The abridged version of the 2011/2012 FY audit report present in parliament (Media Brief)

Posted on October 9, 2013

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MEDIA BRIEF ON 2011/2012 CENTRAL GOVERNMENT AUDIT REPORT PRESENTED AND TABLED IN PARLIAMENT BY MR. EDWARD R.O. OUKO, THE AUDITOR GENERAL ON 8TH OCTOBER, 2013 AT 2.00 P.M.

  1. I.             INTRODUCTION

a)   Legal Mandate of the Office of the Auditor General

  • Office of the Auditor General is established as an Independent Office under Article 248(3) of the New Constitution.

 

  • The Auditor-General is appointed in accordance with Article 229 of the New Constitution.

 

  • The statutory duties and responsibilities of the Auditor-General are given in Article 229(4) of the New Constitution and Public Audit Act (2003).

 

This report provides a Summary of audit findings of the financial statements of Central Government of the Republic of Kenya for the financial year ended 30 June 2012. 

The scope of the audit in Central Government includes Ministries, Government Departments, Agencies and Funds.

b)  Description of the Audit exercise

The Auditor General carries out audits in accordance with International Standards on auditing.  Those Standards require that the Auditor General complies with ethical requirements and plan and perform the audits to obtain reasonable assurance whether the financial statements are free from material misstatement. 

An audit includes examining, on attest basis, evidence supporting the amounts and disclosures in the financial statements.  It also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation.

The Auditor General also considered the public entities’ internal control systems to determine his auditing procedures for the purpose of expressing an opinion on their financial statements.

To ensure that the execution of the National budget was in conformity with the provisions of existing laws, regulations and prescribed procedure, the audits essentially covered authorization and approval of expenditure, budget procedures, management of bank accounts and a review of the internal control systems set up by the audited entities.

c)   Definition of some key audit terms

Audit opinion

This is the final evaluation about the financial statements of an entity. This is arrived at by looking at the international accounting standards and adherence to the regulatory environment.

Unqualified opinion is a clean opinion meaning that the transactions by and large were recorded properly and in agreement with underlying accounting records.

Qualified opinion means that although by and large the transactions were recorded and in agreement with the underlying records, there were cases where the Auditor General was unsatisfied with the veracity of certain expenditures, which in his view were not significant. Hence, except for such unsupported expenditure, the accounts reflect by and large a true and fair situation.

Adverse opinion means that although the transactions were recorded and there were books of accounts, the Auditor General was unsatisfied with the veracity of significant amounts of expenditure. Consequently, the Auditor General could not give a clean or unqualified opinion. Hence, an adverse opinion.

Disclaimer of opinion is serious and means that there was no basis upon which the Auditor General could satisfactorily undertake an audit because of unreliable accounting records, lack of proper documentation and explanations. Consequently, the Auditor General would neither give a qualified nor an adverse opinion.

Exchequer

This is the main government account where all funds are received. It is also referred to as consolidated funds by parliament. These funds are transferred to paymaster accounts for distribution within government according to the budget.

Financial statements

These include the following five categories:

-Profit and loss accounts: Profit and assets

-Balance sheet: assets and liabilities

-Statement of change in equity: Shows source of funds used for that year

-Cash flow statement: Shows in-flow and out-flow of money

-Notes to the accounts: Explain all the figures in the balance sheet and income and expenditure

Materiality

These are factors influencing audit decisions / opinions eg amounts involved, history of auditee, public interest etc .

Misstatement

This is deliberate misinformation by an auditee.

Statement of accounts- development

These are reflections of funds spent on projects

Statement of accounts- recurrent

These are funds spent to meet routine expenses like salaries, motor vehicles, logistics etc.

 

 

II. MAIN FINDINGS OF THE REPORT

a) Summary of budgetary performance for 2011/2012

1. Expenditure Accounts

Key message (s) by AG:

In 2011/2012 the Approved Estimate Gross Expenditure was Kshs.1,170,478,418,074 and Appropriations-In-Aid (AIA) of Kshs.213,846,548,582 resulting to Net Approved Expenditure of Kshs.956,631,869,492 as shown below:-

 

Gross Expenditure

 

Kshs

AIA

 

Kshs

Approved Net Expenditure

Kshs

Recurrent  Vote

 

578,394,336,704

 

74,452,067,201

 

503,942,269,503

Development Vote

 

382,614,041,792

 

139,394,481,381

 

243,219,560,411

Consolidated Fund Services

 

209,470,039,578

 

 0

 

209,470,039,578

 

Total

 

1,170,478,418,074

 

213,846,548,582

 

956,631,869,492

 

The Actual Total Appropriations-In-Aid realized during the year under review however amounted to Kshs.146,811,089,141, against estimated receipts of Kshs.213,846,548,582 resulting in a deficiency of Kshs.67,035,459,441.  The   deficiency represented approximately 31% of the estimated collections and was mainly recorded under the Development Votes, where collections of Kshs.84,690,284,111 were realized against estimated receipts of Kshs.139,394,481,381. The reasons for the under- collection of AIA are provided under the respective Appropriation Accounts.

Summary of expenditure accounts for the year 2011/2012 shows total Actual Expenditure of Kshs.920,024,249,603 compared to Actual Expenditure of Kshs.807,228,599,517 for 2010/2011 as shown below, representing an increase of Kshs.112,795,650,086 or 14% over previous year.

 

     
         

Votes

Net Estimates of Expenditure 2011/2012

Kshs

Actual Expenditure 2011/2012

Kshs

Net Estimates of Expenditure 2010/2011

Kshs

Actual Expenditure 2010/2011

Kshs

Recurrent

               503,942,269,503

     492,770,309,152

                  437,397,181,196

        424,590,007,087

Development

               243,219,560,411

     211,956,549,840

                  208,623,477,194

        165,113,396,308

Consolidated Fund

               209,470,039,578

     215,297,390,611

                  187,733,513,379

        217,525,196,122

Totals

              956,631,869,492

    920,024,249,603

                 833,754,171,769

       807,228,599,517

 

The Actual Net Expenditure of Kshs.920,024,249,603 comprised expenditure amounting to Kshs.492,770,309,152, Kshs.211,956,549,840 and Kshs.215,297,390,611 under Recurrent, Development and Consolidated Fund Services respectively.

