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OFFICE OF THE
CONTROLLER OF BUDGET
DOCUMENTATION OF
RECOMMENDATIONS MADE
ON PUBLIC EXPENDITURE
Supported by
ICPC
Documentation of Recommendations Made on Public Expenditure
EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
ACRONYMS
CHAPTER 1 .............................................................................................................................. 1
Introduction................................................................................................................................. 1
Public Finance in the New Constitution ....................................................................................... 2
How the Audit Process in Kenya Works ...................................................................................... 3
Despite the efforts by the said oversight institutions, recent public interest in the management of resources
in the public sector requires us to rethink our approach to public nances oversight. A cursory glance at the
local dailies, news channels and social talk over the last few months reveals questionable nancial
malpractices covering the entire spectrum in the public sector. From the collapsed Kshs.1.2 billion Sigiri
Bridge, 1.6 billion National Youth Service (NYS) Scandal, Standard Gauge Railway implementation
scandal, Afya Scandal to wheel barrows being purchased at Ksh.109,000 each at the county level; it seems
that Kenyans barely go one month without hearing of a corruption scandal.
The question begs, “Why does this corruption trend continue with a rapid increase of the amounts involved
despite the numerous agencies set up to control it?” Should we continue using the same methods we used
yesteryears to ght the war against fraud, corruption, wastage and abuse of public resources? Could we
then say that the Kshs. 2.6 trillion shillings proposed expenditure in the nancial year 2017/18 is safe
amidst the demonstrated nancial malpractices being experienced? This is a sad state of affairs as we strive
to become a middle income economy by 2030.
It may be argued that most of these oversight agencies come into the picture long after the horse has bolted.
They seem to be either too slow or too late in reacting to these malpractices in a deterrent manner. To add
on, the perpetrators drag the oversight agencies in long, frustrating litigation games that run into years,
many times without a conclusive end. There is need to strengthen institutions and mechanisms of ensuring
that most of these anomalies are detected, deterred and acted upon in real time.
This report serves to review and document recommendations made on public expenditure by specic
oversight bodies. These are the Ofce of Auditor General (OAG), Parliament, Controller of Budget and the
Ethics and Anti-Corruption Commission (EACC). This is with the aim to improve accountability in
government institutions by ensuring that public resources are utilized in a prudent and responsible manner.
This will serve to deliver services efciently and effectively to the citizenry.
The report also aims to sensitize stakeholders such as members of the public and development partners on
issues pertaining to budget implementation by the National and County Government entities in fulllment
of Article 35 of the Constitution of Kenya, 2010, Section 39(8) of the Public Finance Management (PFM)
Act, 2012 and Section 9(6) of the Controller of Budget Act, 2016.Such knowledge is essential to facilitate
and increase participation of the public in positively inuencing the budget execution of both the national
and county governments. It is envisioned that this report will contribute positively towards enhancing
accountability and integrity of the use of public nance in the country.
The provisions of the new Constitution have also enabled the transfer of key public nance responsibilities
from the executive to the legislature. Furthermore, some of the oversight institutions have been
reorganized and new independent constitutional ofces created by splitting the control function of the
Controller and Auditor General (CAG), for example, into two, i.e., the Controller of Budget (COB) and the
Auditor General (AG) under Articles 228–229.
Second, the Constitution extended the role of the COB to monitor budget execution and report on a
quarterly basis to Parliament.
Third, and perhaps most signicant, it overhauled the roles, functions and duties of the Treasury. As a
result, the Secretary of Finance (formerly the Minister for Finance) and the Principal Secretary
(formerly the Permanent Secretary, Treasury) were relegated to legislation. This is a complete
departure from the 1963 Constitution, which, in Chapter VII, gave very clear and distinctive mandates
to the Finance Minister, leaving the legislature to deal specically with matters of approval and
oversight.
In addition, Article 201 of the Constitution has laid down very good and basic principles of budgeting as
follows:
1. There shall be openness and accountability, including public participation in nancial matters.
2. The public nance system shall promote an equitable society and in particular:
i) The burden of taxation shall be shared fairly
ii) Revenue raised nationally shall be shared equitably among national and county
governments; and
iii) Expenditure shall promote the equitable development of the country, including by making
special provision for marginalized groups and areas
3. The burdens and benets of use of resources and public borrowing shall be shared equitably
between present and future generations.
