Taxpayers lose Sh5.7bn as govt agencies mismanage donor funds – Auditor General

Taxpayers could have lost Sh5.7 billion in donor-funded projects due to poor financial management by government institutions, a new report by Auditor General Nancy Gathungu has revealed.

The report, covering the financial year ending June 30, 2024, raises concern over how ministries, departments and agencies handled donor-funded projects.

It cites procurement breaches, inefficiencies, unauthorised spending, and delays that led to massive interest payments.

A total of Sh4.4 billion was paid as interest due to delayed payments, which Gathungu said was an “unnecessary cost” that could have been avoided had agencies kept to project timelines.

The audit also found Sh1.3 billion in ineligible expenditure across 10 projects, suggesting possible misuse of public funds. The audit warns that the situation could worsen, as pending bills in the reviewed projects stood at Sh64 billion.

Some of the worst cases were reported in projects under the Ministry of Health, the Kenya Urban Roads Authority, and the State Department for Infrastructure.

At the Ministry of Health, delays in settling debts for the supply of Covid-19 vaccines led to Sh930 million in interest. The Health Ministry did not pay Sh100 million for Covid-19 response efforts.

Kenya National Highways Authority (KeNHA) is required to pay Sh856 million in interest for delayed tax payments for the Mombasa-Mariakani highway project.

KeNHA is also expected to pay Sh657 million to two contractors for delayed payments in the Isebania-Kisii-Ahero junction project, and Sh615 million in interest for pending bills in the World Bank-funded Kenya Transport Sector Support Project.

Another Sh614 million is due to the contractor of the Kibwezi-Mutomo-Kitui-Migwani road, while Sh318 million is sought for non-payments in the Kapchorwa-Suam-Kitale and Eldoret Bypass project.

The Kenya Rural Roads Authority (KERRA) has accumulated Sh38 million in interest on the Gilgil project and Sh4.8 million for the Roads 2000 projects in Central Kenya. The agency also failed to provide Sh167 million for Gilgil roads, and the Agriculture department did not release Sh99 million.

Ineligible expenditure included Sh475 million used by the National Treasury for the Africa Climate Summit.

“The financing agreement was signed after the summit had taken place, and hence the expenditure incurred was ineligible,” Gathungu said.

The Water Department failed to deduct Sh124 million wrongly paid to the Thwake Dam contractor.

Gathungu also pointed out that 44 projects failed to use their allocated funds before closure, raising fears that planned activities may not be completed.

Other Topics To Read

• National
• KeNHA
• Ministry of Health
• Nancy Gathungu
• KERRA
• Taxpayers lose Sh5.7bn as govt agencies mismanage donor funds – Auditor General
• Headlines

“Although the project periods were ending, some funds had not been absorbed, posing risks that the projects would end without implementing all planned activities and therefore not meeting their objectives,” she said.

The report further revealed that 16 projects mixed donor funds with other agency funds, violating financial rules and making it difficult to trace how money was spent.

“Project funds were, therefore, commingled with the funds of the implementing agencies,” the report stated.

At least 18 projects were stalled because the national and county governments failed to provide the agreed-upon counterpart funding.

In total, state bodies failed to remit Sh3.5 billion in local contributions.

Kenya Power did not release Sh1.1 billion for the Last Mile Connectivity project, while KeNHA failed to remit Sh663 million for a trade facilitation project.

NTSA withheld Sh447 million, and counties also failed to remit Sh80 million for the agricultural value chain development project.

The Auditor General also flagged 28 projects that had surpassed their closure dates without any steps taken to wind them up properly.