There was a net under-expenditure of Kshs.36,661,330,507 made up of under-expenditure of Kshs.11,171,960,351 and Kshs.31,263,010,571 under Recurrent  Vote and  Development Vote respectively  and an over expenditure of Kshs.5,827,351,033 under consolidated Fund Services as shown below:-

 

 

 

 

 

 

Approved Net Estimated Expenditure

Kshs

Actual Expenditure

 

 

Kshs

Under/(Over) Expenditure

 

Kshs

Recurrent  Vote

 

503,942,269,503

 

492,770,309,152

 

11,171,960,351

Development Vote

 

243,219,560,411

 

211,956,549,840

 

31,263,010,571

Consolidated Fund Services

 

209,470,039,578

 

215,297,390,611

 

(5,827,351,033)

 

Total

 

956,631,869,492

 

920,024,249,603

 

36,661,330,507

 

 

 

The under-expenditure of Kshs.11, 171, 960, 351 under Recurrent Vote was attributed mainly to inadequate exchequer issues while the under-expenditure of Kshs.31,263,010,571 under Development Vote was attributed to delayed disbursement of donor funds. The over-expenditure of Kshs.5, 827, 351, 033 under Consolidated Fund Services is explained as due to excess exchequer releases during the year. Reasons for the under/over-expenditure are provided in the respective Appropriation Accounts and the Exchequer Account for 2011/2012.

 

  1. II.           Revenue Accounts

Total revenue recorded as received during the financial year ended 30 June 2012 totalled Kshs.761,682,773,420 against estimated total receipts of Kshs.765,833,207,143 resulting in an under-collection of Kshs.4,150,433,723 or 0.54%. The total revenue collected of Kshs.761,682,773,420 comprised of Kshs.735,052,725,367 and Kshs.26,630,048,053 relating to Recurrent and Development votes respectively. However actual Recurrent Revenue collected during the year reflected excess collection of Kshs.21,437,485,937 or 3% while there was a shortfall of Development Revenue collected of Kshs.25,587,919,660 or 49% as follows:

 

 

 

Details

Estimated Receipts

Kshs

Actual Receipts Kshs

Excess/(Shortfall)

Kshs

Percentage

%

Recurrent Revenue

 713,615,239,430

 735,052,725,367

21,437,485,937

3%

Development Revenue

 52,217,967,713

 26,630,048,053

(25,587,919,660)

49%

Total

765,833,207,143

761,682,773,420

(4,150,433,723)

0.54%

 The reasons for the under-collection of Development Revenue as provided in the  respective Statements include, among others, the following:

  • Non release of funds by development partners
  • Low absorption of funds by projects and programmes

 

Most of the Revenue Accounts prepared by the Ministry of Finance had qualified audit opinions mainly due to material differences between the statements’ balances and KRA records. Examples are as follows:-

Ministry of Finance – Revenue Statement Ref

Amount per Statement

Kshs

Amount per KRA Records

Kshs

Difference

 

Kshs

Revenue Head Dev DR.1

26,630,048,053

27,107,919,707

(477,871,654)

Revenue Head 4510000

1,812,913,337

1,442,053,020

370,860,317

Revenue Head 1420000

1,904,120,077

2,506,995,038

(602,874,960)

Revenue Head 1150000

76,473,854,367

76,759,346,345

(285,491,978)

Revenue Head 1410200

12,693,335,549

11,504,347,952

1,188,987,596

Revenue Head 1140000

255,270,372,624

253,993,293,060

1,277,034,564

Revenue Head 1410000

1,627,482,108

1,122,913,947

504,568,161

Revenue Head 1410000 sub head 1410100

 

1,138,934,040

 

338,871,240

 

800,062,700

Revenue Head 1160000

7,857,096,516

7,890,998,836

(33,902,319)

Revenue Head 1450000

53,380,242,736

53,429,522,091

(49,279,354)

Revenue Head 1110000

312,463,343,618

312,664,131,464

(200,787,845)

Most of the statements’ revenue balances also differed with the exchequer records kept by the ministry. Similarly balances reflected as remitted to the exchequer differed with those recorded at the ministry’s exchequer section.

 

Statement of Revenue Head DR.1 also reflected revenue amounting to Kshs.584,650,885 which was not supported with receipt vouchers.

 

Statement of Revenue for vote R.01 – Ministry of State for Provincial Administration and Internal Security – showed un-accounted for revenue of  Kshs.19,902,229 between revenue recorded as collected of Kshs.882,349,033 and the amount reflected in the statement of Kshs.862,446,804.

 

The Summary Revenue Statements reflects substantial balances of revenue not remitted to the Exchequer amounting to Kshs.2,060,819,622 as follows:-

 

 

Details

Revenue balance B/fwd

 

Kshs

Revenue Collection 2011/2012

Kshs

Total Revenue Available

 

Kshs

Amount Paid to Exch.

 

Kshs

Balance C/fwd

 

Kshs

 

Recurrent

 

1,630,245,164

 

735,052,725,367

 

736,682,970,531

 

734,622,245,013

 

2,060,725,517

 

Development

 

94,104

 

26,630,048,053

 

26,630,142,158

 

26,630,048,053

 

94,104

 

Total

 

1,630,339,268

 

761,682,773,420

 

763,313,112,688

 

761,252,293,067

 

2,060,819,622

 

The total actual revenue reflected as having been paid to the Exchequer Account of Kshs.761,252,293,067 during the year however differs from the total revenue reflected as having been received in the Exchequer Account of Kshs.762,163,158,239 by Kshs.910,865,172. As reported in the respective revenue statement’s audit reports, the discrepancies are mainly due to unexplained and unreconciled differences between statements balances and the exchequer records maintained at Treasury.

 

From the above reasons it is apparent that there are persistent problems in accounting for revenue which has therefore, resulted in most of the Statements of Revenue for 2011/2012 having qualified audit opinions.