4. Public money shall be used in a prudent and responsible way; and
5. Financial management shall be responsible, and scal reporting shall be clear.
These principles can only be achieved if the principle of good governance is observed by all
stakeholders.
1. Letter of understanding
This is sent out to the specic public institution before the audit commences, to explain the nature and
scope of the audit. This is aimed at arriving at common understanding about the terms of the assignment.
The letter informs both auditors and management on the expectations of the audit.
This back and forth engagement takes place numerous times until the queries are cleared or remain
outstanding, if not satisfactorily responded to by the management.
5. Management Letter
This letter is issued to the Accounting Ofcer and includes all unresolved audit ndings and exceptions
arising from the audit exercise. Management is requested to respond tithe audit ndings within a specic
timeline after which the Auditor- General is under obligation to issue the report as it is. When
management's response is received, the same is veried and the audit ndings are either retained, dropped,
or kept in view (to be checked in the next audit); depending on the materiality (signicance) of the ndings,
and response provided.
8. Reporting to Parliament
In line with relevant Constitutional provisions, audit reports are submitted to Parliament or the relevant
County Assembly. National Assembly Committees which receive audit reports include Public Accounts
Committee and Public Investments Committee for National Government Accounts and State
Corporations Accounts, respectively. At the Senate, there is Public Accounts and Investments
Committee. Reports for County Governments are received by the Public Accounts and Investments
Committees at the respective County Assemblies.
At the National Assembly, the Public Accounts Committee (PAC) discusses audit reports formational
Government entities while the Public Investment Committee (PIC) discusses those for State Corporations.
At the Senate, the Public Accounts and Investments Committee of the Senate discusses audit reports for the
County Governments and County Corporations. On the other hand, the County Assemblies Public
Investment and Accounts Committees (PIACs) discuss reports for the County Governments, County
Assemblies and County Corporations.
The deliberations by the relevant watchdog committees involve inviting key ofcers from the various
entities to respond to the audit queries. The public hearing sessions are open to members of the public.
Figure 1:
The Audit Process in Kenya
Article 229 (4) species that within six months after the end of each nancial year, the Auditor-General
shall audit and report in respect to that nancial year on the accounts of National and County government,
accounts of all funds and authorities of the National and County governments, the accounts offal courts,
accounts of every Commission and Independent ofces established by the Constitution, accounts of the
National Assembly, the Senate and the County Assemblies, accounts of political parties funded from
public funds, the public debt and the accounts of any entity that legislation requires the Auditor General to
audit.
In addition, Article 229 (6) of the Constitution requires the Auditor-General to conrm whether or not
public money has been applied lawfully and in an effective way. The Ofce is mandated to provide
assurance unaccountability of public resources through; Certication of Accounts, Continuous Audit
presence and Service Delivery to all Kenyans.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
nancial statements. It also includes evaluating the accounting policies used and signicant estimates
made by Management, as well as evaluating the overall presentation of the nancial statements. Further, it
includes procedures to determine whether public money has been applied lawfully and in an effective way.
The new Constitution envisaged a new concept of auditing requiring the Auditor-General not only to look
at the scal and managerial accountability aspects of auditing, but to also conrm that the programmes
implemented lead to results and outcomes that positively transform the lives of our people.
The role of the Ofce of the Auditor-General in the accountability process is summed up below:
Figure 2:
Summary of the Role of the Auditor
General in the Accountability Process
b) 2014/2015 Budget
In 2014/2015 the Approved Estimated Gross Expenditure was Kshs.2,099,370,186,391 while approved
Appropriations-In-Aid (AIA) were Kshs.401,419,514,999 resulting in Net Approved Expenditure of
Kshs.1,697,950,671,392 as follows:
As shown above, 40% of the approved net expenditure was budgeted for meeting the National
Government recurrent expenditure and 21% for development expenditure. Consolidated Fund Services
including repayments of Public Debt accounted for 26%, while County Governments accounted for 13%
of the total budgeted net expenditure.
