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REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE APPROPRIATION

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					REPORT OF THE CONTROLLER AND AUDITOR
GENERAL ON THE APPROPRIATION ACCOUNTS,
OTHER PUBLIC ACCOUNTS AND THE ACCOUNTS OF
THE FUNDS OF THE REPUBLIC OF KENYA FOR THE
YEAR ENDED 30 JUNE, 2009



                 INTRODUCTORY AND GENERAL

This Report covers the financial year 2008/2009 and is issued in accordance with
the requirements of Section 105 (2) (c) of the Constitution of Kenya.

EXCHEQUER ISSUES

All issues from the Consolidated Fund were authorized by me as required by
Section 105 (2) (a) of the Constitution of Kenya.

GOVERNMENT FINANCIAL POSITION AS AT 30 JUNE 2009

1.     The overall Government financial position as at 30 June 2009 was a net
surplus of Kshs.35,783,271,151.10 compared to a net surplus of
Kshs.56,205,599,678.06 recorded in the previous year.         The surplus of
Kshs.35,783,271,151.10 was arrived at as indicated below:-

Government Financial Position as at 30 June 2009

(i)   Exchequer Account

Recurrent and Development Votes                 2008/2009              2007/2008
                                                   (Kshs)                 (Kshs)

Total Receipts                          628,391,857,456.65     619,772,629,216.10
Total Issues                          (627,275,256,689.00)   (619,544,842,701.00)
Surplus/(Deficit)                         1,116,600,767.65         227,786,515.10
Surplus Brought Forward                   1,064,207,986.85         836,421,471.75
Sub-Total Net Surplus                     2,180,808,754.50       1,064,207,986.85
Cereals and Sugar Finance Corporation     (897,797,000.00)       (897,797,000.00)
Tax Reserve Certificate                      17,774,920.00          17,774,920.00
Tax Reserve Certificate refunded           __51,702,360.00          51,702,360.00
in 2007/2008
Sub-Total: Recurrent and Development
Exchequer Balance                         1,352,489,034.50        235,888,266.85
(ii) Balance in Bank

Central Bank of Kenya                      34,430,782,116.60            55,969,711,411.21
Sub-Total                                    35,783,271,151.10            56,205,599,678.06
Total                                        35,783,271,151.10            56,205,599,678.06

2.      The total issues from the Consolidated Fund for both Recurrent and
Development Services during the year 2008/2009 amounted to
Kshs.627,275,256,689.00 against total receipts of Kshs.628,391,857,456.65,
resulting in a surplus of Kshs.1,116,600,767.65 as at 30 June 2009. However,
when added to the surplus of Kshs.1,064,207,986.85 brought forward from
2007/2008, a Tax Reserve Certificate of Kshs.69,477,280.00, a deficit of
Kshs.897,797,000.00 relating to a long outstanding loan owing from the yet to be
wound-up Cereals and Sugar Finance Corporation and a bank balance of
Kshs.34,430,782,116.60, the result is a net overall Government cash position of
Kshs.35,783,271,151.10 as at 30 June 2009. This cash position represents a
decrease of Kshs.20,422,328,526.96 or approximately 36% of the previous
year’s balance of Kshs.56,205,599,678.06.

3.     As indicated above, the overall Government cash position of
Kshs.35,783,271,151.10 has been arrived at after taking into consideration the
short-term borrowing in form of a Tax Reserve Certificate of Kshs.69,477,280.00
and a deficit of Kshs.897,797,000.00 relating to the Cereals and Sugar Finance
Corporation. However, and considering the fact that Cereals and Sugar
Finance Corporation has, as observed in the preceding paragraph, been placed
under a winding-up process, the recoverability of the amount of
Kshs.897,797,000.00 from the Corporation may be in doubt.


OUT-TURN OF EXPENDITURE FOR 2008/2009

4.    When compared with the overall approved budget, the year 2008/2009
ended with a net under-expenditure of Kshs.37,995,330,420.91 compared to a
net under-expenditure of Kshs.20,311,965,325.49 recorded in 2007/2008. The
net under-expenditure of Kshs.37,995,330,420.91 was arrived at as shown
below:-

RECURRENT
                             Gross                 AIA                  Net         Under(Over)
                              Kshs                Kshs                 Kshs               Kshs

Estimated        390,563,987,617.00   40,610,351,917.00   349,953,635,700.00
Actual           381,806,767,028.54   38,437,622,488.35   343,369,144,540.19
Under(over)        8,757,220,588.46    2,172,729,428.65     6,584,491,159.81    6,584,491,159.81




                                             2 
 
DEVELOPMENT
Estimated           203,383,165,731.00   61,546,204,261.00   141,836,961,470.00
Actual              163,665,089,453.91   38,288,190,073.77   125,376,899,380.14
Under (Over)         39,718,076,277.09   23,258,014,187.23    16,460,062,089.86   16,460,062,089.86



CONSOLIDATED FUND SERVICES
Estimated           167,592,430,156.00                   -   167,592,430,156.00
Actual              152,641,652,984.76                   -   152,641,652,984.76
Under(Over)          14,950,777,171.24                   -    14,950,777,171.24   14,950,777,171.24
Net overall position                                                              37,995,330,420.91



5.      The under-expenditure of Kshs.37,995,330,420.91 was mainly caused by
slow implementation of projects, inadequate exchequer issues, delayed
disbursement of donor funds and failure to submit expenditure returns by various
development partners. Detailed reasons for the under-expenditure are provided
in the respective Appropriation Accounts.


EXPENDITURE CONTROL

6.    The Excess Expenditure incurred during 2008/2009 without Parliamentary
approval totalled Kshs.633,999,805.03 compared to Kshs.2,484,258,548.70
recorded in the previous year. The Excess Expenditure of Kshs.633,999,805.03
was incurred in eight (8) Ministries and Departments as follows:-
Vote Ministry/Department                         Recurrent        Development            Total
                                                     Kshs.                Kshs.          Kshs.
03     Public Service                                    -         1,307,703.55   1,307,703.55
16     Trade                                             -         8,618,367.00   8,618,367.00
21     Environment and Mineral Resources                 -        16,821,368.40 16,821,368.40
26     Judicial Department                    2,265,287.41        37,676,542.70 39,941,830.11
30     Energy                                            -        86,224,169.60 86,224,169.60
48     Office of the Prime Minister                      -       131,379,199.62 131,379,199.62
49     Public Health and Sanitation                      -       344,215,140.55 344,215,140.55
58     Development of Northern Kenya          5,492,026.20       ____________-    5,492,026.20
       Total                                  7,757,313.61       626,242,491.42 633,999,805.03


7.      The Excess Expenditure of Kshs.633,999,805.03 does not however
include pending bills amounting to Kshs.16,393,797,984.64 which, though
relating to 2008/2009 were not settled during the year, but were instead carried
forward to 2009/2010, as discussed in the ensuing paragraph.




                                                3 
 
PENDING BILLS

8.       During the year ended 30 June 2009, a number of Ministries and
Departments did not settle bills totalling Kshs.16,393,797,984.64, made up of
amounts of Kshs.5,531,049,565.50 and Kshs.10,862,748,419.14 under
Recurrent and Development Votes respectively, but instead carried forward such
bills to 2009/2010, as indicated below:-

    Vote   Ministry/Department      Recurrent        Development             Total
                                      Kshs.             Kshs.                Kshs.
    01     Provincial              468,327,710.40     459,708,566.45      928,036,276.85
           Administration and
           Internal Security
    02     State House              12,770,164.15                  -       12,770,164.15
    04     Foreign Affairs          49,674,593.16                   -      49,674,593.16
    05     Home Affairs            235,202,210.98      85,963,485.58      321,165,696.56
    06     Planning, National       15,434,380.35         190,000.00       15,624,380.35
           Development and
           Vision 2030
    07     Finance                 282,516,852.20     135,179,271.90      417,696,124.10
    08     Defence                 191,004,723.42                   -     191,004,723.42
    10     Agriculture             314,175,313.20     479,476,840.05      793,652,153.25
    11     Medical Services         24,152,753.00     124,804,058.80      148,956,811.80
    12     Local Government       1,511,030,016.04    127,633,415.63     1,638,663,431.67

    13     Roads                  1,681,097,871.95   8,511,676,909.70   10,192,774,781.65
    14     Transport                 26,805,558.20       7,668,355.00       34,473,913.20
    15     Labour and Human         14,957,815.02      12,985,865.10       27,943,680.12
           Resource
           Development
    18     Gender, Children and     15,780,430.30       2,704,124.05       18,484,554.35
           Social Development
    19     Livestock                18,654,220.00      16,198,260.50       34,852,480.50
           Development
    20     Water and Irrigation     19,126,753.00      55,617,996.00       74,744,749.00
    21     Environment and         117,377,053.65     123,490,901.60      240,867,955.25
           Mineral Resources
    22     Co-operative             14,789,327.87       4,659,315.00       19,448,642.87
           Development and
           Marketing
    23     Cabinet Office            9,416,738.30                   -        9,416,738.30
    24     East African              6,977,144.00                   -        6,977,144.00
           Community


                                            4 
 
     26    Judicial Department       36,343,629.30       138,926,078.51        175,269,707.81
     27    Public Service             8,405,418.00                       -        8,405,418.00
           Commission
     29    National Assembly         51,239,409.80                       -      51,239,409.80
     31    Education                122,169,127.70       106,126,911.10        228,296,038.80
     32    Information and           12,213,843.27           499,000.00         12,712,843.27
           Communications
     36    Lands                     12,953,867.20        22,503,567.95         35,457,435.15
     40    Immigration and           40,723,003.25          3,491,000.00        44,214,003.25
           Registration of
           Persons
     41    National Heritage and      6,297,619.20          4,410,687.90        10,708,307.10
           Culture
     42    Youth Affairs and        113,946,642.43        12,643,847.00        126,590,489.43
           Sports
     43    Higher Education,            945,200.00                       -         945,200.00
           Science and
           Technology
     44    Housing                    7,704,036.00                       -        7,704,036.00
     46    Tourism                   18,552,137.91        10,273,998.48         28,826,136.39
     48    Office of the Prime       18,047,916.60          1,207,194.00        19,255,110.60
           Minister
     49    Public Health and            748,620.00                       -         748,620.00
           Sanitation
     55    Forestry and Wildlife                   -        1,900,000.00          1,900,000.00
     56    Fisheries Development     32,933,039.00                       -      32,933,039.00
     59    Public Works              14,698,127.90       412,808,768.84        427,506,896.74
     60    Industrialization          3,856,298.75                                3,856,298.75
           Total                   5,531,049,565.50    10,862,748,419.14     16,393,797,984.64

9.    Had the bills been settled during the period and the expenditure charged
to the accounts for 2008/2009, sixteen (16) additional Ministries and
Departments would have recorded Excess Expenditure against Recurrent and/or
Development Votes, as shown hereunder:-

Recurrent Vote
                                                                                 Excess
                                     Net Surplus         Pending Bills         Expenditure
    Vote   Ministry/Department          Kshs.               Kshs.                 Kshs.