 

 

  1. III.          The Exchequer Account as at 30 June 2012

The Statement of Receipts into and Issues from the Exchequer Account for the year ended 30 June 2012 reflects an overall net surplus of Kshs.1,159,431,088 compared to a net surplus of Kshs.64,321,964 posted in the previous year.  The total issues from the Consolidated Fund for both Recurrent and Development Services during the year 2011/2012 amounted to Kshs.912,182,711,625 against total receipts of Kshs.913,277,820,749 resulting in a surplus of Kshs.1,095,109,124 as at 30 June 2012.  However, when added to the Exchequer balance of Kshs.64,321,964 brought forward from 2010/2011, the result is an overall net surplus of Kshs.1,159,431,088 as at 30 June 2012 compared to previous year closing balance of Kshs.64,321,964 as shown below:

   

          2011/2012

 

       2010/2011

   

             Kshs

 

            Kshs

Total Receipts

 

      913,277,820,749

 

     828,355,598,036

Total Issues

 

      912,182,711,625

 

     830,960,838,366

Surplus/(Deficit) for the year

 

               1,095,109,124

 

        (2,605,240,329)

Exchequer balance brought forward

 

               64,321,964

 

          2,673,967,668

Post year adjustment

 

 –

 

                (4,405,375)

 

Exchequer Account balance as at 30 June

 

         1,159,431,088

 

               64,321,964

 

Receipts into the Exchequer Account during the year of Kshs.913,277,820,749 comprised of  Ordinary Revenue and Other receipts as follows:-

 

                    Source of Revenue

     

              Kshs

         

(i)             Ordinary Revenue receipts (Recurrent and Development Votes)

 

 

 

     762,163,158,239

 

Other Receipts:

 

 

 

 

ii) Recoveries over issue -Recurrent

 

 

 

        

         5,185,428,526

iii) Recoveries over issue-Development

 

 

 

       11,311,755,948

 

iv) Treasury Bonds

 

 

 

     134,681,800,000

 

Total receipts into Exchequer Account

 

 

 

    913,342,142,713

 

 

 

 

 

The Exchequer Account reflects total Revenue Receipts from both Recurrent and Development votes during the year figure of Kshs.762,163,158,239 while the Recurrent and Development revenue summary statements show a total of Kshs.761,252,293,067 occasioning a difference of Kshs.910,865,172. However, the discrepancy is due to unexplained differences between statements balances and the Exchequer Records maintained at the Treasury which have also not been reconciled.

The Exchequer Account also reflect Kshs.39,981,000,000 Exchequer Issues under the Ministry of Education (Recurrent Vote), against the approved appropriated amount of Kshs.33,928,337,251 resulting in an over issue of Kshs.6,052,662,749 from the Exchequer Account during the year.  The over issue arose from a withdrawal of a sum of Kshs.7 billion from the Consolidated Fund on 21 June 2012, to cater for the Free Primary and Free Day Secondary Education.  However, no evidence has been provided for audit confirmation that Parliamentary approval for the additional expenditure was granted as required under Article 223 of the Constitution.

 

b)  Summary of the audit findings

The audit of the financial statements for the year ended 30 June 2012 indicates that out of the audited 252 financial statements only 6% had a clean (unqualified) audit reports while 51%, 10% and 33% had qualified, adverse and disclaimer of opinion reports respectively as detailed below:

 

 

 

 

 

2011/2012

2010/2011

 

No. of Financial Statements

Percentage

 

%

No. of Financial Statements

 

 

%

Unqualified Opinion

15

6%

Qualified Opinion

      130

51%

60

33%

Adverse Opinion

24

10%

Disclaimer of Opinion

83

33%

121

67%

Total

      252

100%

181

100%

 

From the table above, the trend shows that financial statements with unqualified opinions improved from nil statement in 2010/2011 to 15 statements in 2011/2012. However, statements with qualified opinions rose from 60 to 130 statements or 51% while statements with adverse and disclaimer of opinions (combined) declined from 121 in 2010/2011 to 107 statements in 2011/2012 or from 67% in 2010/2011 to 43% in 2011/2012. 

Further, out of 252 financial statements audited, I was unable to arrive at any meaningful opinion on 33% or 83 financial statements, hence disclaimer of my opinion. Consequently I was  not able to establish whether expenditures reflected in these statements were incurred lawfully and in an effective way as required by  Article 229(6) of the Constitution. Were the accounts with disclaimer of opinion  be treated as accounts with no proper justification, then by implication 33% of the total actual expenditure for 2011/2012 of Kshs.920,024,249,603 or Kshs.338 bn can be regarded as having not been properly accounted for.

The main issues forming the basis of qualifications of the audit opinion on the financial statements includes:-

i)             For statements with Qualified Opinion

  • Unsupported expenditures
  • Non surrender of imprests
  • Unauthorized expenditures
  • Uncleared balances reflected in the Statement of Assets and Liabilities
  • Long outstanding reconciling items in bank reconciliation statements
  • Excess expenditure
  • Misallocation of expenditure items
  • Lack of adequate disclosures

 

 

The following is a list of financial statements for which I was able to express qualified  opinion as I was not provided with sufficient and accurate information and explanations.

 

 

Page

Paragraph

 

 

 

 

1.

EXCHEQUER ACCOUNT

1

1

 

 

 

 

 

CONSOLIDATED FUND SERVICES

 

 

 

1.

The Statement of Assets and Liabilities for Consolidated Fund Services (CFS)

11

35-36

2.

Public Debt – Statement of Expenditure

12

38

3.

Salaries, Allowances and Miscellaneous Services – Statement of Expenditure

14

44-45

4.

Pensions and Gratuities – Statement of Expenditure

30-35

114-140

5.

The Statement of Assets and Liabilities – Pensions and Gratuities

35-37

141-149

 

 

 

 

 

APPROPRIATION ACCOUNTS –  RECURRENT

 

 

 

1.

R.02 – State House

65-66

275-283

2.

R.03 – Ministry of State for Public Service

69

291-294

3.

R.04 – Ministry of Foreign Affairs

71-73

300-311

4.

R.06 – Ministry of Planning, National Development and Vision 2030

90-91

397-404

5.

R.07 – Ministry of Finance

2-5

2-19

6.

R.08 – Ministry of State for Defence

95-96

422-427

7.

R.09 – Ministry of Regional Development Authority

97-98

430-438

8.

R.12 – Ministry of Local Government

122-124

542-555

9.

R.17 – Ministry of Justice, National Cohesion and Constitutional Affairs

164-165

728-732

10.

Commission for Truth, Justice and Reconciliation

167

739

11.

R.18 – Ministry of Gender, Children and Social Development           

168-170

740-751

12.

Public Trustee

216-219

945-961

13.

R.27     Public Service Commission

227

994-995

14.

R.31 – Ministry of Education

243-248

1050-1077

15.

R.32 – Ministry of Information and Communication     

259-260

1115-1117

16.

R.36 – Ministry of Lands    

280-281

1188-1193

17.

R.41 – Office of the Vice President and Ministry of State for National Heritage and Culture  

314-316

1334-1342

18.

R.44 – Ministry of Housing

348-349

1489-1497

19.

R.45 – National Security Intelligence Service

356

1530-1532

20.

R.46 – Ministry of Tourism

358-361

1535-1551

21.

R.48 – Office of the Prime Minister

366

1566-1567

22.

R.55 – Ministry of Forestry and Wildlife         

374-375

1603-1612

23.