The 2014/2015 gross budget of Kshs.2,099,370,186,391 was shared between the National Government
and the County Governments at the ratio of 89% and 11% respectively as follows:
Figure 4:
FY 2014/2015 Gross Estimated
Expenditure Share between National
and County Governments
1. Unsupported Expenditure
During 2014/2015, a number of Ministries, Departments, Commissions and Funds failed to avail
documents in support of various expenditure totaling 7,321,277,260 which was a signicant improvement
compared to the previous year where Kshs.66,782,697,987 was unsupported.
In absence of the records and documentation, the propriety of the expenditure of Kshs. 7,321,277,260
could not be ascertained and therefore these public funds may not have been utilized lawfully and in an
effective manner.
3. Pending Bills
During the year ended 30 June 2015, a number of Ministries and Departments did not settle bills
amounting to Kshs, 43,212,107,778 which was an increase of 160% from the previous year's gure of
Kshs.16,638,164,142. The gure of Kshs 43,212,107,778 comprises of Kshs. 17,168,420,458 and Kshs.
20,731,068,491 under Recurrent and Development Votes respectively and a further Kshs. 5,312,618,829
not classied. The bills were instead carried forward to 2014/2015 nancial year.
However, the total outstanding imprests of Kshs. 117,553,816 for the current year signicantly reduced
by Kshs.233,489,395 or approximately 67% from Kshs.351,043,211 reported as outstanding as at 30
June 2014.
In addition, the ministries and departments continued to prepare their respective nancial statements on
Cash Basis of accounting as instructed by National Treasury. This implies that capital assets are expensed
as a result of which Statements of Assets as at the end of each nancial year do not show a complete and
true and fair view of the ministry's or department's assets.
As at 30th June 2015, the OAG was not in a position to ascertain what each ministry/department owned.
Consequently the net worth of the Government of Kenya as a whole could not be determined.
In line with this mandate, the OCOB prepared the First Half Budget Implementation Review Report for FY
2016/17, covering the period July to December, 2016. The report provides the status of budget
implementation review during the reporting period to Parliament. While monitoring budget
implementation, the Ofce identied cross-cutting issues that hampered budget execution in the reporting
period. Recommendations were provided on how to address the identied challenges.
In the period under review, MDAs had delays in uploading of procurement plans and budgets in IFMIS,
which interrupted their planned activities as work plans could not be implemented.
Ø It is recommended that the Public Sector Accounting Standards Board (PSASB) review this matter
and develop guidelines in line with international best practice.
Other factors that affected budget implementation during this period included the doctor's strike, which
interrupted service delivery in the health sector and the widespread drought that has resulted in budget
reallocations to augment the Contingency Fund.
While budget revision is permitted under Article 223 of the Constitution and Section 44 of the PFM
Act,2012, the timing of Supplementary Budgets should allow sufcient time for implementation of
activities. When supplementary budgets are approved towards the end of the nancial year,
implementation of activities by the MDAs may be hampered.
However, IFMIS is not always updated to capture A-I-A generated by the MDAs. Therefore, nancial
reports generated from the system may be incomplete and could lead to MDAs reporting higher
expenditure than the released exchequer issues.
Conclusion
There is need for concerted efforts by all players to address the challenges identied in order to improve on
budget implementation. Specically, the MDAs should address the operational challenges while the
Public Sector Accounting Standard Board should review the current system of expensing funds transferred
to the SAGAs as Capital Transfers and issue guidelines based on international best practice on the
accounting treatment of capital transfers.
3.3 COUNTY GOVERNMENTS BUDGET IMPLEMENTATION REVIEWS
The OCOB is also responsible for examining the budget performance by the forty seven counties. This
audit is based on analysis of nancial reports submitted to the Controller of Budget by the County
Treasuries, the Approved County Budgets, and reports generated from the Integrated Financial
Management Information System (IFMIS). The information contained in the audit report is useful to
Parliament and the public at large in tracking budget implementation. It is also useful in monitoring budget
implementation by the County governments.
The audit report indicates that overall absorption of funds improved marginally to 32.13 per cent in FY
2016/17 compared to an absorption rate of 31.3 per cent recorded in the rst half of FY 2015/16.