    R.01   Provincial                 159,072,675.80     468,327,710.40       (309,255,034.60)
           Administration and
           Internal Security



                                             5 
 
    R.02   State House                  1,827,475.70        12,770,164.15      (10,942,688.45)
    R.05   Home Affairs               218,813,277.86      235,202,210.98       (16,388,933.12)
    R.08   Defence                     13,786,412.20      191,004,723.42      (177,218,311.22)
    R.10   Agriculture                250,112,416.06      314,175,313.20       (64,062,897.14)
    R.12   Local Government           217,535,003.78    1,511,030,016.04    (1,293,495,012.26)
    R.13   Roads                      322,032,943.68    1,681,097,871.95    (1,359,064,928.27)
    R.14   Transport                   23,554,995.00       26,805,558.20        (3,250,563.20)
    R.21   Environment and              7,369,411.30       117,377,053.65     (110,007,642.35)
           Mineral Resources
    R.22   Co-operative                 6,402,936.79        14,789,327.87       (8,386,391.08)
           Development and
           Marketing
    R.24   East African                 1,800,489.35         6,977,144.00       (5,176,654.65)
           Community
    R.27   Public Service               1,627,366.90         8,405,418.00       (6,778,051.10)
           Commission
    R.41   National Heritage and          282,904.66         6,297,619.20       (6,014,714.54)
           Culture
    R.56   Fisheries                    8,034,177.80        32,933,039.00      (24,898,861.20)
           Development
           Sub Total                 1,232,252,486.88   4,627,193,170.06    (3,394,940,683.18)

Development Vote

    Vote   Ministry/Department           Net Surplus        Pending Bills         Excess
                                                                                Expenditure
                                            Kshs.               Kshs               Kshs.

    D.13   Roads                        2,391,244,762.90 8,511,676,909.70 (6,120,432,146.80)
    D.40   Immigration and
                                            1,364,926.80       3,491,000.00       (2,126,073.20)
           Registration of Persons
    D.59   Public Works                      805,867.25      412,808,768.84     (412,002,901.59)
              Sub Total                 2,393,415,556.95 8,927,976,678.54 (6,534,561,121.59)

             Total                                                            (9,929,501,804.77)



OUT-TURN OF REVENUE

10.    Revenue recorded as having been received as at 30 June 2009 totalled
Kshs.479,630,267,573.92, made up of Recurrent and Development Revenue
balances of Kshs.443,508,480,504.78 and Kshs.36,121,787,069.14 respectively,
against estimated total receipts of Kshs.507,345,721,653.00.    There was
therefore an under-collection of Kshs.27,715,454,079.08 during the year,
representing approximately 5% of the estimated receipts.


                                              6 
 
The reasons for the under-collection are provided in the footnotes to the
respective Statements of Revenue.


COLLECTION OF APPROPRIATIONS-IN-AID

11.   The total Appropriations-In-Aid collected in 2008/2009 amounted to
Kshs.76,725,812,562.12,        against       estimated        receipts     of
Kshs.102,156,556,178.00, resulting in a deficiency of Kshs.25,430,743,615.88.
The deficiency represented approximately 25% of the estimated collections.

12.    The deficiency occurred mainly under the Development Votes, where out
of estimated collections of Kshs.61,546,204,261.00 during the year, only receipts
of Kshs.38,288,190,073.77 were realized.

 As in the previous year, the reasons for the under-collection are provided in the
respective Appropriation Accounts.


APPROPRIATION ACCOUNTS

13.    During the year under review, a number of Ministries and Departments
submitted for audit, Recurrent and Development Appropriation Accounts which
had errors and were therefore inaccurate. Many such Appropriation Accounts
carried balances which did not agree with those reflected in the respective
Ledgers against which the Accounts had been drawn. Further, and as discussed
in a related paragraph below, expenditure recorded against various items in the
Accounts was not supported with the relevant documents, consequent upon
which the propriety of such expenditure could not be ascertained. In other
instances, expenditure incurred during the year was altogether excluded from the
Accounts.

These matters have been dealt with in detail in the paragraphs under the
respective Ministries and Departments.


STATEMENTS OF ASSETS AND LIABILITIES

14.    The Statements of Assets and Liabilities as at 30 June 2009 for a number
of Ministries and Departments continued to reflect significant balances under
various Accounts, which had not been analysed and/or cleared from the books of
account as at 30 June 2009. As in the previous year, such Accounts included
General Account      of   Vote, Paymaster General, Exchequer, Advances,
Suspense, Agency and Clearance, amongst others.




                                        7 
 
15.   For example, the Advances Account debit and credit balances for
2008/2009 in respect of all Ministries and Departments stood at Kshs
2,100,309,597.07 and Kshs.341,041,377.00 respectively as at 30 June 2009, as
shown below:-

Vote                                         Advances Account
                                        Debit                 Credit
                                        Kshs.                 Kshs.

Recurrent                   1,673,479,096.07          332,239,687.05
Development                   426,830,501.00            8,497,199.95
Deposits                     __________0.00               304,490.00
Total                       2,100,309,597.07          341,041,377.00

16.    Similarly, the Suspense Account debit and credit balances for the year
amounted to Kshs.34,006,881,688.72 and Kshs.33,685,322,753.49 respectively
as at 30 June 2009, as indicated below:-

Vote                                          Suspense Account
                                           Debit              Credit
                                           Kshs                Kshs

Recurrent                  19,068,197,819.07       20,238,177,188.16
Development                13,774,850,103.95       12,172,595,367.12
Deposits                    1,163,833,765.70        1,274,550,198.21
Total                      34,006,881,688.72       33,685,322,753.49

17.     Further, the Clearance Account debit and credit balances for the period
totalled to Kshs.6,882,182,886.09 and Kshs.2,416,519,216.95 respectively as at
the close of the year, as summarized below:-

    Vote                              Clearance Account
                                      Debit                  Credit
                                      Kshs                    Kshs

Recurrent                  4,784,674,753.89        1,901,543,395.93
Development                  732,081,114.15          101,408,026.02
Deposits                   1,365,427,018.05          413,567,795.00
Total                      6,882,182,886.09        2,416,519,216.96

As in the previous year, I have not been able to establish what many of these
balances represent or whether such balances are represented by actual cash.




                                      8 
 
FUND ACCOUNTS

18.   As similarly observed in my report for 2007/2008, various Funds are
dormant and have not recorded any meaningful activities for a number of years.
These Funds include:-


Fund                                             Ministry

District Cash Fund                             Provincial Administration and
                                               Internal Security
Provident Fund                                 Finance
Asiatic Widows and Orphans Pensions Fund       Finance
Rural Development Fund                         Planning, National Development
                                               and Vision 2030
District Development Fund                      Planning, National Development
                                               and Vision 2030
Rural Enterprise Fund                          Finance
Hides and Skin Cess Fund                       Livestock Development

These Funds continue to tie up substantial sums of cash that could otherwise be
utilized to finance other critical and urgent development programmes.


BANK RECONCILIATION STATEMENTS

19.    A review of Bank Reconciliation Statements for Recurrent, Development
and Deposits Cashbooks as at 30 June 2009 in respect of several Ministries and
Departments indicated that the Statements continued to reflect substantial
receipts and payments in the Cashbooks not recorded in the Bank Statements,
and also receipts and payments in the Bank Statements not recorded in the
Cashbooks. In many instances, the receipts and payments were found to have
been outstanding for considerably long periods of time.

These matters have been discussed in detail in the paragraphs under the
respective Ministries and Departments.


UNSUPPORTED EXPENDITURE

20.    During the year under review, a number of Ministries and Departments
failed to avail documents to support various expenditure totalling
Kshs.3,597,578,609.95 reflected in the Appropriation Accounts for 2008/2009,
as summarized below:-




                                       9 
 
                                                                     Unsupported
    Vote     Ministry/Department                                     Expenditure
                                                                        Kshs.
    01       Provincial Administration and Internal Security            86,372,512.00
    04       Foreign Affairs                                           762,884,644.75
    06       Planning, National Development and Vision 2030              3,038,780.00
    07       Finance                                                    16,619,044.00
    10       Agriculture                                               349,412,372.70
    13       Roads                                                       8,301,319.00
    16       Trade                                                     342,045,770.80
    18       Gender, Children and Social Development                    23,504,558.00
    19       Livestock Development                                     168,171,835.30
    20       Water and Irrigation                                       90,618,425.35
    24       East African Community                                     48,346,247.00
    26       Judicial Department                                        48,822,509.25
    31       Education                                                  27,294,694.80
    33       Interim Independent Electoral Commission                  159,656,239.85
    35       Special Programmes                                      1,055,324,178.45
    36       Lands                                                      65,368,784.35
    49       Public Health and Sanitation                              285,442,398.45
    59       Public Works                                                  470,000.00
    60       Industrialization                                          55,884,295.90
             Total                                                   3,597,578,609.95

In absence of the documents, the propriety               of    the    expenditure   of
Kshs.3,597,578,609.95 could not be ascertained.


EXCLUDED EXPENDITURE

21.    Expenditure totalling Kshs.711,152,701.67 incurred in 2008/2009 under
various Ministries and Departments as shown below, was excluded from the
Annual Accounts for the year, with the result that such Accounts were
understated by amounts equivalent to the expenditure.

Vote        Ministry/Department                            Excluded Expenditure
                                                                           Kshs.
01         Provincial Administration and Internal Security        131,481,344.25
04         Foreign Affairs                                         19,484,224.05
09         Regional Development Authorities                         1,355,214.80
13         Roads                                                   18,694,010.00
14         Transport                                               16,346,951.00
20         Water and Irrigation                                    44,136,353.05
                                          10 
 
26     Judicial Department                                      2,061,995.70
35     Special Programmes                                     463,235,465.20
49     Public Health and Sanitation                             5,224,608.92
60     Industrialization                                        9,132,534.70
       Total                                                  711,152,701.67

As observed in the paragraphs on the matter under the respective Ministries and
Department, most of the expenditure was excluded from the Accounts due to
book-keeping errors and non-submission of expenditure returns for various
projects.


CONTROL OVER IMPRESTS

22.    As in the previous year, various Ministries and Departments continued to
exercise weak controls and inadequate management of imprests during
2008/2009 and as a result,       substantial balances of such imprests totalling
Kshs.3,342,877,820.60 as shown below, were indicated as outstanding as at 30
June 2009.