R.56 – Ministry of Fisheries Development

378

1622-1623

24.

R.57 – Ministry of Nairobi Metropolitan Development

380-381

1628-1633

25.

R.58 – Ministry of State for Development of Northern Kenya and Other Arid Lands

383-384

1640-1646

26.

R.60 – Ministry of Industrialization

400-402

1729-1735

27.

R.61 –  Independent Interim Boundaries Review Commission (IIBRC)

407

1755-1756

28.

R.64 – Kenya National Commission on Human Rights

410

1759-1762

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page

Paragraph

 

APPROPRIATION ACCOUNTS – DEVELOPMENT

 

 

 

 

Votes

 

 

1.

D.02 – State House

67-68

284-287

2.

D.03 – Ministry of State for Public Service

69-70

295-297

3.

D 06 – Ministry of Planning, National Development and Vision 2030

91-93

405-414

4.

D.09 – Ministry of Regional Development Authority

98-101

439-445

5.

D.10 – Ministry of Agriculture

104-106

459-468

6.

D.12 – Ministry of Local Government

124-126

556-565

7.

D.14 – Ministry of Transport

147-150

656-667

8.

D.15 – Ministry of Labour and Human Resource Development

153-155

685-691

9.

D.16 – Ministry of Trade

159-163

710-723

10.

D.24 – Ministry of East African Community

207-208

914-916

11.

D.29 – National Assembly  

230

1003-1005

12.

D.32 – Ministry of Information and Communication

260-261

1118-1121

13.

D.41 – Office of the Vice President and Ministry of State for National Heritage  and Culture

316-317

1343-1348

14.

D.48 – Office of the Prime Minister

366-367

1568-1570

15.

D.49 – Ministry of Public Health and Sanitation            

370-372

1584-1595

16.

D.55 – Ministry of Forestry and Wildlife        

375-376

1613-1618

17.

D.56 – Ministry of Fisheries Development

378-379

1624-1625

18.

D.57 – Ministry of Nairobi Metropolitan Development               

381-382

1634-1638

19.

D.58 – Ministry of State for Development of Northern Kenya and Other Arid                 Lands

384-387

1647-1657

20.

D.60 – Ministry of Industrialization

402-405

1736-1750

 

 

 

 

 

 

STATEMENTS OF ASSETS AND LIABILITIES – DEPOSITS

 

 

 

Votes

 

 

1.

02 – State House

68

288-290

2.

03 – Ministry of State for Public Service

70

298-299

3.

05 – Office of the Vice President and Ministry of Home Affairs

86-87

377-383

4.

06 – Ministry of Planning, National Development and Vision 2030

93-94

415-421

5.

08 – Ministry of State for Defence

96

428

6.

09 – Ministry of Regional Development Authority

101

446-448

7.

10 – Ministry of Agriculture

106-107

469-471

8.

11 –  Ministry of Medical Services

119-120

527-534

9.

12 – Ministry of Local Government

126-128

566-576

10.

14 – Ministry of Transport

150-151

668-674

11.

15 – Ministry of Labour and Human Resource Development

155

692-696

12.

16 – Ministry of Trade

163

724-727

13.

19 – Ministry of Livestock Development

180-181

797-800

14.

20 – Ministry of Water and Irrigation

188

828-829

15.

21 – Ministry of Environment and Natural Resources

195

858

16.

22 – Ministry of Co-operative Development and Marketing

198-199

874-878

17.

26 – The Judiciary

224

978-980

18.

32 – Ministry of Information and Communication        

261

1122

19.

36 – Ministry of Lands       

282-283

1201-1204

20.

41 – Office of the Vice President and Ministry of State for  National Heritage and Culture

317-318

1349-1350

21.

43 – Ministry of Higher Education, Science and Technology      

347

1486-1488

22.

45 – National Security Intelligence Service

356

1533

 

 

 

 

 

 

 

 

Page

Paragraph

23.

46 – Ministry of Tourism   

363-364

1560

24.

49 – Ministry of Public Health and Sanitation

372-373

1596-1602

25.

55 – Ministry of Forestry and Wildlife

377

1620-1621

26.

56 – Ministry of Fisheries Development

379

1626

27.

57 – Ministry of Nairobi Metropolitan Development

382

1639

28.

60 – Ministry of Industrialization     

406

1751-1753

 

 

 

 

 

STATEMENTS OF REVENUE

 

 

1.

Development Revenue – Head DR .1

15

46-49

2.

4510000 – Redemption Receipts from Domestic Lending and On-Lending

15-16

50-54

3.

1420000 – Sales of Goods and Services

16-17

55-57

4.

1210000 – Social Security Contributions

17

58

5.

1150000-Taxes on International Trade and Transactions

17-18

59-60

6.

1410000 – Sub Head 1410200 – Property Income

18

61-63

7.

1140000 – Taxes on Goods and Services

18-19

64-66

8.

1410000 – Property   Income – Rent of Land

19

67-68

9.

1410000 – Sub-Head 1410100 – Loan Interest Receipts

19-20

69-72

10.

1160000 – Other Taxes (Not Elsewhere Classified)

20

73-74

11.

1450000 – Other Receipts Not Classified Elsewhere

20-21

75-76

12.

1110000 – Taxes on Income, Profits and Capital Gains

21-22

77-82

13.

Recurrent Revenue – Head R.01

63-64

267-270

14.

Vote 20 – Ministry of Water and Irrigation-Arrears of Water Revenue

189-190

831-835

15.

Vote 25 – State Law Office

213

930

16.

Vote 32 – Ministry of Information and Communication                                               

262

1124-1125

17.

Vote 40 – Ministry of State for Immigration and Registration of Persons 

313

1333

18.

Vote 46 – Ministry of Tourism                                                                                          

364

1561-1562

19.

Head-000000-056 – Fishing Rights  

379

1627

 

 

 

 

 

STATEMENT OF OBLIGATIONS GUARANTEED BY THE GOVERNMENT OF KENYA

 

 

 

1.

Ministry of Industrialization

406

1754

 

 

 

 

 

STATEMENT OF INVESTMENTS BY THE PERMANENT SECRETARY/TREASURY IN VARIOUS COMPANIES

 

 

 

1.

Ministry of Finance

50-51

205-208

 

 

 

 

 

STATEMENT OF PARTICIPATION BY THE GOVERNMENT OF KENYA IN QUASI – GOVERNMENT ORGANIZATION AND OTHER STATUTORY ORGANIZATIONS

 

 

 

1.