The OCOB observed that most counties made progress in addressing some of the challenges highlighted in
previous CBIRRs, such as; capacity building of technical staff, adoption of IFMIS, and compliance with
budgetary timelines. However, the OCOB observed with concern that some of the challenges identied in
previous years were yet to be addressed. Some of the cross-cutting challenges included:
For the FY 2016/17, the National Treasury did not fully adhere to the Disbursement Schedule. This
affected execution of budgeted activities. A total of Kshs.116.25 billion was disbursed to the Counties out
of the expected Kshs.143.57 billion as at 31st December, 2016.
Factors that affected budget implementation of counties in the FY 2015/16 are as follows:
ii) Establishment and Operationalization of the County Budget and Economic Forums (CBEF)
Section 137 of the PFM Act, 2012 requires a county government to establish the County Budget and
Economic Forum (CBEF) to provide means for consultation on matters relating to budgeting and nancial
management at the County level. While most of the Counties have constituted the CBEF in line with the
provisions of Section 137 of the PFM Act, some counties are yet to establish the CBEF.
During the reporting period, it was noted that some County Treasuries delayed in submitting their nancial
reports leading to delays in the preparation of County Budget Implementation Review Report (CBIRR).
Delay in the approval of key budget and planning documents by the County Assembly negatively affects
the budget process timelines provided under Section 117 and 126 of the PFM, Act, 2012 and overall budget
implementation.
vi) Failure by the National Treasury to Disburse Funds based on the CARA, 2015 Disbursement
Schedule
The National Treasury did not fully adhere to the disbursement schedule approved by the Senate in
releasing funds to the Counties in FY 2015/16. Counties therefore, lacked certainty on when to expect
disbursements, which affected planning of activities. This implied that some planned activities could not
be implemented on time.
The accumulation of huge pending bills negatively affects the business community.
ix) Failure by the National Treasury to disburse funds based on the approved Cash Disbursement
Schedule
The National Treasury did not fully adhere to the Disbursement Schedule approved by the Senate in
releasing funds to the Counties in FY 2015/16. Therefore the Counties lacked certainty on when to expect
cash disbursements, which affected timely implementation of budgeted activities.
The OCOB has observed enormous progress made by the Counties in budget implementation since
transition to devolved governments in 2013. The success of devolution will largely depend on how the
National and County Governments utilize the scarce resources in implementing planned activities
geared towards stimulating growth and development, creating employment opportunities, creating
wealth and ultimately attaining the high standard of living for Kenyan citizens in line with Vision
2030.
The mandate of the Commission is to combat corruption and economic crime in Kenya through law
enforcement, prevention, public education and promotion of ethical standards and practices. Apart from
the Act aforesaid and the constitutional mandate conferred on it specically in enforcement and ensuring
compliance with chapter Six of the Constitution, the Commission also derives its statutory mandate from a
number of other statutes namely, the Anti-Corruption and Economic Crimes Act of2003, the Leadership
and Integrity Act, 2012 and the Public ofcer Ethics Act, 2003.
It was envisaged that after the presentation of the reports, the County Executive and the County Assembly
would prepare plans/matrixes for implementation of the recommendations. The plans/matrixes are to be
submitted to EACC within a period of one month from the date of the presentation of the reports. The plans
will be used to assist EACC to continuously monitor the progress on implementation and to address any
emerging issues.
i) Financial Management
a) Lack of Fixed Assets Registers – almost all the assessed County Executives and County
Assemblies do not have comprehensive Fixed Assets Registers.
b) Lack of title deeds and log books for assets owned by the County Executives and Assemblies. For
example in Kwale, Tharaka Nithi and Laikipia County Executives;
c) Use of manual systems that may lead to misappropriation of Revenue;
d) Use of casual employees in revenue collection;
e) Failure to maintain some important books of accounts, and in some cases where they are
maintained they are not promptly updated;
f) Unsupported payment vouchers. For example in Tharaka Nithi CE, Kisii County Executive among
others. In Kisii CE, A payment to a contractor for the construction of Kiogoro washrooms of Kshs:
1,000,000 paid on 25thSeptember, 2014 lacked the approved requisition to procure, invoice and the
level of completion certicate in the same CE A payment to Geosan Enterprises of Kshs: 49,920
paid on 24th September, 2014 for the supply of DSTV services/goods lacked the tender award
document, inspection and acceptance certicate, contract/LPO document, goods received note and
delivery note.
g) Delay in surrender of imprests and in some cases issue of multiple imprests to staff contrary to the
provisions of the Public Finance Management (County Government) Regulations, 2015. This was
a common nding in most of the assessed County Executives and Assemblies.
h) Lack of Audit Committees. E.g. in Kwale County Executive at the time of the assessment, the audit
committee consisted of the Deputy Governor as chair and some member of the CEC as members.
