The County Assemblies of Nairobi, Migori and Vihiga are among the assemblies flagged over possible financial fraud since their financial reports contain gross misstatements.
They have also been cited over possible corruption and mismanagement of public funds.
In her report for the financial year 2022/2023, Auditor General Nancy Gaqthungu revealed how the three counties topped the country in questionable financial dealings that are unsubstantiated.
From unremitted salary deductions, and unauthorized expenditure to payment of salaries outside the payroll, the counties flouted regulations governing public expenditure.
Among the 47 counties, only three counties including Bungoma, Trans Nzoia and Marsabit got their financial books right with the auditor’s office, with 41 others still facing questions over their expenditures.
The books of accounts and underlying records of Bungoma, Trans Nzoia, and Marsabit agreed with the financial statements, and no material misstatements were found.
This essentially means the financial statements gave a true and fair view of the operations of the three counties
The Auditor General said that a majority of the counties are still grappling with unauthorized payments and out-of-budget expenditures according to the new findings on the financial dealings of devolved units.
The remaining 41 counties were awarded a qualified opinion, meaning that there is an area of uncertainty in their financial statements.
In Nairobi, the auditor pointed out that there was a variance of Sh 1,800,798,423 after a review of the financial statements against the ledger hence, the accuracy and completeness of the financial statement could not be confirmed.
Githungu pointed out that the City assembly breached the law by making a 37 per cent transfer from the County Revenue Funds (CRF) totaling Sh 1,748,810,398 above the maximum ceiling as regulated in Article 25 (1) of the Public Finance Management for County governments.
“The statement of receipts and payments reflects compensation of employees amount of Kshs.646, 213,322 as disclosed in the financial statements. The amount represents approximately 37% of the transfers from CRF of Kshs.1,748,810,398 being 2% percentage points over and above the maximum allowed ceiling contrary to Regulation 25 (1)(b) of the Public Finance Management (County Governments) Regulations 2015 which requires the expenditure set should not exceed thirty-five (35) percent of the County Government’s revenue. In the circumstances, Management was in breach of the law.” Githungu stated.
According to the report for the financial year 2022/23, of the sh 905 million, the county assembly could not account for Sh 258 million for unsupported salary advance, unsupported sh 36 million for foreign travels, Sh 12 million for unsupported local travels, Sh 279million unsupported motor vehicle reimbursements, and Sh310 million for misclassification of expenditure.
Irregular payment to service providers using imprest was also an issue noted by the auditor as the county Assembly made payments amounting to Sh 3,454,900 during the year under review as per diem and ground transport with no evidence of the procurement procedures to identify the facilitators or contractors not being provided for audit.
“The payment of Sh3,454,900 in respect of facilitation fees, per diem, and ground transport had no explanation provided by Management for the use of imprest in procurement and payment to service providers which amounts to direct procurement without justification.” She stated in the report.
Payment of legal fees came back to haunt Nairobi county, with figures showing that the assembly owes various law firms Sh38.7 billion as pending bills for legal services for the year under review.
The auditor said that despite the payment of millions in legal fees, there were glaring errors as some could not be supported.
A review of payment vouchers relating to the payment of legal services revealed that there were no contracts between the advocate and the County Assembly, no itemized fee notes, no detailed service provided by the lawyers upon which the fee note was based and no current status of the legal cases was provided for audit.
During the year under review, Nairobi county Assembly was exposed for deducting Pay as You Earn amounting to Sh64,007,354, National Hospital Insurance Fund (NHIF)of Sh3,576,750, and National Social Security Fund (NSSF) of Sh2400 which was not remitted to the respective institutions
This was contrary to Section 37(1) of the Income Tax Act, which states that an employer paying emoluments to an employee shall deduct therefrom, and account for tax thereon, to such extent and in such manner as may be prescribed.
Gathungu also noted that the assembly employed three staff members but no minutes of the recruitment were provided nor the minutes by the County Service Board to show adoption of the recommendation to recruit the said members.
She further revealed that the academic certificates were not submitted to the Kenya National Qualification Authority for validation and authentication.
Vital documents including ethics and anti-corruption reports on declaration of wealth and liabilities on first appointment, NHIF and NSSF registration certificates, and IPPD data capture sheets for the three were also not provided.
The report also states that the City County Assembly breached the law in the employment of partisan staff after they hired 200 against the set limit of 144.
The Speaker’s residence of the County Assembly of Nairobi City was awarded at a cost of Kshs.55,811,842 and a final completion certificate issued on 26 August, 2021 in respect of the project.
During the year under review an amount of Kshs.2,028,303 was paid to the contractor as the final payment.
“However, a physical inspection conducted on 10 November, 2023 revealed that the project was complete but the residence was not in use. In the circumstances, value for money on the expenditure of Kshs.55,811,842 incurred on the construction of the Speaker’s residence could not be confirmed.” Gathungu said in her report.
Additionally, the report exposes human rights abuses, poor internal audit systems, and violations of employment laws.
According to Gathungu, Nairobi county was one of the counties that got adverse opinions.
Others ills in the report are irregularities in legal contracts, illegal procurement and failure to implement e-procurement.