Ministry of Energy

237

1026-1027

 

 

 

 

 

STATEMENTS OF THE SUBSCRIPTIONS BY THE KENYA GOVERNMENT TO INTERNATIONAL ORGANIZATIONS

 

 

 

1.

Ministry of Finance

11

37

 

 

 

 

 

 

Page

Paragraph

 

 

 

 

 

STATEMENT OF OUTSTANDING LOANS

 

 

 

1.

Ministry of Tourism

364-365

1563-1565

 

 

 

 

 

FUND ACCOUNTS

 

 

 

1.

Provident Fund

23-25

85-93

2.

Asian Officers Family Pension Fund

25-27

94-101

3.

Pensions and Gratuities – Funds and Deposits – Statement of Assets and Liabilities

27-30

102-113

4.

European Widows and Orphans Pension Scheme Fund

37-39

150-155

5.

District Cash Fund Account-Finance

39-41

156-169

6.

Civil Contingencies Fund

41-42

170-171

7.

Rural Enterprise Fund

42-43

172-175

8.

Kenya Local Loan Support Fund

43

176-178

9.

Asiatic Widows And Orphans Pension Fund

44

179-180

10.

Petroleum Development Levy Fund-Finance

49-50

203-204

11.

District Cash Fund Account-State for Provincial Administration and Internal Security

64

272-274

12.

Kenya Prisons Industries Revolving Fund

87-88

384-389

13.

Kenya Prisons Farms Revolving Fund

88-89

390-395

14.

Local Authorities Transfer Fund (LATF)

128-129

577-580

15.

Road Maintenance Fuel Levy

129-130

581-583

16.

Mechanical and Transport Fund

144-145

642-647

17.

Occupational Safety and Health Fund

156

697-700

18.

Women Enterprise Fund 

174-175

766-770

19.

Management, Supervision and Liquidation Fund

199-200

879-886

20.

Parliamentary Mortgage Scheme Fund

231

1008-1010

21.

Petroleum Development Levy Fund-Energy

237-238

1028-1032

22.

Strategic Grain Reserve Trust Fund

267-277

1172-1178

23.

Faza Fire Disaster Fund      

277

1179

24.

Nakumatt/Molo Fire Victims Fund

277

1180

 

 

 

 

 

 

 

 

 

 

FINANCIAL STATEMENT

 

 

 

1.

Nuclear Electricity Project Committee

242

1048-1049

 

 

 

 

ii) For statements with Adverse Opinion

  • Discrepancies between the Appropriation Accounts and the respective Ledgers and the trial balance
  • Differences between 2010/2011 closing audited balances and opening balances for 2011/2012
  • Unsupported balances in the financial statements
  • Failure to prepare financial statements in accordance to Treasury instructions

 

The following is a list of financial statements for which I express an adverse opinion due to materials misstatements.

 

 

 

Page

Paragraph

 

APPROPRIATION ACCOUNTS –  RECURRENT

 

 

 

 

Votes

 

 

1.

R.05 – Office of the Vice President and Ministry of Home Affairs

78-83

328-357

2.

R.11 – Ministry of Medical Services

111-115

489-509

3.

R.14 – Ministry of Transport

146-147

648-655

4.

R.16 – Ministry of Trade

157-159

701-709

5.

R.42 – Ministry of State for Youth affairs and Sports

319-324

1351-1375

6.

R.43 – Ministry of Higher Education, Science and Technology

335-338

1423-1442

7.

R.49 – Ministry of Public Health and Sanitation            

368-370

1573-1583

 

 

 

 

 

 

 

 

 

 

 

 

 

APPROPRIATION ACCOUNTS – DEVELOPMENT

 

 

 

 

Votes

 

 

1.

D.05 – Office of the Vice President and Ministry of Home Affairs

83-86

358-376

2.

D.11 – Ministry of Medical Services

115-119

510-526

3.

D.31 – Ministry of Education

248-256

1078-1109

4.

D.42 – Ministry of State for Youth Affairs and Sports

324-329

1376-1401

5.

D.43 – Ministry of Higher Education, Science and Technology

339-347

1443-1485

6.

D.46 – Ministry of Tourism

361-363

1552-1559

 

 

 

 

 

STATEMENTS OF ASSETS AND LIABILITIES – DEPOSITS

 

 

 

 

Votes

 

 

1.

07 – Ministry of Finance

45-49

185-202

2.

31 – Ministry of Education

256-258

1110-1114

3.

42 – Ministry of State for Youth Affairs           & Sports

330-332

1402-1412

 

 

 

 

 

STATEMENTS OF OBLIGATIONS GUARANTEED BY THE GOVERNMENT OF KENYA

 

 

 

1.

Ministry of Finance

51

209

2.

Ministry of Information and Communication

 

 

 

 

 

 

 

FINANCIAL STATEMENT

 

 

 

1.

Independent Electoral and Boundaries Commission (IEBC)

263-268

1126-1146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page

Paragraph

 

 

FUND ACCOUNTS

 

 

1.

Government Clearing Agency Fund

13

41-43

2.

Treasury Main Clearance Fund

44-45

182-184

3.

Agricultural Information Resource Centre Revolving Fund

108-109

478-483

4.

Health Care Services Fund

120-121

535-538

5.

Political Parties Fund

269-271

1147-1152

 

Iii) For statements with Disclaimer of Opinion

  • Failure to produce trial balance as at 30 June 2012
  • Exclusion of expenditures from the Appropriation Accounts
  • Unexplained balances in the financial statements
  • Unreconciled / unsupported balances
  • Book keeping errors among other issues as illustrated below.

 

The following is a list of financial statements for which I was unable express an opinion due to lack of sufficient and accurate information and explanations.

 

 

Page

Paragraph

 

APPROPRIATION ACCOUNTS –  RECURRENT

 

 

 

 

Votes

 

 

1.

R.01 – Ministry of State for Provincial Administration and Internal Security

52-58

210-242

2.

R.10 – Ministry of Agriculture

102-104

449-458

3.

R.13 – Ministry of Roads

131-139

584-618

4.

R.15 – Ministry of Labour and Human Resource Development

152-153

677-684

5.

R.19 – Ministry of Livestock Development

176-178

772-785

6.

R.20 – Ministry of Water and Irrigation

184-186

810-817

7.

R.21 – Ministry of Environment and Natural Resources

191-192

836-845

8.

R.22 – Ministry of Co-operative Development and Marketing

196-197

861-866

9.

R.23 – The Cabinet Office

201-203

887-899

10.

R.24 – Ministry of East African Community

206-207

909-913

11.

