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No place to hide while spendi ng stolen cash

Antony Asambo @PeopleDailyKe

Amid the ongoing war on graft, the focus is what lifestyle audits can unearth from those suspected to have siphoned public funds.

From the layman’s definition, lifestyle audit simply means looking into one’s way of life in order to determine whether declared sources of income can support their way of life.

It is assumed that the audit will smoke out those who have amassed wealth beyond declared means.

The difference between what one has declared as a source of income and the actual living cost is treated as illegally acquired funds that originate from underworld economy made up of crime related activities that include, but not limited to, corruption-based kickbacks, drugs, counterfeit, human trafficking, only to mention.

Many things have been said about this lifestyle audit, with some questioning the legal provision for undertaking such an audit.  

Notwithstanding any legal provisions, I am aware of the provisions of the Income Tax Act (ITA)  and The Public Officers Ethics Act (as amended in 2009) that can be used together with The Ethics and Anti-Corruption Commission Act ( as amended in 2015) to undertake such an audit.

The ITA gives KRA powers to call for any information for purposes of supporting tax returns submitted. In other words, KRA can undertake an assessment and a taxpayer may suffer for intentionally omitting critical sources of income with intention to evade tax. The Public Officers Ethics Act also brings into focus the declarations of wealth by public officers and amongst other things, matters related to declaration and any misleading information.

It is common practice amongst those who loot public coffers to hide their loot in family members’ names or companies associated with family members or relatives.

Remember the relevant legislations, including the ITA defines a relative as a spouse, an ancestor, lineal descendant, brother, sister, uncle, aunt, nephew, niece, stepfather, stepmother, stepchild, adopted child, his adopter or adopters; and the spouse of a relative as referred here.

Therefore any attempt to hide the loot or settle them on children or relatives is, but an act in futility that when subjected to serious investigators scrutiny, would land even the unsuspecting relative in the corridors of the court. Psychologists say those who engage in corrupt activities do so in order to live a conspicuous life so that those who have made it in life in terms of lifestyle genuinely and the society can also recognise them.

Such people spend on both moveable and immovable property, and other living activities that is very easy to track. In tax accounting, we normally conduct what is called back duty investigation, that looks more as what one would term lifestyle audit.

The following should constitute what is reviewed by the investigating team:

Water and electricity bills:

The connections of these services, of water and electricity, is a sign that an individual has attained some level of income that can be measured as a percentage of a household income. Looking at other domestic household needs, the expense head attributed to electricity and water is between one per cent and two per cent of the household income. So where an individual pays electricity bill of Sh500, the total household income may be estimated to be between Sh25,000 and Sh50,000.

Any person with good income will not only have many electrical appliances but will also be scared about his security and safety and therefore have security lights on throughout the night, thereby pushing up the electricity bills! When the investigating team finds your domestic water bill at Sh3,500 and power bill at Sh17,500 per month then you should know where the estimate will go.

Schools and colleges:

When the level of income rises, people tend to provide good school and college opportunities to their children and their siblings.

General cost of taking a sibling to school or college varies from public to private institutions. The cut on household income is between 15 per cent and 25 per cent in order to leave room for shelter, clothing, and food.

The investigating team should seek graduation photos, uniforms, fee receipts (including those transport and extra-curriculum activities), and any school/college correspondence.

Domestic workers:

The “mama nyumba” where there is good money will not soil her hands doing domestic chores and will have at her call cook, babysitters, shamba boy, watchman, and driver. Where these domestic workers are not paid by the employer, what is paid to them will make part of individual’s estimated income.

Vehicles and land:

Within the home compound, attention will be made to the motor vehicles owned and how long they have stayed within such ownership, the distance they have travelled so that an estimate may be made on the expenses that have been incurred in relation to fuel, insurance, maintenance on tyres, mileage services.

In case, for example, one has owned a high-end sports utility vehicle for three years and has done 60,000 km with fuel consumption of about 0.5 litre per km at a cost of Sh100 per litre, with normal service of Sh15,000 per Service after 10,000 km, the replacement of the tyres, then one should able to estimate the cost of running the vehicle.

The other asset that is also a centre of interest is land and the house. These will be estimated based on the areas they are located and market prices. The house will be valued by professionals looking at the finishing and other beauties associated with it.

Cost of land and houses or buildings are easy to estimate because of their vibrant market. Corrupt people are sometimes cheated to ask for delivery of materials to their housing projects so that they don’t receive cash nor make purchases themselves. Remember that at whatever stage the house will be at the time of the audit, professionals will be able to estimate the cost of its construction.

Lifestyle outside the home:

The last but not least will be the lifestyle outside the home or house. The air travelling, hotel accommodation, supermarkets purchases made through credit cards and supermarkets cards that award points for purchases. There are numerous evidence provided by the airports on landing information and check in by hotels. This is an area which is not challenging in terms of evidence. Where someone purchases an air ticket or books a hotel as a cover-up remember that the person who flies or checks in must provide his personal identification and with such information, one will be tracked.

Coupled with M-Pesa transaction information any receipt and payment will be tracked and recorded accordingly even though some people use agents to make transfers on their behalf. All these are summarised through bank statements.

Harambee and philanthropic course:

Lastly, is for those who want to be seen in public functions, and in particular the politicians, through harambees and philanthropic activities. The donations and contributions can be tabulated to ascertain how much one has given out in a given period. This will be assumed to have come from your own sources and any defense to the fact that you collected the same from friends will either land your friends in problems or will not be accepted.

The author is lecturer at Jomo Kenyatta University of Agriculture and Technology, a tax advisor and a forensic auditor. [email protected]

What should be noted is that whenever such investigation is being carried out on an individual, it will be escalated to all relatives as defined by the ITA Sec.26(5)!

Further let no one be cheated that one can cover their trail using lawyers or accountants as these teams of professionals failed in the great Enron case in the US.

Continue enjoying the ill-gotten wealth as long as government agencies look the other way!

The author is lecturer at Jomo Kenyatta University of Agriculture and Technology, a tax advisor and a forensic auditor. He can be reached on [email protected]

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