Before we talk about serious stuff, let me take you through a few words I learnt through this whole experience. The auditor’s language referred to as budget Audit terms;
- Unsupported expenditure: This means that there was an expenditure reported by a ministry but there is not enough documentation to be sure that the spending was authorized, or that goods and services were received for the expenditure.
- Excess Expenditure: This is when a ministry overspends its budget without authorization. A ministry has a “vote” of spending that is basically when Parliament tells them how much they can spend. If the vote is exceeded without proper authorization, then this is called “excess expenditure” or “excess vote”.
- Pending Bills: These bills arise when a ministry commits to pay for goods and services, and receives those goods and services, but does not settle the bill during the financial year. Pending bills are a problem because the government works on a single-year budget and a ministry must have cash and book expenditure when it happens. All money that is not spent is returned to the Treasury to be budgeted afresh the next year. There is no basis for carrying forward commitments.
- Imprests: These basically cash advances when government officers travel or attend meetings that must be returned or accounted for with proper records. They are often not returned or accounted for and sometimes officers who have failed to account for them are allowed to obtain new imprests against government policy.
- The four types of statements can be summarized as:
Unqualified: This means that there are no problems with the documentation reviewed by the auditor and the ministry has managed funds properly.
Qualified: A qualified opinion is when the auditor has found some problems but they are not pervasive. Usually, these problems can be rectified fairly easily.
Adverse: An adverse opinion is when the auditor is able to review the ministry’s documentation, but the problems found are pervasive and will require considerable changes to rectify. This kind of finding should be of particular concern to oversight bodies.
Disclaimer: A disclaimer is when the auditor is unable to fully review the ministry’s documentation because there is a substantial amount of information that has not been made available. In such a case, the auditor feels unable to determine whether the situation is qualified or adverse because the paperwork is not adequate. This is a serious lapse in compliance and should be of major concern to oversight bodies.
NB: Out of 46 counties, ( apart from Kisii county Assembly Reports were not available for review) none of the counties financial reports got an Unqualified opinion from the Auditor General. The largest number falling under Qualified opinion by 22, followed by 17 counties with Adverse opinion and 6 counties financial statements got the Disclaimer opinion.
There were a number of issues I identified, aside from merely the financial aspect that riddled them. Some of these issues were also highlighted by the participants in their understanding. But I will focus on just 3 of them.
- Unsupported expenditure.
It means that a government ministry or a county department, reported to the auditor general that an expenditure took place, but the entity did not provide enough documentation to show that the expenditure was authorized, or that goods and services were received for the expenditure.
- All expense claims must be supported by adequate evidence (e.g. original copies of receipts, invoices or bills) that the cost has actually been incurred. Without evidence an expense should not be paid unless:
- There are exceptional circumstances e.g. loss of evidence due to theft or fire.
- It is reasonable out of pocket business expenses under 500 ksh where it was not possible to obtain a receipt e.g. parking meters, tube and bus fares, telephone calls from public and toll charges.
However, here in Kenya, this is not familiar and it may lead to loss of funds, which does not necessarily mean it is stolen. Often involve issues such as poor record keeping, lack of fiscal discipline and failure to follow stipulated laws on budgets (such as breaking procurement laws).
Back in 2012, the Auditor General, Mr. Ouko talked about the weakness and inadequacies in maintaining of account records. He warned that the situation will definitely be more complicated and intricate when county governments come on board as this problem will be devolved to all the 47 counties.
Mr. Ouko pointing out Kisumu County with the highest number of unsupported expenditure of over kshs 1.6 Billion. While the biggest spender/unaccounted for funds in terms of category falls under foreign and domestic travels, money was spent, yet no records of these trips ever taking place.
Some of the financial statements from the counties differed with the actual records, such as Uasin Gishu County where compensation of employees up to 9.8m could not be explained since the records were not on IFMIS.
When county departments prepare their statements on a cash basis, it would be impossible to tell what the government owns and owes.
For this infraction, there were 3 guilty counties. These counties are West Pokot, that was documented to have failed to observe the ⅓ gender rule and Kakamega county that also registered gross inequality issues. And Nyeri County where 92% of the staff comes from one tribe.
According to Section 65 of CGA promotes balanced ethnic composition in Government. Article 174(b) of the Constitution provides that one of the objects of devolution is to foster national unity by recognizing diversity. Section 7(1) of the National Cohesion and Integration Act,2008, stipulates that all public establishments shall seek to represent the diversity of the people of Kenya in the employment of staff.
Early this year, Nyeri County Nominated ward Rep lost her seat after High Court nullified her nomination following an election petition suit. Ms. Millicent Cherotich, who was nominated by Jubilee Party to represent marginalized groups in Nyeri.
“Can a person get married to another community and pursue interests of her community in her husband’s backyard?” One posed. Ms.Cherotich argued that she was nominated to pursue the issues of Kalenjins.
But The Constitution does not provide for ethnic representation but calls for community and cultural diversity in county representation.We should be a people that are driven more by equity than by equality because, whereas equality is concerned with the numbers(quantity) equity is concerned with fairness and addressing issues(quality). What quantity is to equality, quality is to equity. Affirmative action should not in any way overshadow transformative action.
- Establishing up Audit Committees
Any entity working without an audit committee is in the same boat as an airplane without sufficient fuel, traveling at high altitudes. The pilot knowledgeable of the lack of fuel compensates by flying high, in order to cover more distance on the way down. This seems wise at first, but it is a risk that could as easily go west and the resultant carnage would be horrendous.
County governments and their assemblies cheap out on getting audit committees arguing that they have county finance departments and the budgeting bodies so when reports like the Auditor general’s report come out, they are just as surprised as we are about their spending, and this makes it harder for the citizens to receive service delivery proportional to their consideration in terms of paying taxes and maintaining a good track record. There are so many counties that registered this as an issue. They include; Baringo, Mombasa, Wajir, Uasin Gishu and Embu.
These have been reported in previous years that the County Assemblies have not established an audit committee contrary to section 167(1) of the Public Finance Management ( County Government) Regulations 2015 which require each county government entity to establish an audit committee. A number of Counties have attributed the absence of the audit committee to lack of budgetary provision for the function and the same has been factored in the budget for financial year 2017/2018, though no documentary evidence has been provided to show that the committee will be in place any time soon. Consequently, the management has been in breach of the law.
This also goes hand in hand with the call for an organization of a documentation department that will sufficiently keep records and maintain the receipts and invoices for all county expenditure, just to ensure that everything is overboard.