R.25 – State Law Office

210-211

919-924

12.

Official Receiver – State Law Office 2010/2011

214-215

931-937

13.

Official Receiver – State Law Office 2011/2012

215-216

938-944

14.

R.26 – The Judiciary

220-222

962-971

15.

R.29 – National Assembly

228-230

996-1002

16.

R.30 – Ministry of Energy

233

1012-1014

17.

R.35 – Ministry of State for Special Programme

272-273

1153-1159

18.

R.40 – Ministry of State for Immigration and Registration of Persons

308-310

1310-1318

19.

R.59 – Ministry of Public Works       

388-389

1661-1673

20.

R.65 –Commission for Implementation of the Constitution

411-413

1763-1776

 

 

 

 

 

APPROPRIATION ACCOUNTS – DEVELOPMENT

 

 

 

 

Votes

 

 

1.

D.07 – Ministry of Finance

6-10

20-34

2.

D.01 – Ministry of State for Provincial Administration and Internal Security

58-62

243-258

3.

D.04 – Ministry of Foreign Affairs

74-75

312-322

4.

D.13 –     Ministry of Roads

139-142

619-629

5.

D.17 – Ministry of Justice, National Cohesion and Constitutional Affairs

165-166

733-738

6.

D.18 – Ministry of Gender, Children and Social Development

170-172

752-760

7.

D.19 – Ministry of Livestock Development

178-180

786-796

8.

D.20 – Ministry of Water and Irrigation

186-188

818-827

9.

D.21 – Ministry of Environment and Natural Resources

193-195

846-857

10.

D.22 – Ministry of Co-operative Development and Marketing

197-198

867-873

11.

D.23 – The Cabinet Office

203-205

900-908

12.

D.25– State Law Office

212

925-926

13.

D.26 – The Judiciary

222-223

972-977

14.

D.30 – Ministry of Energy

234-235

1015-1017

15.

D.35 – Ministry of State for Special Programme           

274-275

1160-1169

16.

D.36 – Ministry of Lands    

281-282

1194-1200

17.

D.40 – Ministry of State for Immigration and Registration of Persons

310-312

1319-1325

18.

D.44 – Ministry of Housing

349-351

1498-1504

19.

D.59 – Ministry of Public Works      

390-397

1674-1713

 

 

 

 

 

 

 

 

 

 

Page

Paragraph

 

STATEMENTS OF ASSETS AND LIABILITIES – DEPOSITS

 

Votes

 

 

1.

01 – Ministry of State for Provincial Administration and Internal Security

62-63

259-266

2.

04 – Ministry of Foreign Affairs

76-77

323-327

3.

13 – Ministry of Roads

142-144

630-641

4.

18 – Ministry of Gender, Children and Social Development

173-174

761-765

5.

24 – Ministry of Easter African Community

208-209

917-918

6.

25 – State Law Office

212-213

927-929

7.

29 – National Assembly     

231

1007

8.

30 – Ministry of Energy     

235-236

1018-1022

9.

35 – Ministry of State for Special Programme

275-276

1170-1171

10.

40 – Ministry of State for Immigration and Registration of Persons

312-313

1326-1332

11.

44 – Ministry of Housing   

351

1505-1507

12.

58 – Ministry of State for Development of Northern Kenya & Other Arid Lands

387

1658-1660

13.

59 – Ministry of Public Works          

397-398

1714-1719

 

 

 

 

 

STATEMENTS OF REVENUE

 

 

 

1.

Ministry of Transport

151

675

2.

1430100 – Fines and Forfeitures

224-226

981-993

3.

Land Revenue

285

1211-1216

 

 

 

 

 

STATEMENTS OF OUTSTANDING LOANS

 

 

 

1.

Ministry of Agriculture

108

476

2.

Ministry of Water and Irrigation

189

830

3.

Ministry of Environment and Natural Resources

195

859

4.

Ministry of Energy

236

1023-1024

5.

Government of Kenya Loans Issued to Settlement Fund Trustees

284

1210

 

 

 

 

 

STATEMENTS OF OBLIGATIONS GUARANTEED BY THE GOVERNMENT OF KENYA

 

 

 

1.

Ministry of Agriculture

108

477

2.

Ministry of Transport

151

676

3.

Ministry of Energy

236

1025

4.

Ministry of Housing

351-352

1507-1509

 

 

 

 

 

STATEMENT OF INVESTMENT BY THE GOVERNMENT OF KENYA IN LOCAL COMPANIES

 

 

 

1.

Ministry of Agriculture

107

472-474

 

 

 

 

 

STATEMENT OF PARTICIPATION BY THE GOVERNMENT OF KENYA IN QUASI – GOVERNMENT ORGANIZATION AND OTHER STATUTORY ORGANIZATIONS

 

 

 

1.

Ministry of Agriculture

107

475

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page

Paragraph

 

FUND ACCOUNTS

 

 

1.

Demonstration Farms Fund

109-110

484-488

2.

Medical Supplies Fund

121

539-541

3.

Veterinary Services Development Revolving Fund (VSDF)

181-182

801-808

4.

Hides and Skins Cess Fund Account

182-183

809

5.

Training Fund       

238-240

1033-1041

6.

Kenya Energy Sector Environment and Social Responsibility Programme Fund

240-242

1042-1047

7.

National Humanitarian Fund

277-279

1182-1187

8.

Township Roads and Drains Fund

283-284

1205-1209

9.

Agricultural Settlement Fund Trustees -2007/2008

286-290

1217-1234

10.

Agricultural Settlement Fund Trustees -2008/2009

290-294

1235-1253

11.

Agricultural Settlement Fund Trustees -2009/2010

294-298

1254-1272

12.

Agricultural Settlement Fund Trustees -2010/2011

298-302

1273-1291

13.

Agricultural Settlement Fund Trustees -2011/2012

303-307

1292-1309

14.

National Youth Service (NYS) Mechanical and Transport Fund

333-334

1413-1422

15.

Kenya Slum Upgrading, Low Cost Housing and Infrastructure Trust Fund (Kensuf)

352-353

1511-1519

16.

Civil Servants Housing Scheme Fund

353-355

1520-1529

17.

Stores and Services Fund

398-399

1720-1728

 

iv) Statements with unqualified opinions

The following is a list of financial statements for which I express an unqualified opinion as I was provided with sufficient and accurate information and explanations.

 

 

 

Page

Paragraph

 

CONSOLIDATED FUND SERVICES

 

 

 

1.