Vote        Ministry/Department                    Outstanding Imprest
                                                           Kshs.
01          Provincial Administration
            and Internal Security                          11,868,270.50
02          State House                                     2,563,992.45
04          Foreign Affairs                                35,699,228.00
05          Home Affairs                                    4,265,635.05
07          Finance                                        30,057,880.70
08          Defence                                           847,400.00
10          Agriculture                                     4,290,541.50
11          Medical Services                            2,793,472,897.35
12          Local Government                               16,164,776.00
13          Roads                                           5,912,703.90
15          Labour and Human
            Resource Development                            3,173,895.00
16          Trade                                             600,429.80
17          Justice, National Cohesion and
            Constitutional Affairs                          1,092,187.65
18          Gender, Children and Social
            Development                                     4,596,758.00
19          Livestock Development                           5,204,490.80
20          Water and Irrigation                           11,297,217.90
21          Environment and Mineral
            Resources                                      10,362,241.80
22          Co-operative Development
            and Marketing                                     648,745.00

                                      11 
 
23           Cabinet Office                                  1,811,243.00
25           State Law Office                                1,808,503.45
26           Judicial Department                             1,639,041.90
29           National Assembly                              11,005,189.30
31           Education                                      27,985,826.85
32           Information and Communications                  1,982,487.00
35           Special Programmes                              3,200,476.50
36           Lands                                           1,690,584.00
40           Immigration and Registration of
             Persons                                        17,562,397.10
42           Youth and Sports                                  635,150.50
43           Higher Education, Science and
             Technology                                      6,483,389.45
44           Housing                                         1,450,616.90
46           Tourism                                         3,081,950.00
48           Office of the Prime Minister                    2,101,300.00
49           Public Health and Sanitation                  308,564,016.60
55           Forestry and Wildlife                           2,070,711.80
56           Fisheries Development                           1,479,696.00
58           Development of Northern Kenya                   1,483,127.50
59           Public Works                                    2,473,904.95
60           Industrialization                               2,248,916.40
             Total                                       3,342,877,820.60

23.     In other circumstances, some Ministries and Departments issued to
officers additional imprests before such officers had surrendered or accounted for
balances previously issued.

24.     Although the Government Financial Regulations and Procedures clearly
spell out the guidelines for control and management of imprests, as
supplemented by various circulars issued by Treasury from time to time, no
significant efforts appear to have been made during the year to ensure
compliance with such guidelines.


MAINTENANCE OF ACCOUNTING RECORDS

25.    A number of financial statements submitted for audit by various Ministries
and Departments have been excluded from the Certificate of the Controller and
Auditor-General for 2008/2009. The reasons for such exclusion relates to
various weaknesses observed during the year, in the maintenance of accounting
records and preparation of the financial statements. These weaknesses
included:-

     •   Poor and inadequately maintained accounting records including Ledgers
         and Trial Balances;

                                       12 
 
    •   Unanalysed balances for various below the line accounts;
    •   Uncleared long outstanding balances in the Statements of Assets and
        Liabilities and Bank Reconciliation Statements;
    •   Unreconciled Cashbook balances;
    •   Inaccurate brought forward balances in the Statements of Assets and
        Liabilities and in various Revenue Statements; and
    •   Material book keeping errors resulting in exclusion of expenditure from the
        Accounts.

Detailed observations are highlighted in the main Report.




        OFFICE OF THE DEPUTY PRIME MINISTER AND
                  MINISTRY OF FINANCE

APPROPRIATION ACCOUNT FOR VOTE D.07 FOR THE YEAR ENDED 30
JUNE 2009

Accuracy of the Appropriation Account

26.     The Appropriation Account for Vote D.07 for the year ended 30 June 2009
reflects gross expenditure of Kshs.9,915,129,699.65, which includes expenditure
amounting to Kshs.39,849,107.85 incurred under Sub Vote 075 - Centralized
Services, Head 171-District Treasuries Services, Item 3110200 – Construction of
Buildings. However, payment vouchers and other related records in support of
the expenditure show that an amount of Kshs.46,732,699.00 was actually
incurred on the Construction during the year.

In consequence, the gross expenditure of Kshs.9,915,129,699.65 recorded
against Vote D.07 as at 30 June 2009 has been understated by a figure of
Kshs.6,883,591.15.

Under-Expenditure and Under-Collection of Appropriations-In-Aid

27.   The Appropriation Account also reflects gross under-expenditure of
Kshs.4,464,095,605.35 or approximately 31% of the approved estimates of
Kshs.14,379,225,305.00.      The Account also shows under-collection of
Appropriations-In-Aid of Kshs.801,003,910.95, representing about 83% of the
estimated receipts of Kshs.970,261,195.00.

28.  The reasons provided in the footnotes to the Account for the under-
expenditure and under-collection of Appropriations-In-Aid include; non-release of


                                         13 
 
As in the previous year, the Ministry does not appear to have put in place
measures to address the underlying causes of under-expenditure and under-
collection of Appropriations-In-Aid.

Unvouched Expenditure

29.    Expenditure totalling Kshs.16,619,044.00 charged against various items
under Sub-Votes 070 and 075 in the Appropriation Account were not supported
with payment vouchers and other related documents.

In absence of the vouchers and other records, it has not been possible to confirm
that the expenditure of Kshs.16,619,044.00 constituted a proper charge against
public funds.


APPROPRIATION ACCOUNT FOR VOTE R.07 FOR THE YEAR ENDED 30
JUNE 2009

Payment on Behalf of a Parastatal

30.     The Appropriation Account for Vote R.07 for the year ended 30 June 2009
reflects an expenditure of Kshs.200,000,000.00 charged to Head 164 – Item
4110200 – Domestic Loans to Non-Financial Public Enterprises on 4 June 2009,
in respect of Kenya Broadcasting Corporation. According to information
available, the expenditure represented a grant to the Corporation to enable it
settle outstanding electricity bills during 2008/2009. The expenditure was
however, and for reasons not clear, charged to Head 164- Item 4110200 –
Domestic Loans to Non-Financial Public Enterprises instead of Item 2630100 –
Current Grants to Government Agencies and Other Levels of Government,
against which it had been budgeted for. This apart, it has also not been clarified
why the Government was required to meet costs clearly falling under operations
of the Corporation.

31.    Additional information indicates that during the same period, extra
payments totalling Kshs.422,351,364.45 were made on behalf of the Corporation
under Sub-Vote 522, Item 980 – Payment Under Loan Guarantee Act and Item
982 – Payments Under Loan Guarantee Act – Redemption, on account of
various loans outstanding against the parastatal as at 30 June 2009.

Other Operating Expenses

32.   The Appropriation Account also reflects expenditure totalling
Kshs.791,257,754.40 incurred during the year under Sub-Vote 070, Head 135,
Item 2211300 – Other Operating Expenses. The expenditure includes an
                                       14 
 
amount of Kshs.147,526,579.55 in respect of legal and arbitration fees paid to
three (3) law firms for representing Government in various court cases involving it
and other parties, in Geneva - Switzerland and London- United Kingdom.

However, records and other information relating to the cases have not been
seen and as a result, it has not been possible to establish how the firms were
identified and their fees determined.

33.    A further payment of Kshs.1,526,201.00 made on 21 June 2009 and
included in the expenditure balance of Kshs.791,257,754.40 could not be verified
due to lack of the respective payment vouchers and other relevant supporting
documents.


PENDING BILLS

34.     Records maintained at the Ministry’s Headquarters indicated that bills
totalling Kshs.417,696,124.10 relating to 2008/2009 were not settled during the
year but were instead carried forward to 2009/2010. Out of the total, bills
amounting to Kshs.282,516,852.20 were chargeable to the Recurrent Vote R.07,
while the balance of Kshs.135,179,271.90 represented those in respect of the
Development Vote.

35.    Had the bills been settled and the expenditure charged to the accounts for
2008/2009, the Recurrent Appropriation Account for the year would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.505,319,100.05 instead of Kshs.787,835,952.25 now shown, while the
Development Appropriation Account for the same period would have reflected a
reduced Net Surplus of Kshs.3,527,910,422.50 instead of Kshs.3,663,089,694.40
now recorded.


STATEMENT OF PUBLIC DEBT

36.    In the previous year’s report, reference was made to an increase of the
outstanding Public Debt from Kshs.744,885,408,792.00 as at 30 June 2007 to
Kshs.805,984,199,495.00 as at 30 June 2008. A review of the position in
2008/2009 indicates that the outstanding Public Debt increased by a further
amount of Kshs.177,464,286,744.00 (or approximately 22% of the previous
year’s debt) from Kshs.805,984,199,495.00 to Kshs.983,448,486,239.00 as at 30
June 2009.

37.     The net increase of Kshs.177,464,286,744.00 during the year was mainly
attributed to disbursements of new loans to the Government by various
development partners and additional borrowings from the domestic market
through Treasury Bonds and Bills.

                                        15 
 
38.    The Statement of Public Debt also includes a balance of
Kshs.33,580,020,000.00 described as Kenya Currency Loans. The balance
includes loans of Kshs.20,000.00 and Kshs.200,000,000.00 indicated in the
Statement as relating to various Kenya Savings Bonds and Irredeemable Loan
from Central Bank of Kenya for Development Projects respectively. As in the
previous year, it has not been indicated as to why the latter balances have not
been cleared from the books of account.

39.    The Statement further reflects a new item referred to as Government pre-
1997 Overdraft Debt at the Central Bank of Kenya. Although a payment of
Kshs.2,220,000,000.00 was paid against the item during the year leaving a
balance of Kshs.33,380,000,000.00 outstanding, the movement of these two
particular balances has not been identified or explained.


SUSPENSION OF REPAYMENT OF LOANS

40.     As in the previous year, the Statement of Public Debt as at 30 June 2009
reflects a balance of Kshs.983,448,486,239.00, representing total outstanding
debt as at that date.         This balance however includes loans totalling
Kshs.23,837,379,155.00 whose repayments were discontinued in 2004/2005
after the respective projects were suspended due to various issues touching on
the procurement processes then followed.

41.   Further, and as previously reported, five (5) other projects with loans
amounting to Kshs.18,385,087,280.00 were cancelled during the same period
and a refund of Kshs.1,050,702,075.25 was received from the creditors, on
account of four (4) loans.

The five (5) cancelled projects have however been excluded in the Public Debt
balance of Kshs.983,448,486,239.00 as at 30 June 2009, and as in the previous
years, no reason has been provided for excluding the projects in the Statement.

42.     Separate     information    available    indicates    that    a   sum     of
Kshs.211,569,636.00 was during the year paid from Vote R.07 to two (2) law
firms, in respect of legal and arbitration fees for representing the Government in
some three (3) cases instituted by the lenders. Similarly, an additional amount of
Kshs.139,119,013.80 was paid from the Vote to a local firm of Accountants, for
provision of advisory services on resolution of the security related contracts.
Apart from the fact that the basis of payment of the fees to the firms has not been
clarified, no progress reports on the services rendered have been seen.


