Auditor General flags KFS over Sh2.1bn unpaid tax, ethnic hiring issues

The Kenya Forest Service has been criticised by auditors for lacking diversity in its recruitment of rangers last year.

According to a new report by Auditor General Nancy Gathungu, 26 per cent of the 2,666 rangers recruited in February 2023 came from one ethnic community.

This community as per the report on Kenya Forest Service (KFS) for the year that ended on June 30, 2023, filled 693 positions, while members of other communities did not receive any opportunities.

Also, KFS is said to have hired personnel who were over the specified age limit of 28 years, with at least 114 rangers not meeting the required criteria.

Entry requirements stipulate that recruits are to be 28 years or below to be eligible for the listing.

"The management was in breach of the law and internal controls relating to the recruitment of 114 rangers were not adhered to," Gathungu said in the report.

In addition to concerns about recruitment practices, auditors found weaknesses in Kenya Forest Service's revenue control systems.

The service is also grappling with a tax dispute with KRA and uncertainties regarding its retirement benefit scheme.

The Auditor General also discovered that there is no integration between revenue collection, invoicing, and receipting processes.

Although revenue is collected via M-Pesa and bank accounts, receipts are manually entered into the system, and invoices are generated after receipt.

"In the circumstances, the effectiveness of the internal controls on revenue collection could not be confirmed," reads the report in part.

Regarding the tax issue, taxpayers face potential increased payments due to Kenya Forest Service's failure to pay KRA a sum of Sh2.1 billion.

The audit report further reveals that in May, KRA issued agency notices to the service's bankers for unpaid taxes totalling Sh4.1 billion.

Acknowledgement

The report indicates that KFS acknowledged these arrears and entered negotiations with KRA. Both parties agreed to settle the principal amount of Sh2.1 billion by making monthly payments of Sh10 million starting from March 2023.

By the end of the fiscal year on June 30, 2023, KFS's banks had remitted Sh98.9 million towards the principal, leaving a remaining balance of Sh2.1 billion.

"The failure or delay of payment of tax arrears of Sh2.1 billion may attract penalties and interest which may affect service delivery by KFS," the report reads in part.

An outstanding debt of Sh75 million owed by government agencies and media houses with transmitters located within Kenya Forest Service's forests has been highlighted.

The audit found that license charges were not paid because the fee was reportedly remitted to the government-owned Kenya Broadcasting Corporation.

Additionally, the total balance does not include amounts owed by the defunct Ministry of Sports (Sh10 million) and Kenya National Highways Authority (Sh77.7 million).

Gathungu reported that the balances do not include an amount of Sh32.4 million for a special user licence issued to Sustainable Energy Systems Limited, which has remained receivable due to an outstanding legal case.

In the circumstances, the accuracy and completeness of the receipts of Sh1.7 billion could not be confirmed.

KFS also faces questions after it failed to add rangers houses that were constructed and donated by China Roads and Bridges Corporation.

The agency reported that it owned property worth Sh715 million at various locations save for the Chinese donations.

"Further, contrary to the requirements of IPSAS 17, the land on which these buildings are erected had not been valued and disclosed separately in the last seven years," the report reads in part.

On pensions, there was no evidence KFS appointed its members to the board of trustees of the scheme.

Thus, the members were locked out of the day-to-day operations of the scheme.

In the circumstances, the scheme's usefulness and oversight by employees could not be confirmed, the auditor-general said.

It was also found that among the 265 gazetted forest blocks owned by Kenya Forest Service, covering a total of 2,585,526.44 hectares, only 77 blocks have title deeds.

There are also uncertainties regarding the exact acreage due to ongoing court cases over land ownership disputes between the service and private parties.

Additionally, instances of illegal encroachments and excisions on forest land were identified in various parts of the country.

Of these, a total of 555.9 hectares were illegally acquired by private parties in Kipkabus, Tingwa and Ngong' forest.

Further, in Uasin Gishu county, 29.5 hectares of land had unlicensed operational installations while other parcels, though licensed, remain unpaid by five institutions.