Statement of Outstanding Public Debt

12-13

39-40

 

 

 

 

 

APPROPRIATION ACCOUNTS –  RECURRENT

 

 

 

1.

National Gender and Equality Commission

175

771

2.

Controller of Budget

408

1757

3.

Director of Public Prosecution

409

1758

 

 

 

 

 

STATEMENTS OF ASSETS AND LIABILITIES – DEPOSITS

 

 

 

1.

Ministry of Justice, National Cohesion and Constitutional Affairs

166

738

2.

Office of the Prime Minister

367

1571

 

 

 

 

 

STATEMENTS OF REVENUE

 

 

 

1.

Office of the Vice President and Ministry of Home Affairs

89

429

2.

Ministry of State for Defence

96

429

3.

Ministry of Environment  and Mineral Resources

195

860

 

 

 

 

 

STATEMENT OF OUTSTANDING LOANS

 

 

 

1.

Ministry of Finance

22-23

83-84

 

 

 

 

 

STATEMENT OF PARTICIPATION BY THE GOVERNMENT OF KENYA IN QUASI – GOVERNMENT ORGANIZATION AND OTHER STATUTORY ORGANIZATIONS

 

 

 

1.

Ministry of Finance

44

181

 

 

 

 

 

FUNDS

 

 

 

1.

Government Press Fund

64

271

2.

National Assembly Car Loan Scheme Fund

232

1011

3.

Intelligence Service Development Fund

357

1534

4.

Water Towers Conservation Trust Fund

368

1572

 

 

c) Main audit issues identified in 2011/2012

a)Unsupported Expenditure

During 2011/2012, a number of Ministries and Departments failed to avail documents in support of various expenditure totalling Kshs.5,214,321,544 appearing in the respective Appropriation Accounts,  as summarized below:-

 

 

Vote

 

 

Ministry/Department

 

 

Unsupported Expenditure

     Kshs.

01

 

Internal Security

548,757,270

02

05

 

06

15

16

17           

 

23

31

State House

Home Affairs

 

Planning and National Development

Labour

Trade

Justice, National Cohesion and

Constitutional Affairs

Cabinet Office

Education

  46,990,908

124,380,805

 

 24,023,560

 22,085,420

236,777,935

 

697,783,597

42,200,000

17,848,293

35

36

Special Programmes 

Lands

709,898,240

 54,653,475

40

Immigration and Registration of Persons

337,235,255

41

National Heritage and Culture

   3,216,740

42

Youth Affairs and Sports

    178,307,216

44

Housing

22,403,051

46

Tourism

1,574,810

49

Public Health and Sanitation

1,920,758,130

58

Development of Northern Kenya

 

 

and Other Arid Lands

42,415,716

59

Public Works

40,043,516

60

Industrialization

142,967,618

 

 

Total

 

5,214,321,544

 

In absence of the records and documentation, the propriety of the expenditure of Kshs.5,214,321,544 could not therefore be ascertained

 

b) Excess Expenditure

Excess Expenditure incurred during 2011/2012 without Parliamentary approval totalled Kshs.7,048,222,153 compared to Kshs.362,357,466 recorded in the previous year.  The Excess Expenditure of Kshs.7,048,222,153 was incurred under Recurrent Expenditure in five (5) Ministries/Department as follows:-

 

 

Vote

 

Ministry

 

Excess Vote (Kshs.)

 

 

 

13

Roads

67,918,413

17

Justice, National Cohesion and Constitutional Affairs

1,064,927,340

31

Education

5,509,953,008

47

Teachers Service Commission

403,668,065

55

Forestry and Wildlife

1,755,327

 

Total

7,048,222,153

 

 

 

 

The Excess Expenditure of Kshs.7,048,222,153 does not however include pending bills amounting to Kshs.4,476,921,844 which, though relating to 2011/2012 were not settled during the year,  but were instead carried forward to 2012/2013, as discussed in the ensuing paragraph.

c)Pending Bills

During the year ended 30 June 2012, a number of Ministries and Departments did not settle bills amounting to Kshs.4,476,921,844 comprising Kshs.3,135,726,929 and Kshs.1,341,194,915 under Recurrent and Development Votes respectively, but instead carried forward such bills to 2012/2013, as indicated below:-

Vote

Ministry/ Department

Recurrent

Kshs

Development

Kshs

Total

Kshs

 

01

Provincial Administration and Internal Security

 

1,250,614,630

 

336,537,807

 

1,587,152,437

 

04

Foreign Affairs

79,073,453

79,073,453

05

Home Affairs

213,697,420

213,697,420

06

Planning, National Development

&Vision 2030

 

17,038,369

 

 

17,038,369

07

Finance

90,739,630

90,739,630

09

Regional Development Authorities

 

13,457,223

 

 

13,457,223

10

Agriculture

18,246,448

18,246,448

11

Medical Services

279,241,276

279,241,276

13

Roads

30,793,912

30,793,912

14

Transport

13,820,070

13,820,070

18

Gender and Children Development

 

25,510,728

 

 

25,510,728

20

Water and Irrigation

90,162,800

90,162,800

22

Ministry of Cooperative and Marketing

5,752,214

5,752,214

23

Cabinet Office

1,016,528

1,016,528

24

Eastern African Community

34,603,205

34,603,205

25

State Law office

4,433,687

4,433,687

29

National Assembly

43, 205,755

43, 205,755

31

Education

2,272,720

2,272,720

35

Special Programmes

 

538,164,502

 

 

538,164,502

36

Lands

773,425

773,425

40

Immigration and Registration of Persons

239,938,182

239,938,182

41

National  Heritage and Culture

4,818,210

4,818,210

42

Youth Affairs and Sports

32,736,447

32,736,447

43

Higher Education Science and Technology

45,475,610

45,475,610

44

Housing

54,643,188

54,643,188

46

Tourism

4,980,040

4,980,040

48

Office of the Prime Minister

6,931,060

6,931,060

49

Public Health and Sanitation

19,683,802

19,683,802

57

Nairobi Metropolitan Development

17,108,149

17,108,149

58

Development of Northern Kenya and Other Arid Lands

12,530,949

12,530,949

59

Public works

960,220,948

960,220,948

60

Industrialization

31,905,210

31,905,210

 

 

 

Total

 

3,135,726,929

 

 1,341,194,915

 

 4,476,921,844

 

 

 

 

 

 

 

Had the bills totaling Kshs.4,476,921,844 been settled during the period and the expenditure charged to the accounts for 2011/2012,nine (9) additional Ministries and Departments would have recorded Excess Expenditure against Recurrent and/or Development Votes, as shown hereunder:-

Excess Expenditure Had the Bills Been Paid  – Recurrent Vote

 

Vote

Ministry/Department

Net Surplus

 

Kshs

Pending Bills

 

Kshs

Excess      Expenditure     Kshs

11      Medical Services                      106,155,743                279,241,277   173,085,533

 

30        East African Community   16,612,509             34,603,205                  17,990,696

 

35        Special Programmes 112,476,199                538,164,502                425,688,303

 

40        Immigration                             214,863,693                239,938,182                  25,074,490

 

41        National Heritage                           788,969                    4,818,210                    4,029,241

 

46   Tourism                                            1,542,993                    4,980,040                    3,437,048

 

49   Public Health                                    4,658,198                  19,683,802                  15,025,604

 

Excess Expenditure  Had the Bills Been Paid – Development Vote

 

Vote

Ministry/Department

Net Surplus

 

Kshs.

