Over Sh338 billion of the total government expenditure for 2011/2012 was unaccounted for even as the State struggles to raise fresh revenue through new measures like VAT.
Only 6 per cent of the Sh920 billion that the government spent (Sh55.2 billion) was fully accounted for, according to a new report released by the Auditor General Tuesday.
The damning report indicates that a further Sh561 billion lacked adequate supporting documents, highlighting the shocking loopholes that lead to the misuse of government funds.
Auditor-General Edward Ouko said about a third of the 252 financial statements of institutions he audited were either deliberately misstated or revealed fraudulent expenditure.
“We were very frustrated by their deliberate efforts to deny us information,” Mr Ouko said, referring to the accounting officers’ failure to provide documents to support their expenses.
Other expenditures were not authorised, he added.
The massive loss of government funds brings into focus a cash-strained government that is struggling to meet its most basic obligations including healthcare, food security and salaries for its workers. In the current year, for instance, the government widened the 16 per cent VAT net to cover a host of consumer products in a bid to raise additional revenue, which saw the price of basic commodities skyrocket.
Mr Ouko identified malpractices in government as absence of proof of payment, over-expenditure, unpaid bills and unaccounted for imprests by government employees.
Five government ministries spent Sh7 billion without parliamentary approval under recurrent expenditure. This is 20 times more compared to the figure recorded in the 2010/2011 financial year.
The Ministry of Education once again found itself under the spotlight of irregular spending after spending Sh5.5 billion on the free primary and secondary school programmes without parliamentary approval.
Plagued by scandals
The ministry has been plagued by scandals particularly since the introduction of free primary education in 2003.
The Ministry of Justice National Cohesion and Constitutional Affairs spent Sh1.1 billion while the Teachers Service Commission spent Sh403 billion without consulting Parliament.
In addition to this, ministries and departments did not settle bills amounting to Sh4.4 billion, forcing tax payers to shoulder this burden in the 2012/2013 financial year.
Michael Otieno, the governance advisor at the National Taxpayers Association, said the long and unregulated procurement process in the government was opening loopholes for theft of funds.
“Most of the government expenditure occurs at the end of the financial year when departments rush to finish their allocations, and this is where the bulk of the leakages happen,” Otieno said.
He proposes that public expenditure plans should be executed on a quarterly basis to avoid heaping the spend on the end of the financial year.
“We hope that the leakages will be investigated by the Ethics and Anti-Corruption Commission to ensure taxpayers start getting value,” Otieno said.
The department of provincial administration and internal security did not settle bills amounting to about Sh1.6 billion but instead carried forward such bills to 2012/2013.
The Ministry of Public Works had not settled an amount of over Sh960 million, revealing a lacklustre attitude towards accounting, and mismanagement of the tax payer’s money.
The Ministry of Special Programmes had over Sh538 billion carried forward to the next year under recurrent votes. Others in this list include the Department of Medical Services, and the Ministry of Immigration and Registration of Persons.
An expenditure of Sh5.2 billion was unaccounted for as several ministries and departments failed to provide documentary evidence for their expenditures. The Ministry of Public Health and Sanitation topped the list, failing to account for close to Sh2 billion of its expenditure.
The ministries for Special Programmes and Justice, National Cohesion and Constitutional Affairs registered an equally dismal performance, failing to account for Sh709 million and Sh697million respectively.
An amount of over Sh2.1 billion was revealed as imprests or advances of loans which ought to have been recovered or accounted for on or before June 30, 2012. The Ministry of Agriculture had total outstanding imprests of over Sh773 million; the Ministry of Finance had an advance of Sh490 million while the Ministry of Public Funds had over Sh490 million unaccounted for.
The audit report comes after one year of extensive investigation and assessment into the expenditure accounts of government ministries and departments.
The Auditor General said many ministries failed to adequately disclose their spending, had unclear balances reflected in the statement of assets and liabilities and failed to produce their trial balance as at June 30, 2012. They excluded expenditure from the appropriations accounts and issued un-reconciled or unsupported balances, he said.
Book-keeping errors and unexplained balances noted in the financial statements were other issues revealing loopholes in the accounting process.
“There is weak and inadequate maintenance of accounting records observed across a number of ministries and departments during the year. Material receipts and payments were not reflected in the cash books,” Ouko said.
Mr Ouko said the way ministries were preparing their accounts did not show “a complete and true view” of their assets and liabilities. He said this made it hard to determine the government’s net worth.
The auditor-general recommended that the government adopt either the Accrual or Modified Accrual Basis of International Public Sector Accounting Standard (IPSAS) to make accounting of public funds clear and precise.
The chairman of the Institute of Certified Public Accountants of Kenya (ICPAK), Mr Benson Okundi, says the loss of government funds “is quite abnormal in any scenario because all expenditure should have all the supporting evidence showing that it was incurred and used for intended purposes, to create value for the taxpayers.”
PIC Chairman Adan Keynan put the blame on the Coalition government. “This is a reflection of just how much people benefitted from the Coalition government, but we as the PIC are going to interrogate this spending and institute criminal proceeding where we find officers culpable,” he said.