In Tharaka Nithi and Kili County Executives, the Audit Committees had not been established at
the time of the assessment
ii) Procurement
a) Use of contractors and suppliers who have not been prequalied by the County Executive and
Assemblies;
b) Lack of an effective mechanism for inspection and acceptance of delivered items which may lead
to ctitious payments;
c) Weak stores management / control procedures;
d) Failure to disclose evaluation criteria in the bid documents, which may lead to biased award of
Tenders.
The mandate of the Commission is to combat corruption and economic crime in Kenya through law
enforcement, prevention, public education and promotion of ethical standards and practices. Apart from
the Act aforesaid and the constitutional mandate conferred on it specically in enforcement and ensuring
compliance with chapter Six of the Constitution, the Commission also derives its statutory mandate from a
number of other statutes namely, the Anti-Corruption and Economic Crimes Act of2003, the Leadership
and Integrity Act, 2012 and the Public ofcer Ethics Act, 2003.
It was envisaged that after the presentation of the reports, the County Executive and the County Assembly
would prepare plans/matrixes for implementation of the recommendations. The plans/matrixes are to be
submitted to EACC within a period of one month from the date of the presentation of the reports. The plans
will be used to assist EACC to continuously monitor the progress on implementation and to address any
emerging issues.
County Governments should also strive to implement the views of the public that were shared in the
budgeting process in order to sustain public trust.
Once the Auditor General has nished his/her report, the report is then tabled with the Publics Accounts
Committees (PACs) in the different assemblies at the respective level of government. Article 229 (8) of the
Constitution requires that within three months after receiving an audit report, Parliament or the County
Assembly shall debate and consider the report and take appropriate action. The PACs review the report to
identify the most important issues regarding potential misuse of funds and lack of accountability for funds
and then take some type of action.
The action in the rst instance normally involves calling the ofcers that are being questioned in the report
to come and give responses to what the auditor has raised. Often times however, ofcers are very slow to
respond to the auditor, therefore sometimes the auditor will have a negative nding against an ofcer
because they didn't provide information, and by the time the PAC are reviewing that report, the ofcer is
able to nd the documentation, avail it to the auditor, and the audit issue is then cleared.
One can also nd that most of the issues raised are actually cleared by the time the public accounts
committee is reviewing the report. However a number of other issues will not have been cleared and those
are issues the PAC needs to focus on and nd out what is the problem with a particular case. In such a case,
the accounting ofcer will be called to explain the irregularity, if they are unable to give a satisfying
explanation, then that accounting ofcer should be sanctioned. There are sanctions in the PFM Act for
ofcers who do not account for funds. If there is enough evidence that this is a criminal issue, then the
police or the Director of Public Prosecutions should get involved.
However, more often than not, there is a lot of delay in the review of these reports, and the PACs do not
have the capacity to read and understand the complex issues and transactions of these reports.
“The Public Accounts Committee (PAC) shall be responsible for the examination of the
accounts showing the appropriations of the sum voted by the House to meet the public
expenditure and of such other accounts laid before the House as the committee may think t”.
The primary mandate of PAC is therefore to oversight the expenditure of public funds by
ministries/departments, to ensure value for money and adherence to government nancial regulations and
procedures. The Committee executes its mandate on the basis of annual and special audit reports prepared
by the Kenya National Audit Ofce (KENAO).
1. Expenditure Control
Excess Expenditure incurred during 2012/2013 without Parliamentary approval totaled Kshs. 38,495,253
compared to Kshs.7,048,222,153 recorded in the previous year. This Excess Expenditure of Kshs
38,495,253 was incurred under four (4) Votes as follows:
Recurrent Expenditure
Vote Department/Agency/Commission Excess Vote (Kshs)
127 Witness Protection Agency 5,374,255
165 Commission for Implementation of Constitution 4,219,055
Development Expenditure
Vote Department/Agency/Commission Excess Vote (Kshs)
126 Judicial Department 15,310,912
207 Public Service Commission 13,591,031
Total 38,495,253
The Excess Expenditure of Kshs 38,495,253 did not taken into account pending bills of Kshs.
