KPLC on spot for misappropriating Sh2.5billion

Auditor General has revealed that Kenya Power engaged in erroneous spending totaling to Sh2.5 billion, including an outlay of Sh1.2 billion to pay salaries without the Treasury’s consent in the fiscal year that ended in June.

The most recent audit queries imply that the State-backed electrical utility has not yet addressed the procurement issues that have recently cost top executives their jobs.

It has been established that a Sh2.06 billion additional budget that was approved by the company’s board in May but not by the Treasury is the subject of the majority of the questions.

These money was allocated to employee costs, transformer maintenance, and system strengthening for the company.

In a report that has not yet been made public, the Auditor-General notes that “the board on May 4, 2022 approved a supplementary budget of Sh2.06 billion, consisting of Sh860 million for system reinforcement, trace maintenance, and transformer repairs, and Sh1.2 billion for staff cost deficit by June 2022.”

“However, there was no proof that management had asked the National Treasury for permission to implement the law’s provision for a supplementary budget,” adds the report.

According to the assessment, which was reported to the media, “there is a likelihood that unauthorised expenditure may well be made in breach of public finance management legislation.”

The corporation is also accused by the Auditor-General of breaking procurement laws when it hired generators for its Mandera and Lodwar power stations by issuing a direct contract for Sh185 million to power producer Aggreko Kenya.

Kenya Power asserted that by issuing the direct tender, it complied with the Public Procurement and Asset Disposition Act. It highlighted the need to guarantee the interoperability and standardization of the generators inside its system as justification.

However, the Auditor-General notes that additional suppliers may have provided the generators. The auditor also expressed concerns about a payment of Sh114 million made to a consultant for legal assistance with the renegotiation of power purchase agreements.

The Auditor-General claims that failure to execute under the contract would subject the power company to damages because the consultants were not required to provide performance security.

The electricity supplier is also charged with exceeding the allowed budget of Sh760 million by Sh50.6 million for insurance services.

According to the company’s rules, they were supposed to get full pay for the first two months of the suspension, half pay for the following two months, and then no pay until their cases were settled.

According to the investigation, “The Corporation may have overpaid employee workers who were on suspension and those who were required to take mandatory leave, leading to an overstatement of employee costs and misuse of public funds.”

The audit inquiries have once more brought attention to potential income leaks at the utility, which are primarily associated with erroneous purchase.

The company, which had huge financial reserves that allowed it to launch significant projects to expand its distribution network, was once listed among the Nairobi Securities Exchange’s most liquid companies.

The auditor has criticised Kenya Power for keeping 59 procurement officers who had been suspended in November 2021 pending an inquiry on full pay for the period of their absence in addition to asking questions about expenditures.

It has been noted that the staff members were put on leave until October of this year, when they were reinstated once the electrical distributor’s investigations were finished.

The company’s reserves, however, have been depleted by a string of procurement problems and claims that it was storing dead stock, which has hurt its profitability.

In an effort to turn around its financial situation, the corporation has been evaluating its procedures to stop the cash leakage.

On the strength of increasing electricity sales and lower operating costs, Kenya Power’s net income surged 27.6 times to Sh3.8 billion in the six months ending in December from Sh138 million a year earlier.