STATEMENT OF OUTSTANDING LOANS

43.     The Consolidated Statement of Outstanding Loans as at 30 June 2009
reflects a total loans lent balance of Kshs.38,914,062,352.00, out of which an

                                        16 
 
amount of Kshs.2,879,247,902.00 was repaid during the year leaving a balance
of   Kshs.36,034,814,450.00.   As    in   2007/2008,    the     balance   of
Kshs.36,034,814,450.00 was spread across various organizations through
eleven (11) ministries.

44.   The total loans balance of Kshs.36,034,814,450.00 as at 30 June 2009
represents an increase of Kshs.6,036,798,079.36 or approximately 20% of total
amount of Kshs.29,998,016,370.64 reported as at 30 June 2008.

The following further observations were made in respect of movements of some
of the balances indicated above:-

Ministry of Agriculture and Rural Development

45.    Loans outstanding under Ministry of Agriculture and Rural Development
increased by Kshs.2,665,576,021.81 during the year under review from
Kshs.2,807,762,513.19 as at 30 June 2008 to Kshs.5,473,338,535.00 as at 30
June 2009. The increase of Kshs.2,665,576,021.81 has been attributed to
additional loans granted to Pyrethrum Board of Kenya, Coffee Board of Kenya
and Horticultural Crop Development Authority of Kshs.863,368,270.00,
Kshs.560,332,369.00 and Kshs.1,284,183,986.00 respectively, and loan
repayments of Kshs.42,308,603.90.

Ministry of Water and Irrigation

46.     Loans outstanding under the Ministry of Water and Irrigation increased by
Kshs.2,405,371,615.55 during the year under review, from a balance of
Kshs.1,832,167,586.45 as at 30 June 2008 to Kshs.4,237,539,202.00 as at 30
June 2009. The increase of Kshs.2,405,371,615.55 was partly due to new loans
totalling Kshs.1,824,306,468.00 issued to some five (5) water boards and water
companies during the year. However, the difference of Kshs.581,065,147.55
could not be explained.

Ministry of Energy

47.    Loans outstanding in respect of Ministry of Energy increased by
Kshs.1,023,260,276.00 during the year. However, this increase has not been
explained.

48.   The Statement also reflects a cumulative amount of loans repaid during
the year of Kshs.2,879,247,902.00, representing a net increase of
Kshs.457,317.19 from the amount of Kshs.2,878,790,584.81 reported as at 30
June 2008. Records maintained at the Ministry of Finance however indicate that
loan repayments in 2008/2009 amounted to Kshs.1,338,118,511.68. When
added to the previous year’s repayments figure of Kshs.2,878,790,584.81 as at
30 June 2008, the total cumulative amount repaid as at 30 June 2009 adds up to

                                       17 
 
Kshs.4,216,909,096.49. This particular amount differs by Kshs.1,337,661,194.49
from the repayment figure of Kshs.2,879,247,902.00 reflected in the Statement
as at 30 June 2009. The difference has not been reconciled or explained.

49.    As reported in the previous years, the Statement reflects under Ministry of
Transport and Communication loans outstanding as at 30 June 2009 of
Kshs.2,967,931,485.00, which include an amount of Kshs.2,065,555,780.00 lent
to Kenya Railways Corporation, but which had not been repaid as at 30 June
2009. The Corporation has since been put under concession and as a result, it
has not been possible to establish how its liabilities in form of on-lent loans were
to be settled.

50.    As observed in 2007/2008, several loans denominated in various
currencies lent to Nairobi City Commission have not been included in the
Statement of Outstanding Loans as at 30 June 2009, and as similarly noted in
the previous year, no reason has been provided for the omission.

51.    As previously reported, the Ministry is shifting from the manual system of
recording on-lent loans to the computerized Commonwealth Secretariat Debt
Recording and Management System (CSDRMS). However, loan ledgers
maintained under the existing manual system still show incomplete and
inaccurate data.

52.    In the circumstances therefore, and unless the loans records are first
updated, the new system being adopted will generate unreliable information due
to the incomplete and inaccurate nature of data being used to establish the
current database.


EXPENDITURE ON KEN-REN CHEMICAL AND FERTILIZER COMPANY
LIMITED

53.    The Public Debt balance of Kshs.983,448,486,239.00 as at 30 June 2009
includes balances of Kshs.1,215,548,677.00 and Kshs.2,368,181,389.00 under
Euro Loans due to an Austrian company of BAWAG and a Belgium entity of
DUCROIRE respectively, on account of KEN-REN Chemical and Fertilizer
Company Limited.

54.   As reported in 2006/2007, the above debts arose as a result of a joint
venture entered into in the mid 1970’s between the Government and an
American firm known as N-Ren Ltd, to form a company called Ken-Ren Chemical
and Fertilizer Limited, which was to manufacture fertilizers for domestic and
export markets. According to information available, Ken-Ren entered into
several financing and equipment procurement contracts with various Austrian
and Belgium banks and suppliers, with the Government of Kenya being the
guarantor.

                                        18 
 
55.    Information available indicates that these contracts were dishonoured as
no factory was put up to manufacture the fertilizer as planned. As a result, the
Government as a guarantor was sued by the foreign firms at the International
Chamber of Commerce (ICC) Court for breach of contract, where, and after
protracted proceedings, the final awards were made in favour of the firms. The
Government agreed and signed a debt re-structuring agreement dated 14
November 2000 with the Austrian company, to facilitate settlement of the
principal debt due of Euros 16,635,156.16 at an interest rate of 1.5% p.a.
Repayments for the debt commenced in October 2003 and were scheduled for
completion in March 2010.

56.   A debt re-scheduling agreement between the Government and the
Belgium firm, DUCROIRE was dated 31 October 2003 and a debt of Euros
32,520,319.00 due, was agreed upon as repayable between July 2004 and June
2015.

57.      A review of the two debts in June 2009 showed that a total of
Kshs.2,371,887,138.05 made up of principal and interest amounts of
Kshs.1,639,409,203.95 and Kshs.732,477,934.10 respectively, had been paid as
at 30 June 2009. However, and as observed in the preceding paragraphs, no
fertilizer factory had been constructed, thus making the entire expenditure of
Kshs.2,371,887,138.05 nugatory.


UNDELIVERED MOTOR VEHICLES

58.    Examination of expenditure records maintained at the Ministry’s
Headquarters revealed that an international export & import bank was on 23
September 2008 paid a sum of Kshs.460,161,822.00 (USD 6,218,403) in respect
of a debt which had been owing from the Government for over eight (8) years.

59.   According to information available, the Government through Office of the
President and Ministry of Internal Security & Provincial Administration in
November 1997 entered into a contract agreement with a motor vehicle company
based in South Korea, for supply of five hundred and twenty (520) vehicles for
use by the Police and the Provincial Administration. Pursuant to the agreement,
the Government was to settle bills for the vehicles under a supplier’s credit
arrangement, whereby the local agent of the company would receive the
payments.

The terms of the credit included;

      •      The credit amount: US$ 10 million;
      •      Period of repayment: 5½ years including a 2½ years moratorium;
             and,

                                      19 
 
      •      Interest: LIBOR + 0.75% per annum.

60.    Further information seen indicates that payments were made through
three (3) Kenya Government Promissory Notes of equal amounts, comprising of
principal plus interest, and maturing as indicated below:

      •      1st Promissory Note maturing on 15 May 1999 – US$3,857,038
      •      2nd Promissory Note maturing on 15 May 2000 – US$3,857,038
      •      3rd Promissory Note maturing on 15 May 2001 – US$3,857,038

Delivery of the vehicles was to be made within six (6) months from the date of the
order, that is, 11 December 1997.

61.   In February 1998, the local agent assigned the 1st Promissory Note to a
development bank based in East Africa and effectively transferred the debt from
the company to the bank.

62.    In May 2000, the agent again assigned the remaining two Promissory
Notes to the international export & import bank earlier mentioned in this report.
The Office of the President and Ministry of Internal Security & Provincial
Administration however declined to honour these particular Promissory Notes, on
account of non-delivery of the vehicles. According to records available, the
company had as of May 2000 delivered three hundred and sixty one (361)
vehicles, leaving a balance of one hundred and fifty nine (159) units.

63.    In July 2000, and due to an unsatisfactory performance by the company,
the Attorney General advised the Ministry that the contract could be terminated
and the Government would then claim damages for the units which had not been
delivered. However, and although the contract was eventually terminated on 16
December 2002 as advised by the Attorney General, the Government was still
obliged to honour the two Promissory Notes held by the export & import bank.

64.    The Ministry does not appear to have submitted any instructions to the
Attorney General to proceed with the legal demand for recovery of the money
from the company or local agent, nor does it seem to have effectively pursued
supply of the remaining one hundred and fifty nine (159) vehicles. Instead, and
under an unclear development, the agent on 12 July 2007 issued a Notice of
Intention to sue the Government for losses of Kshs.182 million (US$2.6 million)
incurred against discounting of the Promissory Notes, and accrued interest of
Kshs.126 million (US$ 1.2 million). As of September 2008, the matter does not
appear to have been further addressed or resolved. In the meantime, the
principal and interest on the two unsettled Promissory Notes had continued to
accumulated to stand at Kshs.460,161,822.00 (US$6,218,403) as at 23
September 2008.



                                       20 
 
65.    Following a series of meetings in September 2008 between the Ministry,
the Office of the Prime Minister, Ministry of Finance and the Office of the Attorney
General, Treasury undertook and paid on 23 September 2008 the debt of
Kshs.460,161,822.00 (US$6,218,403) to the export & import bank, under Vote
D.07 – Ministry of Finance.       However, and as far as I have been able to
establish from the records available, the one hundred and fifty nine (159) units
had not been supplied and delivered to the Police or the Provincial Administration
as at 30 June 2009, although the full bill for the units had been settled.

66.    Further, and again on the basis of records seen during the audit, it has
also not been possible to establish how one hundred and forty three (143) units
out of the three hundred and sixty one (361) delivered, were distributed to the
two Departments.

67.    The credit of US$10 million does not also appear to have been reported to
Parliament as required by the External Loans and Credit Act (Cap. 422).


OUTSTANDING TEMPORARY IMPRESTS

68.   Examination of Imprests records maintained at the Ministry’s
Headquarters indicated that Temporary Imprests totalling Kshs.10,033,974.20
which ought to have been surrendered or otherwise accounted for on or before
30 June 2009 were still outstanding as at that date.

69.     Out of the total, imprests amounting to Kshs.1,226,332.20 were owed by
officers on Job Group ‘M’ and above, Kshs.2,703,136.65 by officers on Job
Group ‘L’ and below, Kshs.1,330,136.10 by politicians, Kshs.4,238,225.75 by
individuals no longer working in the Ministry, Kshs.277,265.00 by deceased
officers, while the balance of Kshs.258,878.50 was indicated as being under
investigation.

70.   A review of the position as at 31 August 2009 revealed that imprests
amounting to Kshs.623,560.00 had been surrendered or accounted for, leaving
a balance of Kshs.9,410,414.20 outstanding.


