Audit uncovers Sh2.3 billion risk, revenue misreporting at Geothermal Development Company
The report shows the company might have to pay Sh2.3 billion in a legal dispute with another firm, a ruling already issued by a tribunal and upheld by the High Court.
Geothermal Development Company (GDC) could face a financial setback that may disrupt its operations, according to an audit by Auditor General Nancy Gathungu.
The report shows the company might have to pay Sh2.3 billion in a legal dispute with another firm, a ruling already issued by a tribunal and upheld by the High Court.
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The amount is subject to an annual interest of 14 per cent until fully settled. GDC has filed an appeal and is waiting for the final decision.
“The company is subject to several legal claims incidental to its operations, the outcome of which cannot at present be foreseen, and possible loss or range of loss of which cannot at present be meaningfully quantified,” the auditor noted.
She stressed that until the court issues a verdict, the company remains exposed. “In the event that those liabilities crystallise, the company may be exposed to huge cash outlay,” she added, warning that such payments could affect its ability to meet commitments and deliver services effectively.
The audit, covering the period ending June 30, 2024, also pointed to other financial risks that may affect taxpayers and delay key projects.
It highlighted that GDC received Sh4 billion from KenGen for steam services but recorded only Sh1 billion as revenue, treating the rest as a capital grant. Management claimed these payments were appropriations in aid and not sales revenue.
“Accounting for the payments should follow International Financial Reporting Standards (IFRS) on revenue recognition,” the report stated.
“The accounting policy adopted by management constitutes a departure from the requirements of IFRS on revenue from contracts with customers.”
If the funds had been recorded correctly, GDC would have reported an additional Sh3.34 billion in revenue, increasing its taxable income and profit after tax.
“In the circumstances, the accuracy and completeness of the revenue from steam charge payment totalling Sh1 billion couldn’t be confirmed,” Gathungu added.
The report further revealed that GDC had not remitted Sh27 million owed to the Kenya Energy Environment and Social Responsibility Programme Fund over four years, a liability not reflected in its books.
The agency also failed to recover a debt of Sh86 million, signalling weak credit management and the risk of bad debts.
The findings suggest that misclassification of funds and unpaid obligations may have understated the company’s profits and tax responsibilities, raising concerns about its financial management.
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