43,634,365,991 which, though relating to 2012/2013, were however not settled in that year but were
instead carried forward to 2013/2014, as discussed in the ensuing paragraph.
It was the Committee's considered position that expenditure without Parliamentary approval constituted a
grave violation of the Constitution and must be severely punished and cease forthwith.
2. Pending Bills
During the year ended 30th June 2013, a number of Ministries and Departments did not settle bills
amounting to Kshs 43,634,365,991 comprising Kshs. 12,198,920,189 and Kshs. 31,435,445,802 under
Recurrent and Development Votes, respectively, but were instead carried forward to 2013/2014. The
Ministry of Roads topped the list with bills amounting to Kshs 21,324,630,000 followed by Defense at
Kshs 4,463,081,171 and IEBC at Kshs 4,045,023,700.
And if indeed this paradox is in fact the reality; that it is true surpluses do exist while government continues
to bear costly decits, then this raises serious questions on Treasury's ability and capacity to manage the
budget.
4. Collection of Appropriations-In-Aid
The Actual Total Appropriations-In-Aid realized in the year under review amounted to
Kshs.161,103,373,462, against estimated receipts of Kshs 246,324,086,619 resulting in a deciency of
Kshs 85,220,713,157. The deciency represented approximately 35% of the estimated collections and
was mainly recorded under the Development Votes, where collections of Kshs 91,266,520,041 were
realized against estimated receipts of Kshs.159,291,712,053.
The Committee noted that failure by ministries/departments to comply with the conditions agreed with
development partners has been a major contributing factor; but development partners also contribute
signicantly to this problem by setting sometimes impossible conditions, including the insistence on
retention of original accounting documents.
It is, however, noteworthy, that in a bid to address this challenge, the National Treasury had been
developing the Kenya External Resources Policy. The PAC emphasized the need to speed up the
completion of this policy.
5. Accounting Standards
During the year under review, the PAC noted several accounting errors in Appropriation Accounts. Most
signicantly, there were numerous cases of balances in Appropriate Accounts and those in Trial Balances
and Ledgers not agreeing or tallying. The Committee put this down to non-adherence to appropriate
accounting standards, which was a contributory factor for several audit queries.
6. Unsupported Expenditure
In FY 2012/2013, a number of ministries/departments failed to avail documents in support of various
expenditure totaling Kshs.33, 922,820,718 appearing in their respective Appropriation Accounts. Though
some of the documents were later submitted for audit verication after production of the audit report, most
of the audit queries remained unresolved as shown in the table below:
7. Imprest Control
The audit of temporary imprest revealed balances which ought to have been recovered or accounted for on
th
or before 30 June 2013 but were still outstanding as at that date, amounting to Kshs 633,178,658.
The Committee observed that Government Financial Regulations and Procedures on imprests as
supplemented by Treasury Circulars spelt out guidelines for management of imprests, and faulted
Accounting Ofcers for failing to enforce them leading to widespread malpractices.
Close to 60% of audit queries in this report had been resolved by way of belated action by Accounting
Ofcers upon being summoned by PAC. These would most probably have never been audit queries if the
Accounting Ofcers had sufciently and promptly responded to the Auditor General's Management
Letters. In most cases, Accounting Ofcers act on queries just when about to appear before PAC or when
ordered by the Committee during sittings. Common issues include:
1. Failure to provide documents at the time of audit;
2. Failure to provide footnotes; and
3. Failure to do reconciliations and provide explanations for differences between sets of records.
The Committee further noted that despite its directives to Accounting Ofcers to take certain specic
actions on audit queries, especially as regards resolving accounting matters after appearance, some
Accounting Ofcers still failed to oblige.
Despite the Committee's recommendations that all Accounting Ofcers take necessary action to resolve
outstanding accounting matters, no marked progress had been recorded. However, it is worthy to note that
a Taskforce had been established by the National Treasury to address the matter.
i) Expenditure Control
Stern action is taken by the Appointing Authority against Accounting Ofcer(s) and Treasury ofcials
responsible for this breach of the letter and spirit of the Constitution. The DPP should also seriously
consider prosecution. Further, the Cabinet Secretary, National Treasury must promptly institute stringent
measures to ensure scal discipline in the public sector.
v) Unsupported Expenditure
To address this, the PAC recommended that Accounting Ofcers:
(a) Should institute strict measures to ensure that their ministries/departments have in place proper
record keeping systems;
(b) Must ensure strict adherence to Section 68 of the PFM Act;
(c) Must be held personally responsible and be duly surcharged for all the unsupported expenditure.