OUTSTANDING STANDING IMPRESTS

71.     Examination of other Imprests records also maintained at Headquarters
indicated that Standing Imprests totalling Kshs.1,023,874.15 which ought to have
been surrendered or otherwise accounted for, on or before 30 June 2009 were
still outstanding as at that date. Out of the total, imprests amounting to
Kshs.804,387.60 were owing from officers who are deceased, Kshs.2,359.00
from officers no longer in the Service, while the balance of Kshs.217,127.55
was due from others.

                                        21 
 
DISTRICT CASH FUND

Dishonoured Cheques

72.   As similarly reported in 2007/2008, the District Cash Fund Balance Sheet
as at 30 June 2009 reflects dishonoured cheques for amounts totalling
Kshs.19,045,362.70 under the Paymaster General Account, relating to
2005/2006 and earlier years. No reason has again been provided for failure to
have the cheques replaced.

Outstanding Imprests and I.O.Us

73.    In the report for the previous year, reference was made to Outstanding
Imprests and I.O.Us totalling Kshs.2,082,689.85, comprising Kshs.1,033,806.00
and Kshs.1,048,833.85, owing from various officers at the Mombasa and
Murang’a District Treasuries respectively, with some such Imprests and IOUs
dating to as far back as in 2000/2001. A review of the position in 30 June 2009
disclosed that no recoveries had been made and the entire balance of
Kshs.2,082,689.85 was still outstanding as at 30 June 2009.

74.     Additional information available indicates that the outstanding balance of
Kshs.2,082,689.85 was owing from amongst others; officers who are on
interdiction, dismissal, retirement or deceased. It has not however been clarified
how the imprests owing from officers who are no longer in Service will be
recovered.

Cash Shortage

75.    In the report for 2007/2008, reference was made to a cash shortage of
Kshs.3,040,274.00 recorded at the Kirinyaga District Treasury, and recovery of
which had not been resolved as at 30 June 2008. A review of the position during
2008/2009 indicated that the matter had not yet been concluded as the outcome
of a court case in respect thereof had not been formally communicated. The loss
of Kshs.3,040,274.00 was therefore still outstanding as at 30 June 2009.

Winding up of the Fund

76.   Although according to information available the winding up process of the
Fund appears to have commenced following repeal of the Payment General Act
in 2004, the process had not however been completed as at 30 June 2009.




                                       22 
 
OUTSTANDING IMPRESTS AT THE MAKUENI DISTRICT TREASURY

77.    Examination of Imprests records maintained at the Makueni District
Treasury in respect of various Government Departments in the District revealed
that Temporary Imprests totalling Kshs.6,370,723.55, which ought to have been
surrendered or otherwise accounted for, on or before 30 June 2009 were still
outstanding as at that date.

78.   The balance of Kshs.6,370,723.55 includes imprests amounting to
Kshs.2,067,994.00 relating to 2007/2008 and earlier years, with some such
amounts dating to as far back as in 2003.

No reasons have been provided for failure to have the imprests surrendered or
accounted for on the due dates.

79.   It was further observed that some officers were issued with additional
imprests prior to surrendering or accounting for balances previously issued.


OUTSTANDING IMPRESTS AT THE FAFI DISTRICT TREASURY

80.     A cash survey conducted at the Fafi District Treasury on 9 October 2009
revealed that Temporary Imprests totalling Kshs.1,439,723.00 owed by various
officers attached to Government Departments in the District and which ought to
have been surrendered or otherwise accounted for, on or before 30 June 2009
were still outstanding as at that date.

No reasons have been provided for failure to have the imprests surrendered or
accounted for as at 30 June 2009.

81.   It was further observed that various officers were issued with additional
imprests before having surrendered or accounted for amounts previously issued.


OUTSTANDING IMPRESTS AT THE GARISSA DISTRICT TREASURY

82.    Examination of Imprests records maintained at the Garissa District
Treasury revealed that Imprests totalling Kshs.3,176,717.85 were outstanding as
at 30 June 2009 against various officers attached to Government Departments in
the District.

No reason has been provided for failure to have the imprests surrendered or
otherwise accounted for.




                                      23 
 
83.   Further, and similar to the previous instance, it was observed that a
number of officers were issued with additional imprests before having
surrendered or accounted for amounts previously issued.


OUTSTANDING       IMPRESTS      AT    THE        GATUNDU   SOUTH     DISTRICT
TREASURY

84.    Examination of Imprest records maintained at the Gatundu South District
Treasury disclosed that Temporary Imprests totalling Kshs.579,486.00 which
ought to have been surrendered or otherwise accounted for on or before 30 June
2009 were outstanding as at that date.

No explanation has been provided for failure to have the imprests surrendered or
accounted for on the due dates.


CASH SHORTAGE AT THE GATUNDU SOUTH DISTRICT TREASURY

85.    A cash survey conducted at the Gatundu South District Treasury on 21
December 2009 disclosed a cash shortage of Kshs.1,698,613.00 between the
Cashbook balance of Kshs.4,980,819.25 and Cash on Hand figure of
Kshs.3,282,206.25. Apart from the fact that the shortage had not been made
good of as at 30 June 2009, no details relating to the loss were made available
for audit review.


IRREGULAR      CASH     MANAGEMENT          AT    THE   MACHAKOS     DISTRICT
TREASURY

Outstanding Imprests

86.     Imprest records maintained at the Machakos District Treasury revealed
that Imprests totalling Kshs.3,774,010.10 owed by various Government
Departments and which ought to have been surrendered or otherwise accounted
for, on or before 30 June 2009 were still outstanding as at that date.

No reasons have been provided for failure to have the imprests surrendered or
recovered from the respective holders.

I Owe You’s (I.O.U’s)

87.   A cash survey conducted at the District Treasury revealed that an amount
of Kshs.113,550.00 was held at the Treasury in form of I Owe You’s (IOU’s) as at
30 June 2009.



                                      24 
 
As in the previous instance, no reason has been given for failure to recover these
irregular and unauthorized advances.


FINANCIAL IRREGULARITIES AT THE KITUI DISTRICT TREASURY

Unauthorised Advances

88.     In my report for 2007/2008, mention was made of unauthorized advances
in form of I Owe Yous (I.O.Us) totalling Kshs.2,726,550.00, granted to various
officers at the Kitui District Treasury during the year. A review of the position in
2008/2009 indicated that the situation had not improved, in that such advances
had increased by an amount of Kshs.639,417.00 during the period to stand at
Kshs.3,365,967.00 as at 30 June 2009.

No explanation has been given for this unsatisfactory state of affairs.

Outstanding Temporary Imprests

89.    Imprest records maintained at the District Treasury indicate that
Temporary Imprests totalling Kshs.1,586,732.00 which ought to have been
surrendered or otherwise accounted for, on or before 30 June 2009 were still
outstanding as at that date. It has not however been clarified why the imprests
had not been accounted for, on the due dates or recovered from the officers’
salaries.

90.   Further, it was observed that some officers were issued with additional
imprests before having surrendered or accounted for amounts previously issued.


FINANCIAL IMPROPRIETIES AT THE KWALE DISTRICT TREASURY

Unaccounted for Receipts

91.    During the year under review, the District Treasury collected an amount of
Kshs.733,000.00 from sale of tender documents. Although the amount of
Kshs.733,000.00 was indicated as having been banked at the Kenya Commercial
Bank Ukunda, through Account No.094213970588, a check at the Bank revealed
that no such cash had been banked and indications therefore are that the money
may have been misappropriated. No recovery of the amount had been made as
at 30 June 2009 and no action appears to have been taken against the officers
who perpetuated the loss.




                                         25 
 
Cash Shortage

92.    A cash survey conducted at the Treasury during the month of June 2009
revealed a cash shortage of Kshs.1,232,270.15. Although, and according to
information available the District Accountant has since written to the respective
cashiers demanding refund of the missing cash, no such refund had been
received as at 30 June 2009. In addition, no action appears to have been taken
to safeguard further loss of cash at the Treasury.


VALUE ADDED TAX – KWALE COUNTY COUNCIL

Failure to Charge VAT on Goods and Services

93.   Kwale County Council failed to charge and remit to Kenya Revenue
Authority, Value Added Tax totalling Kshs.864,380.60 in respect of various goods
and services provided to the Council during the year. No reason has been
provided for failure to charge the tax.

Unremitted Value Added Tax

94.   The Council also charged and withheld Value Added Tax totalling
Kshs.1,750,462.65 on various goods and services during the year. No evidence
has however been availed to confirm that the Tax was eventually remitted to
Kenya Revenue Authority.


CONSOLIDATED FUND SERVICES, PUBLIC DEBT – STATEMENT OF
EXPENDITURE

95.   The Statement of Expenditure for Public Debt for the year ended 30 June
2009 reflects actual expenditure of Kshs.125,925,844,842.00 under Public Debt,
representing a decrease of Kshs.15,127,215,210.55 or approximately 10% over
the previous year’s figure of Kshs.141,053,060,052.55. As in 2007/2008, the
decrease was recorded against Internal Debt Interest and Internal Debt
Redemptions.

96.    The expenditure of Kshs.43,992,388,433.55 and Kshs.57,986,881,819.00
against Internal Debt Interest and Internal Debt Redemption respectively,
includes amounts of Kshs.3,209,640,928.90 and Kshs.1,244,012,519.00 on
account of interest accrued on Special Bonds and Redemption of the Bonds
respectively, issued to contractors some years back for settlement of pending
bills, some of which had been considered as ineligible for payment.
Consequently, and as similarly stated in the report for 2007/2008, the propriety of
the expenditure of Kshs.3,209,640,928.90 in respect of accrued interest and of
Kshs.1,244,012,519.00 against Redemption of Bonds could not be confirmed.

                                        26 
 
97.    The expenditure of Kshs.6,496,680,635.55 and Kshs.17,374,477,719.90
incurred on External Debt Interest and Debt Redemption respectively, includes
amounts of Kshs.140,841,541.15 and Kshs.512,604,254.80 incurred on interest
and principal loan repayments respectively, towards settlement of Government
Guaranteed debts incurred in 1970, as a result of financing contracts entered
into between the Government on one hand and Austrian and Belgium Banks on
the other, on account of Ken-Ren Chemical and Fertilizer Company. Although
the Government continues to service these debts, the project, as observed
elsewhere in this report, did not take off and it is not likely to.


CONSOLIDATED FUND SERVICES, SUBSCRIPTIONS TO INTERNATIONAL
ORGANIZATIONS – STATEMENT OF EXPENDITURE

98.     The Consolidated Fund Services, Subscriptions to International
Organizations – Statement of Expenditure for the year ended 30 June 2009
reflects nil expenditure against approved estimates of Kshs.55,000,000.00. No
subscriptions were therefore paid during the year and no reason has been
provided by way of footnotes for the anomaly.

