The Auditor General's 2014/2015 Expenditure Report

The Auditor General’s report on 2014/2015 expenditure is a shocking (to some) portrayal of mismanagement, incompetence and financial gymnastics that has dominated public spending and resource allocation in Kenya. Select parts of it will help expound on my point:

The County Governments allocation for the year 2014/2015 was based on the audited revenue for the year 2009/2010, since the audited financial statements for 2010/2011- 2013/2014 had not been approved by the National Assembly. The County Governments expenditure has been accounted for and reported individually and the respective audit reports issued. Parliament has not audited the accounts from 2010. We have had 4 financial years without audited reports with the Public Accounts Committee firmly in place. What exactly has PAC been doing since then? If an organisation ran that way, KRA would have shut them down without notice but malfeasance by our primary oversight public body has gone unabated and the lack of consequences has led to the increased brazenness of our public officials. A five year-old budget would also explain the inaccurate budget projections and allocations that have been experienced by county governments. 

There was over-expenditure of Kshs.19,972,900,942 for Consolidated Fund Services which has not been explained. The Consolidated Fund includes repayments of Public Debt. We paid more debt than we should have. An un-educated guess would be that this would be a perfect avenue to cover up mis-allocated money without actual accountability. The AG worked with documents submitted by ministries and counties and in this particular case, the national government, and they had enough time to issue a rejoinder but have instead chosen to remain mum despite the perception and conclusions that it may draw.

In the 2013/2014 expenditure report, it was indicated that proceeds from the Sovereign Bond (EUROBond) of USD 1,999,052,872.97 were received on 24 June 2014 and deposited into an offshore account, contrary to Article 206 of the Constitution of Kenya and Section 17(2) of Public Finance and Management Act, 2012 .It was further reported that, out of the balance in the offshore account as at 2 July 2014, an amount of Kshs.34,648,388,180.25 was on 3 July 2014 transferred to the Exchequer Account to fund infrastructure projects but accounted for in 2013/2014 financial year. The amount in question was enough to significantly change our country but things started going wrong even before the money had been used. Bonds, unlike grants have leeway in their use. Several African countries are enjoying the sovereign bond market and are showing significant growth, we’re just being Kenya. I would also, from a nonfinancial background like to understand how expenditure accrued in July of 2014 were accounted for in the expenditure of the previous financial year, which ended in June. What principles/standards of accounting are applied here?

The 2014/2015 gross budget of Kshs.2,099,370,186,391 was shared between the National Government and the County Governments at the ratio of 89% and 11% respectively. The counties thus have less money than our expectations as citizens can accommodate or expected, in the spirit of devolution. We demand central government spending from county government budgets. The counties, however are doing terribly at their own accounting and spending. One county had an allocation allowing them to buy ambulances at 40 million each but instead rented them at 52 million each. Mombasa County spent 1% of funds allocated on development expenditure in the latest county audit. Mandera County recorded zero revenue in the same financial year claiming that they lack revenue-generation streams. The stories get even more bemusing because late last year, another county bought fish which they could not audit because according to them, ‘the fish were released into the water and swam upstream.’ The same county bought snakes for a park which they could not audit because the snakes were in the park, somewhere. Counties are basically just devolved units of corruption.

The outstanding amount of public debt has increased over the years from Kshs.1,382,382,194,875 reported in the year 2010/2011 to Kshs.2,674,806,364,195 in the year 2014/2015 representing an increase of Kshs.1,292,424,169,320 or approximately 93% over the five year period. Part of the rational explanation for the rise was the cost of implementation of the new constitution, which had drastic changes to structures and an unsustainable wage bill which the exchequer ignorantly bears.Debt can be positive. This is not positive debt.

Out of the total expenditure of Kshs. 1,220,644,732,649, expenditure totalling Kshs.12,798,940,280 or 1.05% was incurred lawfully and in an effective way. Expenditure amounting to Kshs.754,391,459,499 or 61.80% had issues hence qualified opinion. Financial statements for expenditure amounting to Kshs.372,619,272,561 or 30.5% were misleading or incomplete hence an adverse opinion. He was unable to confirm whether expenditure totalling Kshs.80,835,060,309 was incurred effectively and lawfully as required by Article 229(6) of the Constitution of Kenya. The AG could only conclusively account for 1.05% of the expenditure. That statement is a summary of our national fiscal and financial accountability.

Kenya re-based its GDP was re-classified as a middle-income country but that does nothing for the state of the ordinary citizen. We are losing more to financial mismanagement than we gain in foreign aid and with the current budget projections of 2.2 trillion, we are looking close to the total amount we spent as a country, in our 2009/2010 financial year which was an economic stimulus package as a recovery tool for Kenya after the economic slump caused by the post-election violence.