be paid followed by the Ministry of Public Works with Sh960 million and Medical Services with Sh279 million.

The Department of Immigration and Registration of Persons, which incurred Sh240 million without parliamentary approval, was fourth on the list and Home Affairs fifth with Sh214 million.

Public funds

The extent of misuse of public funds in the latest audit report lends credence to the then Treasury PS Joseph Kinyua’s estimation that up to one third of the national budget is lost to theft, corruption and waste every year.

Besides pending bills, ministries also incurred expenditure in excess of what Parliament had approved to the tune of Sh7 billion.

“Excess expenditure incurred during 2011/12 without parliamentary approval totalled Sh7,048,222,153 compared to Sh362,357,466 recorded in the previous year,” the report says.

The Ministry of Education topped the list of budget bursters, having exceeded its expenditure by Sh5.5 billion, followed by the Ministry of Justice and National Cohesion, which incurred Sh1 billion extra. Nearly 20 ministries spent a total of Sh5.2 billion but had no documents to support it.

The Public Health and Sanitation department had the highest unsupported expenditure of Sh1.9 billion ahead of the Ministry of Special Programmes and  Justice and Constitutional Affairs, which had not documents to support expenditure of Sh709 million and 697 million, respectively.

The Ministry of Education withdrew Sh7 billion from the Consolidated Fund on June 21, 2012 to cater for free primary and secondary education, but there was no indication of parliamentary approval, the Auditor-General says.

Mr Ouko further exposes the dire state of public finance in his finding that various ministries, departments and agencies’ assets could not be ascertained because the government is yet to adopt international public accounting standards.

“As at June 30, 2012, we do not know what each ministry/department owns and consequently the net-worth of the Government of Kenya as a whole cannot be determined,” he says.

The audit report shows that the Office of Vice President and Ministry of Home Affairs irregularly procured air tickets worth Sh30 million and incurred unsupported expenses of Sh124 million.

The report gives the example of a tender that the ministry awarded for the enhancement of security in Vice-President Kalonzo Musyoka’s residences in Karen, Tseikuru and Yatta but which the contractor abandoned before completion.

Contract value

The audit found that the contract value rose by Sh11 million to Sh114 million in the course of the work but no documents were kept to confirm this.

“Information made available further indicate that the contractor abandoned the project and moved out of the site on December 25, 2010 after payment of a total of Sh93,774,252.49. No explanation has been provided for the abandonment,” says the report.

State House also incurred unsupported expenses worth Sh131 million while the Office of the Prime Minister’s assets and liabilities were not supported by documentation.