99.   Further, the Cashbook balance of Kshs.2,601,589.25 for Recurrent
Account No. 01-010-R053 – Subscriptions to International Organizations as at 30
June 2009 differs by a figure of Kshs.273,810.95 with the Bank balance of
Kshs.2,327,778.30 as at the same date. No reconciliation or explanation has
been provided for the difference. Consequently, the accuracy of the Cashbook
balance of Kshs.2,601,589.25 could not be confirmed.


CONSOLIDATED FUND SERVICES,                     PENSIONS     AND     GRATUITIES       -
STATEMENT OF EXPENDITURE

100. The Statement of Expenditure for the Consolidated Fund Services,
Pensions and Gratuities for the year ended 30 June 2009 reflects a total
expenditure of Kshs.25,222,550,670.81, which includes an amount of
Kshs.52,780,845.00 remitted during the year to the Crown Agents in the United
Kingdom, for payment to pensioners residing in that country. However, and as
similarly observed in the previous years, details of the recipients of the pensions
including their life certificates/returns, passports and other copies of identification
documents were not made available for audit verification. Consequently, the
propriety of expenditure of Kshs.52,780,845.00 could not be confirmed.

101. The expenditure of Kshs.25,222,550,670.81 also includes an amount of
Kshs.4,108,107.15 incurred in respect of refund and other ex-gratia allowances
under Sub-Vote 513 – Other Pension Schemes. However, payment vouchers

                                          27 
 
102. The figure of Kshs.25,222,550,670.81 further includes an amount of
Kshs.17,448,551.35 lost through fraudulent encashment of cancelled cheques or
through various other irregularities at the Pensions Department. This particular
amount had not been recovered as at 30 June 2009. Further, no action appears
to have been taken against the officers who perpetuated the fraud.


CONSOLIDATED FUND SERVICES: SALARIES, ALLOWANCES                              AND
MISCELLANEOUS SERVICES - STATEMENT OF EXPENDITURE

103. The Consolidated Fund Services: Salaries, Allowances and Miscellaneous
Services – Statement of Expenditure for the year ended 30 June 2009 reflects
under Sub-Vote 522 Item 980 – Payments Under Loan Guarantee Act – Interest
and Item 982 – Payments Under Loan Guarantee Act – Redemption, expenditure
balances of Kshs.167,233,734.15 and Kshs.616,345,555.00 respectively, relating
to loans the Government had guaranteed on behalf of Tana and Athi Rivers
Development Authority , Kenya Broadcasting Corporation and Nairobi City
Council.

104. As similarly reported in 2007/2008, the terms and conditions of taking-
over of these loans by the Government have not been seen, and as a result, it
has not been possible to establish whether or not the organizations/institution
were required to reimburse the Government the loans and interest it had paid on
their behalf. It has also not been possible to ascertain that the repayments of the
loans and interest had complied with the terms and conditions of the take-over.


CIVIL CONTINGENCIES FUND

105. The Civil Contingencies Fund was created for the sole purpose of funding
urgent and unforeseen expenditures, for which no provision existed in the
approved estimates. During the year under review however, advances totalling
Kshs.1,268,900,000.00 were granted from the Fund to six (6) Ministries to
finance expenditures which clearly could have been foreseen and provided for in
the respective estimates for the year.

106. Although the above advances were repaid during the year, it is a matter of
concern that the Fund was used to finance expenditures which appear not to be
contingent in nature and which therefore could be foreseen and provided for in
the estimates of the Ministries.




                                        28 
 
KENYA LOCAL LOANS SUPPORT FUND

107. The Balance Sheet as at 30 June 2009 reflects an Investments at Cost
figure of Kshs.10,410,373.50, while the supporting schedule shows an amount of
Kshs.10,430,700.00. The difference of Kshs.20,326.50 between the Balance
Sheet and the schedule has not been reconciled or explained.

108. Further, and as stated in the previous years’ reports, the schedule for
Redeemable and Unredeemable Stocks of Kshs.10,430,700.00 show that apart
from a 6% Kenya Stock with nominal value of Kshs.17,400.00 due for redemption
on 6 February 2010, all other Stocks worth Kshs.10,413,300.00 were past the
respective redemption dates. No reasons have been provided for failure to
redeem the Stocks on maturity.

109. In the report for 2007/2008, concern was expressed over an initial
investment of Kshs.4,000,000.00, which had been placed in July 1992 with the
moribund and yet to wound up Cereals and Sugar Finance Corporation, but was
omitted in the Fund’s Balance Sheet as 30 June 2008. This investment has yet
again been omitted in the Balance Sheet as at 30 June 2009, although interest
income of Kshs.660,000.00 for 2008/2009 has been accrued in the financial
statements for the year.

110. No reason has been provided for the inconsistency of omitting in the
Balance Sheet the investment of Kshs.4,000,000.00 on one hand, while
continuing to accrue interest from the same investment on the other. In addition,
and as similarly observed in the previous years, the Corporation is dormant and
technically insolvent. Consequently, the recoverability of the investment and
accrued interest balances of Kshs.4,000,000.00 and Kshs.660,000.00
respectively is doubtful.

111. Additional information indicates that although approval for winding up of
the Corporation was granted by the Government in September 2007, the process
does not appear to have been concluded by 30 June 2009.


RURAL ENTERPRISE FUND

112. In the Report for 2007/2008, it was stated that the manner in which the
Rural Enterprise Fund was being managed and in particular the operational
arrangements with respect to the management of the Fund, including
documentation of loan applications, accounting, administration and loan
recoveries was inadequate.




                                       29 
 
113. A review of the Funds Accounts in 2008/2009 revealed that there has
been minimal and insignificant improvement in the situation as summarized in the
ensuing paragraphs:-

Loan Beneficiaries

114. The Statement of Assets and Liabilities as at 30 June 2009 reflects a loan
balance of Kshs.394,559,879.30, which includes an amount of
Kshs.220,013,036.70 that has not been analysed to show the names of
borrowers, amounts borrowed and outstanding as at 30 June 2009.
Consequently, and in absence of such analysis, the correctness of the balance of
Kshs.394,559,879.30 could not be verified. This apart, it has also not been
explained how the Ministry tracks down defaulters and other debtors without the
analysis. Further, no interest on the loans was accrued in the accounts and no
reasons have been provided for the anomaly.

Unbanked Cash

115. The Statement also reflects unbanked cash balances totalling
Kshs.3,346,895.00, brought forward from 2007/2008 and earlier years. The total
of Kshs.3,346,895.00 comprises Kshs.1,951,920.60 representing Cash with DC
(Loans Repaid); Kshs.108,839.70, Cash with DC (Interest on Loans); and
Kshs.1,288,134.70 relating to Cash in DC’s Miscellaneous Deposit Account.
Apart from failure to clarify why the cash balances had not been banked as at 30
June 2009, there was also no evidence to confirm actual existence of the amount
of Kshs.3,346,895.00 at the DCs’ Offices.

116. In addition, the figure of Kshs.1,951,920.60 under DC (Loans Repaid)
includes advances amounting to Kshs.207,344.25 in form of IOU’s, issued in
1997/98 from the Fund to some five officers working at the DC’s Office, Kisumu.
The IOUs had not however been surrendered or made good of as at 30 June
2009. Further information indicates that part of the IOUs may not be recoverable
as some of the officers have since died.

Unreconciled Balance

117. The Statement further reflects a debit balance of Kshs.770,125.15 against
the Fund, while the Fund Accounts under review show a figure of
Kshs.397,908,774.30 against the item.          The significant difference of
Kshs.397,138,649.15 between the two sets of records has not been reconciled or
explained.




                                      30 
 
TREASURY MAIN CLEARANCE FUND

Sundry Debtors

118. The Treasury Main Clearance Fund Balance Sheet as at 30 June 2009
reflects Sundry Debtors balances totalling Kshs.2,940,995,845.45, which have
not been analysed with the result that the completeness and accuracy of the
amounts could not be ascertained. Further, the total includes an amount of
Kshs.2,332,170,394.25 relating to 2007/2008 and earlier years. No reason has
however been given for the long delay in the collection of this particular amount.

Sundry Creditors

119. The Balance Sheet also reflects a Sundry Creditors balance of
Kshs.2,933,596,645.45, which includes amounts of Kshs.523,686.45,
Kshs.2,932,979,504.45 and Kshs.93,454.55 under PMG Special Account,
Advance Deposits and JCF Interest respectively. However, these three amounts
have not been analysed or supported with the relevant documents. As a result,
the completeness and accuracy of the Sundry Creditors balance of
Kshs.2,933,596,645.45 as at 30 June 2009 could not be ascertained.


PETROLEUM DEVELOPMENT LEVY FUND

120. As reported in 2007/2008, the Fund’s brought forward balance of
Kshs.732,116,062.80 excludes unused funds totalling Kshs.83,165,725.25
carried forward from 2006/2007, and which had been omitted in the financial
statements for that year. Had the balance been considered and taken account of
in the statements, both the Cash with PMG and Fund balances as at 30 June
2009 would have reflected a figure of Kshs.907,018,086.75.

121. The Income and Expenditure balance of Kshs.1,339,236,298.70
representing receipts from Oil Marketeers differs with the amount of
Kshs.1,382,892,492.25 shown in the Kenya Revenue Authority records, by a
figure of Kshs.43,656,193.55. The difference has not been reconciled or
explained.

122. The Balance Sheet as at 30 June 2009 reflects a PMG balance of
Kshs.823,852,361.50, while the Cashbook as at the same date shows an amount
of Kshs.102,978,124.90. The Statement of Assets and Liabilities for Deposit 07
as at 30 June 2009 on the other hand reflects a balance of Kshs.707,983,559.90
against the Fund Account. The differences between the three sets of records
have not been reconciled or explained.




                                       31 
 
ASIATIC WIDOWS AND ORPHANS PENSION FUND

123. As similarly observed in 2007/2008, the Ministry has failed to prepare and
submit for audit Accounts for the Asiatic Widows and Orphans Pension Fund for
the period between 1973/74 to 1995/96. Consequently, the Accounts for the
subsequent periods including the ones under review were prepared on the basis
of unaudited brought forward balances, which could not be confirmed. These
include amounts of Kshs.1,616,270.20, Kshs.200.00, Kshs.578,917.25,
Kshs.8,113.00 and Kshs.2,187,274.45 reflected in the Balance Sheet as at 30
June 2009 against Government Contributions, Personal Contributions, PMG,
Over-contributions to Fund Suspense and Accumulated Excess Expenditure
Over Income respectively.

124. The Fund has not recorded any transaction since 2002/2003 and has
therefore been dormant for the last seven (7) years. Further, and although the
Public Accounts Committee had recommended winding-up of the Fund in order
to stop further maintenance and management costs, no action appears to have
been taken on the recommendation so far, and no clarification in this regard has
been received.