Further, the Committee was quite frustrated by the unacceptably poor performance by some
Accounting Ofcers who made work difcult by their numerous requests to postpone appearance;
coming before the Committee unprepared; submitting poorly prepared, casual and unconvincing
responses; late submission of responses; and failure to furnish the ofce of the Auditor General with
advance copies of responses. The Committee observed that that this was reprehensible conduct that
compromises the audit cycle, and must be strongly discouraged by all means.
Every year, Parliament approves a budget for the Executive for the administration of the state business. At
the end of the scal year, the Executive is required to render an account of its stewardship to Parliament.
Since Parliament cannot verify the accounts submitted by the Executive, these public nance oversight
commissions and state agencies are mandated to audit these accounts and report its ndings to Parliament.
How effective have these institutions been in providing oversight and enhancing the integrity of our public
nance systems? In particular, this report reviewed the Ofce of the Controller of Budget, Auditor
General, Parliament and the Ethics and Anti-Corruption Commission to determine their effectiveness in
enhancing nancial accountability.
Over the recent years, the audited reports have brought to light various malpractices and theft that have
occurred in public ofces. These incidences of malpractices and theft have been met with public out roar,
with calls for action by civil society organizations, different lobby groups, the media and the general public
for the perpetrators to be brought to book. Sadly, this has not been the case. Many of the perpetrators;
alleged or otherwise, have remained untouched. Where legal action is sought after, it has often resulted in
long, frustrating litigation games that have run into years, many times without a conclusive end.
A case in point is the case of Bungoma County Government where eight ofcials were arrested by the
EACC on September 2015for breaching procurement rules in awarding a tender to Jagia Enterprise to
supply 10 wheelbarrows to the county at Sh109,000 each. The wheelbarrows would otherwise cost no
more than a total of Sh.54,000. In defending the purchases, the then Governor Ken Lusaka said, “The
information that I got from the veterinary department was that these were not the ordinary
wheelbarrows that we know. These were wheelbarrows that are made of stainless, non-carcinogenic
material and are used in the food industry.”The case is still ongoing to date. Meanwhile, the former
Governor was appointed as the speaker of the Senate in the 12th parliament.
The lack of action on identied perpetrators has failed to act as a deterrence of corruption as had been
envisaged by the new Constitution when establishing the OAG.
In terms of auditing, the OAG and COB have not totally answered the call of Constitution on
accountability. This can be attributed to some of the challenges the said ofces face in their quest for
public nance integrity as follows:
Secondly, both the ofce of the OAG and the COB are grossly underfunded. It is a fact that the national
budget has been steadily increasing over the years, yet the budget for accountability has remained the
same. This poses disconnect between the Treasury's desire for “efciency, effectiveness and
accountability,” and budget allocations to the Auditor General and the Controller of Budget. Thus, their
budgetary allocation is not commensurate with the intention of enhancing capacity. There is need to
increase budgetary allocation to the OAG if Kenya is to enhance nancial accountability.
Another challenge faced is that of duplication of efforts. The Auditor General and the Controller are
required to prepare reports on the use of nancial resources at both the national and county level. These
reports are then consolidated and presented to the National Assembly. This scenario presents a concern
over the potential duplication of effort in the preparation of these reports.
In addition, there has also been failure by the treasury to abide by the requirement that it should table
memorandum indicating to what extent it has implemented queries raised by the auditor general.
Consequently, this has slowed down the pace at which improvements within the nancial systems are
taken up and implemented.
A critical challenge faced by the OAG is that the nature of the Auditor General's functions requires
guaranteed independence for it to effectively discharge its duties and mandate. However, at present, the
Ofce's budget is negotiated with ofcials of the National Treasury. Although this has not yet done any
harm, it could lead to unwarranted pressure on the Ofce and result in the withholding of necessary funds
thus comprising its independence.
