KNBS in financial turmoil, auditor flags dwindling reserves and outstanding debts

The Kenya National Bureau of Statistics (KNBS) is facing a severe financial crisis, with a recent audit revealing a looming risk of collapse. Auditor General Nancy Gathungu has warned that without immediate intervention, the agency may struggle to sustain its operations.

The findings reveal a worrying trend that threatens the agency's ability to sustain its operations in the near future, raising alarms about the integrity of statistical data crucial for governmental and economic planning.

The audit shows that KNBS recorded a deficit of Sh350 million for the Financial Year that ended on June 30, 2023.

This marks a stark decline from previous years, with reported deficits of Sh1.4 billion in 2022, Sh1.7 billion in 2021, and a staggering Sh3.6 billion in 2020.

Over the past five years, the agency's revenue reserves have dwindled from Sh8.7 billion in 2019 to a mere Sh1.3 billion last year, a trend Gathungu described as deeply concerning.

"The bureau is likely to face financial challenges in the future if strategies are not in place to reverse the trend," Gathungu said.

She expressed skepticism regarding the management's claims that the agency has sufficient resources to operate in the foreseeable future.

Gathungu also downplayed assertions from KNBS management that the agency possesses adequate resources to continue functioning effectively.

In particular, she highlighted issues with the application of the going concern concept in accounting.

KNBS had calculated depreciation based on the expected economic life of its fixed assets rather than their current market value, under the assumption that operations would continue indefinitely.

While the agency claimed to maintain cash reserves in banks, Gathungu emphasised that these assurances were insufficient.

"My opinion is not modified in respect of this matter," she said, underlining the precarious state of the bureau.

KNBS is responsible for collecting, analyzing, and disseminating vital statistical data for both government and private sector use.

This includes conducting the national census, which is scheduled to take place in five years. The agency also publishes essential reports such as quarterly gross domestic product (GDP) figures, economic surveys, consumer price indices, and labour statistics.

In addition to its financial woes, the audit raised concerns about the agency's ability to recover debts totalling Sh55 million.

This amount includes Sh4.4 million linked to the 2009 Kenya Population and Housing Census. Gathungu pointed out that a significant portion of this debt, Sh23.6 million relates to a development project for an enterprise resource program that is currently subject to a court case.

Furthermore, Sh2.9 million is owed by staff members who have since resigned or retired from the agency.

"In the circumstances, the accuracy, recoverability, and fair statement of the receivables of Sh55 million could not be confirmed," the auditor noted.

This casts further doubt on the agency's financial health and its capability to manage its resources effectively.

Gathungu also pointed out that previous audit reports had raised several issues related to the lawful and effective use of public resources, which remain unresolved.

One such outstanding query involved the unsettled imprest claims amounting to Sh4.4 million from the 2009 census.

KNBS had advanced funds to 158 district commissioners for various payments related to the census but has struggled to recover this amount, with ten commissioners failing to surrender the funds.

To address this issue, KNBS has previously sought assistance from the Interior Ministry for recovering the unreturned imprest.

On March 24, 2020, the bureau wrote to the Treasury seeking approval to write off the unaccounted amount but has yet to receive a response.

Despite these challenges, KNBS claims to have improved its processes for handling imprest surrenders, stating that the management of these funds is a regular and ongoing activity.

They mentioned that monthly payroll recoveries are being conducted to mitigate some of the financial shortfalls.