ASIAN OFFICERS’ FAMILY PENSION FUND

125. The Income and Expenditure Account in respect of Asian Officers’ Family
Pension Fund for the year ended 30 June 2009 reflects nil income against
expenditure of Kshs.994,531.00, resulting in excess expenditure of
Kshs.994,531.00. However, information available indicates that dividends
totalling Kshs.2,357,877.60 were received during the year from Kenya Power
and Lighting Company Ltd. Had the dividends been considered and accounted
for in the period, the Income and Expenditure Account would have reflected an
excess income over expenditure of Kshs.1,363,346.60 instead of the deficit of
Kshs.994,531.00 now recorded.

126. The Fund Balance Sheet as at 30 June 2009 reflects credit and debit
balances totalling Kshs.135,774,463.90 and Kshs.1,982,243.50 respectively
under various items including Capital Account, Government Contributions and
Fines amongst others, brought forward from 2007/2008 and earlier years.

127. As similarly reported in 2007/2008, the balances of Kshs.135,774,463.90
and Kshs.1,982,243.50 have not been supported with the relevant analyses or
schedules, with the result that it has not been possible to ascertain their
accuracy.




                                      32 
 
128. The Balance Sheet also reflects an investment portfolio balance of
Kshs.276,198,271.45, made up of Investments at Cost, Cash in Deposit (JCF)
and   Cash    in    Deposit   (C&SFC)    figure    of    Kshs.12,976,580.00,
Kshs.248,021,691.45 and Kshs.15,200,000.00 respectively.

129. The Investments at Cost figure of Kshs.12,976,580.00 representing
shares held in Kenya Power and Lighting Co. Ltd and East African Power and
Lighting Co. Ltd however appears to be understated by an amount of
Kshs.369,400.00, while the figure of Kshs.248,021,691.45 against Cash in
Deposit (JFC), as in the previous years, has not been supported with Investment
Certificates or other verifiable documents. Further, the Institutions/Organizations
in which the investment with JFC was placed have also not been identified.

Consequently, it has not been possible to ascertain existence, ownership and
valuation of the investment balance of Kshs.276,198,271.45 as at 30 June 2009.

130. The Cereals and Sugar Finance Corporation (C&SFC) in which Cash in
Deposit of Kshs.15,200,000.00 is held is technically insolvent and separate
information available indicates that the Corporation is in the process of being
wound up.

131. In the reports for the previous years, reference was made to proceeds
amounting to Kshs.76,962,400.00 in respect of Kenyan Stocks of
Kshs.22,000,000.00, Kshs.33,840,000.00 and Kshs.21,122,400.00 redeemed in
2001, 2004 and 2007 respectively and which had not been invested, but had
instead been lying unutilized in Pensions Department’s Deposits Account. A
review of the situation in 2008/2009 disclosed that no change had been recorded
during the year and the proceeds from the redeemed stocks totalling
Kshs.76,962,400.00 had not been invested as at 30 June 2009.


EUROPEAN WIDOWS AND ORPHANS PENSION SCHEME

132. The Fund Income and Expenditure Account for the year ended 30 June
2009 reflects nil income, against an expenditure of Kshs.59,868.00. Information
available however indicates that an interim dividend of Kshs.1,920,762.00 was
paid on 30 April 2009 to the Permanent Secretary, Treasury on behalf of the
Scheme by Kenya Power and Lighting Company Ltd. It would appear therefore
that the dividend was not accounted for in the Scheme’s Accounts.

133. Had the dividend been recognized and accounted for in the period, the
Accounts would have reflected an excess income over expenditure of
Kshs.1,860,894.00, instead of Kshs.59,868.00 now recorded.




                                        33 
 
134. The Fund Balance Sheet for the year under review reflects Investments at
Cost of Kshs.8,152,112.75, which represents investments with the Kenya Power
and Lighting Company Limited.        However, this amount differs with the
investments figure of Kshs.19,207,620.00 derived from a stock of 960,381
ordinary shares of Kshs.20.00 held in the Company as at 30 June 2009. The
difference of Kshs.11,055,507.25 has not been reconciled or explained.

135. As similarly reported in 2007/2008, the Investment of Kshs.16,900,000.00
reflected in the Balance Sheet as at 30 June 2009 is held in the Cereals and
Sugar Finance Corporation, which is technically insolvent. Although according to
information available, the Government approved the winding-up of the
Corporation with a further requirement that the Office of the Deputy Prime
Minister and Ministry of Finance takes over its assets and liabilities, as well as
loans already lent to other Organizations. No information on progress in this
regard has however been made available for audit review.

136. Similar to the previous year, the Balance Sheet as at 30 June 2009
excludes an amount of Kshs.13,440,825.50 in respect of Sundry Debtors and
another of Kshs.18,328,397.40 relating to accumulated interest receivable from
the Cereals and Sugar Finance Corporation. No reason has been provided for
the omission.

137. In the report for 2007/2008, reference was made to proceeds of
Kshs.9,000,000.00 realized in July 2001 upon redemption of 11% Kenya Stock
2000 which was held in the Ministry’s Deposits Account No.4-867-102-0021
without being re-invested. A review of the position as at 30 June 2009 disclosed
that the amount was still being held in the deposit account, over eight (8) years
after the stock was redeemed.         No reason has been provided on this
unsatisfactory state of affairs.

138. The balance of Kshs.82,602,189.50 in respect of the Paymaster General
Account reflected in the Balance Sheet as at 30 June 2009 has not been
supported with a bank certificate or other relevant records. Consequently, it has
not been possible to ascertain its existence or accuracy.


PROVIDENT FUND

139. Although the Income and Expenditure Account for the Provident Fund for
the year ended 30 June 2009 reflects nil income and expenditure in 2008/2009,
documents reviewed during audit however indicate that dividends totalling
Kshs.18,850,350.00 and Kshs.2,752,206.80 were received from East African
Breweries Ltd and Kenya Power and Lighting Company Ltd respectively during
the year. Consequently, the income for the Fund has been understated by an
amount of Kshs.21,602,556.80 as at 30 June 2009.



                                       34 
 
140. The Fund Balance Sheet as at 30 June 2009 reflects various balances
under Capital Account, Provisions on Investment, Surplus Cash remitted by
Departments and Interest due from GOK, brought forward from 2007/2008 and
earlier years.

The balances have not been analysed and as a result, it has not been possible to
establish what they represent. For the same reason, their completeness and
accuracy could not be ascertained.

141. The Balance Sheet also reflects a brought forward investments portfolio
balance of Kshs.18,303,849.50, made up of amounts of Kshs.13,509,967.45,
Kshs.997,655.80, and Kshs.3,796,226.25 under Investments at Cost, Cash in
Deposit (JCF) and Cash in Deposit (C &SFC) respectively.

142. The share certificates in respect of the Investments at Cost however show
investments with Kenya Power and Lighting Company Ltd of
Kshs.15,250,300.00, resulting in an understatement of Kshs.1,740,332.55, which
has not been explained.

143. Further, and as similarly reported in prior years, Cash in Deposits (JCF)
and Cash in Deposits with Cereals and Sugar Finance Corporation (C & S F C)
of Kshs.997,655.80 and Kshs.3,796,226.25 respectively, have not been
supported with deposit certificates or other related records. In consequence, it
has not been possible to ascertain existence, ownership and valuation of the
investment stated at Kshs.4,793,882.05 as at 30 June 2009.

144. In addition, and as previously reported, C & S F C in which a cash deposit
of Kshs.3,796,226.25 was held as at 30 June 2009, is in the process of being
wound up. The recoverability of the debt is therefore doubtful.

145. An amount of Kshs.6,666,900.00 relating to Sundry Debtors, and the
corresponding accumulated interest of Kshs.6,060,900.00 receivable from C & S
F C as at 30 June 2009 have both been omitted in the Fund Accounts, although
the balances are disclosed in the notes to the Accounts. No reason has been
provided for the anomalies.


STATEMENT OF REVENUE HEAD 1110000 – TAXES ON INCOME, PROFITS
AND CAPITAL GAINS

146. The Statement of Revenue for Head 1110000 – Taxes on Income, Profits
and Capital Gains for the year ended 30 June 2009 reflects actual receipts of
Kshs.184,446,777,305.90, comprising Kshs.98,602,617,049.30 in respect of
Income Tax from Individuals (PAYE) and Kshs.85,844,160,256.60 under Income
Tax from Corporations (Other Income Tax). Records maintained by the Kenya
Revenue Authority however reflect total receipts of Kshs.194,544,651,015.00

                                      35 
 
made up of Kshs.103,412,527,819.00 and Kshs.91,132,123,196.00, relating to
PAYE and Other Income Tax respectively. The resultant difference of
Kshs.10,097,873,709.10 between the two sets of records has not been
reconciled or explained.

147. The Statement also reflects Income Share of Local Authority Transfer
Fund (LATF) actual receipts of Kshs.9,751,303,079.45, while records at the
Kenya Revenue Authority show nil collections. The actual receipts of
Kshs.9,751,303,079.45 also differ with the amount of Kshs.5,985,337,940.35
appearing in the Ledger for the month of June 2009. The differences between
the three sets of records have not been reconciled or explained.

148. The      Statement   of   Revenue     further   reflects payments     of
Kshs.9,214,929,938.00 made to various Local Authorities across the country
during the year. Records maintained at the Central Bank of Kenya on the other
hand indicate that such payments totalled Kshs.9,235,664,935.00 during the
period.     As in the previous instance, the resultant difference of
Kshs.20,734,997.00 has not been reconciled or explained.

149. The Statement in addition reflects a balance of Kshs.4,035,921,861.19
brought forward from 2007/2008 in respect of PAYE and Other Income Tax. The
balance however differs with the carried forward amount of Kshs.378,737,014.35
against the same item in the audited Statement for 2007/2008, by
Kshs.3,657,184,846.84. The Statement further shows a balance of
Kshs.4,611,100,421.00 in respect of Income Share of LATF brought forward from
2007/2008, which similarly differs with the carried forward amount of
Kshs.2,770,184,499.70 against the same item in the audited Statement for
2007/2008, by Kshs.1,840,915,921.30. The above differences have not been
reconciled or explained.

150. The Statement shows a carried forward balance of Kshs.5,108,532,562.45
in respect of Income Share of LATF, while the Statement of Assets and Liabilities
for Deposits 07 as at 30 June 2009 reflects a figure of Kshs.5,985,337,940.35
against the item. The difference of Kshs.876,805,377.90 has, as in the previous
instances, not been reconciled or              explained. The amount of
Kshs.5,108,532,562.45 further differs with the reconciled LATF Cashbook
balance of Kshs.3,238,116,592.46 as at 30 June 2009. Again, the difference of
Kshs.1,870,415,969.99 has not been reconciled or explained.