6.1.2 Recommendations to Strengthen the OAG's Ofce to Enhance Public Finance Oversight
In the current set-up, under Article 221(3) of the Constitution, the Auditor General Ofce's annual
budget estimates are prepared and submitted to the Cabinet Secretary responsible for nance who then
submits to the National Assembly estimates of the revenue and expenditure of the National
government. This arrangement undermines the OAG's absolute independence given that the National
Treasury is an entity subject to its statutory audit. To assure independence, there is need for the
Public Audit law to provide for direct submission of Auditor General's annual budget estimates
to the National Assembly. This model has been implemented in other jurisdictions successfully such
as Canada and United Kingdom.
Lastly, there should be a special unit of both the ofces of the Controller of Budgets and the Auditor
General within the Ethics and Anti-Corruption Commission to specically deal with audit issues at both
levels of government.
6.2PARLIAMENT
6.2.1 Barriers to Effective Fulllment of Parliament's Role
Parliament in Kenya still faces numerous challenges that have undermined its potential to effectively
perform its oversight functions where public expenditure is concerned. The challenges include:
In addition, there is no statutory provision on time limits within which government should respond to
Committee reports.
6.3 EACC
Secondly, most of the enacted anti-corruption laws such as the Ethics and Anti-Corruption Commission
Act, 2011 and the Leadership and Integrity Act, 2012 are weak, suggesting a lack of political will in the
ght against corruption and unethical conduct in the country. These laws need to be strengthened to
support implementation of chapter6 of the constitution and bolster the ght against corruption. However,
on 6th December 2016, the Kenya National Assembly passed the Bribery Bill 2016, which provides for
preventing, investigating, and punishing bribery. This is the missing link in the ght against corruption.
Thirdly, the Commission does not have powers to enforce implementation of its corruption prevention
recommendations.
To add on, County governments have been slow in mainstreaming the integrity and anti-corruption agenda
in their systems. Currently, most county governments are grappling with challenges of establishing robust
structures and systems to ensure transparency, accountability and good governance.
To address this issue, the Chief Justice, David Maraga, in December 2016 directed all applications
challenging corruption charges to only be heard by the Anti-Corruption and Economic Crimes Division of
the High Court that is located in Nairobi. This move was aimed to speed up the hearing of applications that
are usually led by suspects facing corruption charges.
Though noble, this move however impedes decentralization of governance and access to justice. In
essence the Chief Justice has stripped jurisdictional powers from other High Court judges. For example, if
cause of action arises at Busia, there is a high court judge there who can hear the case. But one would have
to travel all the way to Nairobi to le the case.
Secondly, the rules gazetted and published in the dailies were crafted without public participation. In
addition, they were unlawful because parliament did not approve them. This raises concerns on public
participation and decentralization on access to justice.
Secondly, various laws such as the EACC Act, 2011, and the Leadership and Integrity Act, 2012, will need
to be amended to support the ght, especially in strengthening the enforcement mechanism for Chapter 6
of the Constitution and support the ght at the county level. In addition, the Commission needs to partner
with the civil society in order to intensify lobbying for prosecutorial powers to enable it deal with
corruption cases efciently and effectively.
The ofces of the Controller of Budgets and the Auditor General should be strengthened at both the
national and county level. There should also be a special unit of both ofces within the Ethics and
Anti-Corruption Commission to specically deal with audit issues at both levels of government.
However, an assessment of budget reporting for all 47 counties for the nancial years 2016/17 and
2017/18 by the International Budget Partnership Kenya (IBPK) found that counties were not making
key scal and budget-related documents available to the public online in a timely fashion. A summary
of the ndings are as follows:
There is need for capacity building for county governments to ensure access to timely and comprehensive
information on county budgets. This is crucial if the wider public in Kenya is to meaningfully participate in
government decision making.
The Constitution of Kenya 2010 provides a clear set of principles that spell out the role of public nances in
promoting an equitable society, public participation in the budget process and transparent nancial
reporting. Public participation on nancial matters is therefore not a choice but a mandatory requirement
as enshrined in our Constitution and Public Finance Management Act (PFM), 2012. This is, therefore, a
potential area for engagement between CSOs, public oversight bodies and the public to provide support in
enhancing accountability of public funds.
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