Kenyan taxpayers risk losing more than Sh30 billion in doubtful state corporation loans that have been reported differently in official government records, Auditor- General Edward Ouko has said.
Mr Ouko says in his report to Parliament that parastatals closed the 2015/2016 fiscal year with Sh572.2 billion in outstanding loan balance – which was also the opening balance for the 2016/17 fiscal year, when the debt grew 39 per cent or Sh221.5 billion to stand at 793.7 billion at the end of June 2017.
At least 18 State-owned companies had independently confirmed their outstanding loans for the fiscal year 2014/15 as Sh117.5 billion as opposed to the Sh150.2 billion that appeared on official Treasury documents, causing the auditor to doubt its accuracy.
“The resulting variance of Sh32.63 billion was not reconciled or explained casting doubt on the accuracy of the outstanding loan balance of Sh572.2 billion carried forward to the 2016/17 financial year,” Mr Ouko says in his report on outstanding loans for the year ending June 2017.
“In the absence of the circularisation and elaborate reporting instruments, there is high likelihood of holding onto non-existent balances and eventual loss of public funds,” the report says.
The inconsistencies saw Mr Ouko render adverse audit opinion on the outstanding debt, which includes loans parastatals owe the government as well as those guaranteed by the exchequer.
Power generator KenGen #ticker:KEGN accounts for the largest loan among the 18 parastatals whose numbers did not add up. The firm is listed in official government records as owing Sh79.46 billion at the end of June, 2015, while confirmed debt amounted to only Sh64.1 billion.
Electricity distributor Kenya Power #ticker:KPLC also holds a significant portion of the doubtful debt, having been reported as owing Sh34.6 billion against a confirmed amount of Sh31.5 billion.
The two power firms are among the biggest parastatal borrowers among that have taken huge debts to finance capital intensive yet critical expansion projects as part of the quest to meet rising demand for power and increase connectivity.
The Treasury has often guaranteed the huge loans for these state firms, especially those coming from foreign lenders.
Other parastatals with significant variance in reported and confirmed debt include Kenyatta University at Sh10.9 billion and Sh4.7 billion respectively, and the Lake Victoria South Water Services Board, with Sh5.7 billion reported loans that stood Sh3.4 billion higher than the confirmed amount of Sh2.3 billion.
Mr Ouko adds in the report that out of the Sh793.7 billion in outstanding debt as at June 2017, Sh21.9 billion was classified as non-performing or dormant — some dating back to the 1980’s.
That pile includes money borrowed by the collapsed Uplands Bacon (Sh26.2 million due in 1981) and Ramisi Sugar factory (Sh15.8 million due in 1988).
Significant loans classified as dormant include Sh7.6 billion on the books of Local Government Loans Authority and Coast Water Services Board’s Sh6.8 billion.
Others are Sh2.5 billion owed by the National Water Conservation and Pipeline Corporation, Sh1.4 billion owed by the Rift Valley Water Services Board that was due for repayment in November 2011 and Sh1.06 billion from Eldoret Municipal Council (succeeded by Uasin Gishu County) that was due in June 1999.