BusinessPeople Daily

Audit queries raise red flag on spending of State funds

Fred Aminga @faminga

Out of two procurement deals in government, it is likely one of them raised an audit query at the Office of the Auditor General (OAG), says a new report.

The worrying report reveals that most audit reports obtained “qualified opinions” or worse, which implies most cash set aside for development purposes is unlikely to give the taxpayers value for money due to corruption before and after procurement of goods and services.

The research by Institute of Economic Affairs (IEA) on OAG reports since 2013/14 indicates that key ministries, departments and State agencies (MDAs) did not give a true value and fair views of financial position.

But more worrying is the fact that it is the biggest spending units of government ministries and agencies were most likely to get unfavourable financial reports which cumulatively present potential risk of systemic financial losses.

Trends in expenditure of those that received a “disclaimer of opinion” due to prevailing audit queries include State Department of Planning and Ministry of National Coordination where this opinion was recurring.

These were linked to the National Youth Service at some point and have since been linked to losses of billions of shillings.

An “unqualified opinion” is expressed when the financial statements give a true and fair view hence a clean bill of health. Anything other than this leads to either; a qualified opinion, adverse opinion and lastly a disclaimer opinion, which signals danger.

“A disclaimer of opinion is given when the Auditor is unable to establish whether expenditures were incurred lawfully and in an effective way. This is the worst bill of health,” the reports indicate.

The report points out that in 2015/16 the MDAs that received unqualified opinion had expenditure that amounted to Sh42.1 billion or four per cent of the total expenditure for that year.

Moreover, most MDAs take very long to provide information to the Auditor years after spending cash, making it difficult to get a clean bill of health.The report says this lengthy period also provides downtime for unscrupulous individuals to violate the law.

“If a company that gives taxpayers Sh200 billion annually can give financial reports every quarter, why is it impossible for a State agency which consumes Sh400 billion of taxpayers’ money account for the cash given in good time?” posed Kwame Owino, IEA chief executive.

It emerged that between 2013/14 and 2015/16, trends in total budget across all MDAs with “unqualified opinion” or clean health were commissions and independent offices amounting to Sh63.78 billion in those three years meaning that the rest had Auditor’s queries.

Since commencement of devolution in 2013/14 half of the audited financial statements have a qualified opinion indicating the OAG has consistently found limitations in most audited accounts.

In the financial year 2013/14 a total of Sh512 billion given to MDAs obtained a qualified opinion by the OAG, the figure increased to Sh624 billion in 2014/15 and Sh932 billion in 2015/16 amid increasing budgetary allocations.

As a share of the total annual expenditure, this amount in terms of expenditure by ministries, departments and government agencies raises the likelihood of loss of public funds through low level of transparency and accountability due to reduced compliance to regulations.

This year the budget went up by about 10.83 per cent to hit Sh3.074 trillion. Out of this, Sh1.6 trillion will go towards funding the functions of the national government, while more than half of the national government’s allocation (61.01%) will go towards financing the recurrent expenditure.

The author of the study Jackline Kagume concluded that there is need for strengthening the oversight of public procurement as an avenue for raising the effectiveness of public service delivery for Kenya.

“Most of the fixes do not require significant technical amendments to law but a mere adherence to transparency and open contracting in Kenya,” she said.

Show More

Related Articles