Pending Bills

 

Kshs

Excess Expenditure     Kshs.

 

59          

Public Works

297,066,317

960,220,948

663,154,632

 

 

 

 

 

60

Industrialization

31,527,148

31,905,210

      378,062

 

 

 

 

 

 

 

 

 

 

               

These matters have been dealt with in detail under the respective Ministries and   Departments Reports.

d)Management of Imprests

The audit of imprests accounts across the ministries revealed major weaknesses in the management and accounting for imprests as summarized below:

  • Imprest balances reflected in the statements of assets and liabilities could not agree with the respective imprest registers or the ledgers and there were no reconciliations made.
  • Lack of supporting documentation and evidence of material imprest balances relating to previous years but purported to have been cleared during the year 2011/2012.
  • Long outstanding imprests not cleared, some of which is held by deceased, officers who have left service or retirees.
  • Lack of analysis making it impossible to determine the holders of these balances

 

The audit also revealed huge imprest balances which ought to have been recovered or otherwise accounted for on or before 30 June 2012 but was still outstanding as that date amounted to Kshs.2,142,569,431.65 as shown below:-

 

 

 

 

 

 

 

 

Vote

Ministry/Department

Recurrent Vote

 

Imprest

Kshs

Development Vote

Imprest

Kshs

Total Outstanding Imprest

Kshs

 

 

01

Provincial administration & Internal Security

 

 

 

 

152,797,403

 

 

 

152,797,403

 

02

State House

1,191,004

 

1,191,004

04

Public Service

38,053,160

33,646,358

71,699,518

05

VP and Home Affairs

52,931,891

 

52,931,891

07

Finance

265,376,621

225,309,822

490,686,443

08

Defense

 

4,475,000

 

4,475,000

09

Regional Development

369,599

 

369,599

10

Agriculture

 

523,863,840

249,442,769

773,306,609

 

11

 

Medical Services

 

15,741,485

 

109,293,300

 

125,034,785

12

Local Government

 

6,443,086

 

6,443,086

14

Transport

777,818

 

777,818

15

Labour & Human Resource Dev

6,113,426

5,817,666

11,931,092

16

Trade

2,200,591

250,000

2,450,591

18

Gender, Children & Social Development

4,485,835

 

4,485,835

19

Livestock Development

 

 

90,177,006

20,660,273

 

110,837,279

 

20

Water & Irrigation

 

5,454,018

 

 

2,727,009

 

8,181,026

21

Environment & Natural Resources

 

 

10,219,481

171,810,904

 

182,030,385

 

23

 

Cabinet Office

 

944,635

 

251,187

 

 

1,195,822

 

24

 

East African Community

 

2,100,894

 

 

2,100,894

 

25

 

State Law Office

 

2,679,564

 

 

2,679,564

26

The Judiciary

 

2,583,104

 

2,583,104

     31

Education

 

17,317,388

 

5,022,678

 

22,340,065

36

Lands

 

2,106,279

 

2,106,279

40

Immigration & Registration of Persons

 

1,376,946

 

1,376,945

41

VP, National Heritage & Culture

163,140

 

163,140

 

42

Youth Affairs & Sports

 

81,790,342

 

81,790,342

 

43

Higher Education, Science & Technology

 

30,500

 

 

 

 

38,000

 

 

68,500

 

44

Housing

 

2,492,086

 

2,492,086

45

NSIS

16,739,939

 

16,739,939

46

Tourism

2,518,740

 

2,518,740

49

Public Health & Sanitation

1,982,456

 

1,982,456

58

North Eastern Kenya and other Arid Areas

1,067,054

 

1,067,054

59

Public Works

6,730,437

216,824,598

 

223,555,035

60

Industrialization

3,489,924

 

3,489,924

 

 

Total

1,101,474,868

1,041,094,563

2,142,569,432

 

e)Maintenance of Bank and Cash Accounts

Maintenance of Cashbooks across the ministries during 2011/2012 was noted to be weak. As reported in the previous years, the Bank Reconciliation Statements for Recurrent, Development, Deposits and Fund Cashbooks as at 30 June 2012 for several ministries and departments continued to reflect material receipts and payments in the Cashbooks not reflected in the Bank Statements and also receipts and payments in the Bank Statements not reflected in the Cashbooks.

Several entries in the Bank Statements were not analyzed while others have been outstanding for a very long period of time. Most of the ministries’ Cashbooks’ balances as at 30 June 2012 have not been reconciled with Paymaster General Account (PMG) in the ledger.

As a result the accuracy and validity as at 30 June 2012 of most of the PMG balances, which is equivalent to Bank and Cash account balances, could not be ascertained. Detailed observations on the statements are covered under the respective Ministries and Departments reports.

f) Maintenance of Accounting Records

As in the previous years and as also indicated above, there is weak and inadequate maintenance of accounting records observed across a number of ministries and departments during the year.  A number of financial statements differed materially with the Ledgers and Trial Balances from where ideally they ought to have been derived.

In addition, the ministries and departments continued to prepare their respective financial statements on Cash Basis of accounting as instructed by Treasury. This implies that capital assets are expensed as a result of which Statements of Assets and Liabilities as at the end of each financial year do not show a complete and true and fair view of the ministry’s or department’s assets and liabilities.

As at 30 June 2012 we do not, as such, know what each ministry/department owns and consequently the net worth of the Government of Kenya as a whole cannot be determined. 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 of them.

It is the thus my recommendation that the Government adopts either Accrual or Modified Accrual Basis of International Public Sector Accounting Standards (IPSAS).

 

Edward. R.O. Ouko

Auditor General

 

 

 

 

 

 

 

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