151. The Statement of Arrears of Revenue due as at 30 April 2009 and
uncollected as at 30 June 2009 reflects a balance of Kshs.60,489,211,087.00,
made up of PAYE and Other Income Tax Arrears of Kshs.3,723,039,311.00 and
Kshs.56,766,171,776.00 respectively. Apart from failure to collect the arrears,
these two particular balances have not been analysed or supported with the
relevant records and as a result, their completeness and accuracy could not be
ascertained.

                                       36 
 
STATEMENT OF REVENUE HEAD 1140000 – TAXES ON GOODS AND
SERVICES

152. The Statement of Revenue for Head 1140000 – Taxes on Goods and
Services for the year ended 30 June 2009 reflects total actual receipts of
Kshs.196,726,120,891.00, comprising amounts of Kshs.66,216,490,055.00,
Kshs.60,637,581,904.00 and Kshs.69,872,048,932.00 under VAT – Local, VAT –
Imports and Excise Taxes respectively. Records maintained at the Kenya
Revenue Authority however show total receipts of Kshs.190,151,021,862.00.
The resultant difference of Kshs.6,575,099,029.00 between the two sets of
records has not been reconciled or explained.

153. The Statement also reflects payments totalling Kshs.196,726,120,891.00
made to the Exchequer during the year, while records maintained at the
Exchequer Section, Treasury show a figure of Kshs.196,726,192,896.50 against
the item. The resultant difference of Kshs.72,005.50 between the two sets of
records has not been reconciled or explained.

154. The Statement further reflects a Revenue on Hand balance of
Kshs.2,231,386,644.30 brought forward from 2007/2008. This balance however
differs with the amount of Kshs.446,379,166.10 carried forward in the audited
Statement for 2007/2008, by a figure of Kshs.2,677,765,810.40. As in the
previous instance, the difference has not been reconciled or explained.

155. The Statement also shows an over-payment of Kshs.2,231,386,644.30 to
the Exchequer as at 30 June 2009, while the Statement of Assets and Liabilities
for Deposits 07 as at the same date shows an amount of Kshs.862,935,694.65
against the item. Similarly, the difference of Kshs.1,368,450,949.65 between the
two sets of records has not been reconciled or explained.

156. The Statement of Arrears of Revenue reflects a balance of
Kshs.7,228,048,009.00 in respect of Arrears of Revenue due as at 30 April 2009
and uncollected as at 30 June 2009, made up of VAT arrears of
Kshs.7,108,154,172.00 and Excise Taxes arrears of Kshs.119,893,837.00. The
Statement does not however separately show Arrears in respect of 2007/2008
and earlier years, contrary to the requirement of Section 11.9.2 (a) of
Government Financial Regulations and Procedures. Further, no reasons have
been provided for failure to collect the arrears.




                                      37 
 
REVENUE HEAD 1150000 – TAXES ON INTERNATIONAL TRADE AND
TRANSACTIONS

157. The Statement of Revenue for Head 1150000 – Taxes on International
Trade and Transactions for the year ended 30 June 2009 reflects receipts of
Kshs.51,131,413,788.00, including Customs Duties and         Other Taxes on
International Trade and Transactions. However, records maintained in respect of
the Head at the Kenya Revenue Authority reflect receipts of
Kshs.51,183,886,998.00, resulting in a difference of Kshs.52,473,210.00. The
difference has not been reconciled or explained.

158. The Statement also reflects a balance brought forward of
Kshs.53,428,871.10, while the audited Statement for 2007/2008 shows a
Balance on Hand of Kshs.847,412,645.95 as at 30 June 2008. This discrepancy
has not been reconciled or explained.

159. The Statement further reflects a Revenue on Hand balance of
Kshs.53,428,871.10, which however differs by Kshs.809,506,823.55 with the
figure of Kshs.862,935,694.65 reflected in the Statement of Assets and
Liabilities for Deposits 07 as at 30 June 2009. As in the previous instances, the
difference has not been reconciled or explained. It has also not been clarified
why the significant balance of Kshs.53,428,871.10 had not been surrendered to
the exchequer as at 30 June 2009.


REVENUE HEAD 1160000 – OTHER TAXES NOT ELSEWHERE CLASSIFIED

160. The Statement of Revenue for Head 1160000 – Other Taxes (Not
Elsewhere Classified) for the year ended 30 June 2009 reflects actual receipts of
Kshs.4,669,685,264.10 realized during the year, while records maintained at the
Kenya Revenue Authority show receipts of Kshs.4,760,708,597.00 against the
Head. The difference of Kshs.91,023,332.90 between the two sets of records
has not been reconciled or explained.

161. The Statement also reflects a debit balance brought forward from
2007/2008 of Kshs.2,626,344.70,          which differs by a figure of
Kshs.66,188,387.00 with the amount of Kshs.63,562,042.30 shown in the audited
Statement for that year. As in the previous instance, the difference of
Kshs.66,188,387.00 has not been reconciled or explained.


STATEMENT OF REVENUE HEAD 1420000 - SALE OF GOODS AND
SERVICES

162. The Statement of Revenue Head for 1420000 – Sale of Goods and
Services for the year ended 30 June 2009 reflects actual receipts totalling
Kshs.2,656,240,663.55 against estimated collections of Kshs.10,290,902,474.00,

                                       38 
 
resulting in an under-collection of Kshs.7,634,661,810.45 or approximately 74%
of the estimated amount. The under-collection mainly occurred under item
1420109 – Other receipts, where no receipts were realized against an estimate
of Kshs.8,000,000,000.00.

163. The Statement also reflects receipts of Kshs.2,656,240,663.55 under item
1420201 – Fees Under Traffic Act, against estimated collections of
Kshs.1,471,803,126.00 resulting in an over-collection of Kshs.1,184,437,537.55,
representing about 80% of the estimated amount. According to the footnotes to
the Statement, the over-collection was caused by the inclusion under this item,
receipts for item 1420202 – Motor Drivers Licences, for which an amount of
Kshs.819,099,348.00 had been estimated but nil was realized.

164. As similarly observed in 2007/2008, the lumping up of receipts under
Traffic Revenue item with those collectable under Motor Drivers Licences has
been attributed to the fact that the Registrar of Motor Vehicles maintained during
the year one Revenue Account with the Central Bank of Kenya. No action
however has been taken to have the revenue collected under Revenue Head
1420000 – Sale of Goods and Services properly accounted in accordance with
the Estimates of Revenue for 2008/2009.

165. Further, the Revenue receipts of Kshs.2,656,240,663.55 differ with the
total receipts figure of Kshs.3,143,956,424.00 reflected in the Kenya Revenue
Authority records, by Kshs.487,715,760.45. No reconciliation or explanation has
been provided for the difference between the two sets of records.

166. The Statement further reflects a balance brought forward of
Kshs.1,964,644,173.90, while the audited Statement for 2007/2008 shows an
amount of Kshs.6,259,828.40. The Statement also reflects a carried forward
balance of Kshs.1,964,644,179.80 as at 30 June 2009, while the Statement of
Assets and Liabilities for Deposits 07 as at the same date shows a figure of
Kshs.3,764,644,173.90 against the item. No reconciliation or explanation has
been provided for these discrepancies.


REVENUE HEAD 1410000 – PROPERTY INCOME, SUB HEAD 1410401 –
RENT OF LAND

167. The Statement of Revenue Head for 1410000 – Sub Head 1410401, Rent
of Land for the year ended 30 June 2009 reflects actual receipts of
Kshs.1,135,342,883.05 against estimated receipts of Kshs.1,642,654,657.00,
resulting in a deficiency of Kshs.507,311,773.95 or approximately 31% of the
estimated receipts. Further, the actual receipts of Kshs.1,135,342,883.05 differ
with the Kenya Revenue Authority total figure of Kshs.1,085,668,164.00, by
Kshs.49,674,719.05. The difference has not been reconciled or explained.



                                       39 
 
STATEMENT OF REVENUE HEAD 1410000, SUB HEAD 1410200 –
PROPERTY INCOME

168. The Statement of Revenue Head for 1410000, Sub Head 1410200 -
Property Income for the year ended 30 June 2009 reflects an amount of
Kshs.7,136,798,375.55 as having been paid to the Exchequer during the year,
while records maintained at the Exchequer Section, Treasury show a figure of
Kshs.6,918,662,775.15 against the item. The Ledger on the other hand reflects
a balance of Kshs.94,951,890.60. The differences between the three sets of
records have not been reconciled or explained.

169. The Statement also reflects a balance of Kshs.107,036.05 carried forward
to 2009/2010, which however differs with the amount of Kshs.453,062.15 shown
against Investment Revenue in the Statement of Assets and Liabilities for
Deposits 07 as at 30 June 2009, by a figure of Kshs.346,026.10. As in the
previous instance, the difference of Kshs.346,026.10 has not been reconciled or
explained.


REVENUE HEAD 1410000, SUB HEAD 1410100 – STATEMENT OF LOAN
INTEREST RECEIPTS

170. The Statement of Revenue for Head 1410000, Sub-Head 1410100 - Loan
Interest Receipts from Domestic and On-lending for the year ended 30 June
2009 reflects actual receipts of Kshs.1,242,526,372.24 against estimated
collections of Kshs.1,112,426,810.00, resulting in an over-collection of
Kshs.130,099,562.24 or approximately 12% of the estimated amount. The
excess receipts have been attributed to an amount of Kshs.74,226,872.99
received from some five (5) institutions from which nil amounts were expected.

171. The Statement also reflects payments totalling Kshs.1,242,526,372.24 to
the Exchequer during the year, while records maintained at the Treasury show
a figure of Kshs.1,563,871,000.10, occasioning a difference of
Kshs.321,344,627.86. Further, the figure of Kshs.1,242,526,372.24 also differs
with the amount of Kshs.1,022,822,149.85 reflected in the Ministry’s Ledger, by a
figure of Kshs.219,704,222.39. The differences between the three sets of
records have not been reconciled or explained.

172. As similarly reported in the previous year, the Statement does not reflect
any balance on hand as at 30 June 2009, while the Statement of Assets and
Liabilities for Deposits 07 as at the same date shows an amount of
Kshs.32,300,691.90 against the item. No reason has been provided for the
discrepancy.

173. The Statement of Arrears of Revenue indicates that during the year,
arrears of revenue increased by an amount of Kshs.3,778,049,210.38 from
Kshs.28,196,845,114.99 as at 30 June 2008 to Kshs.31,974,894,425.37 as at 30

                                       40 
 
June 2009. The 13% increase was mainly attributed to substantial arrears not
having been received from the Horticultural Development Authority (HCDA),
Agro-chemical and Food Company Ltd and Catering Levy Trustee. At the same
time,    significant   arrears   of   revenue     of    Kshs.10,160,506,075.60,
Kshs.12,989,332,887.10 and Kshs.907,967,764.00           brought forward from
2007/2008 and earlier years in respect of Nairobi City Council, Kenya Railways
Corporation and National Water Conservation and Pipeline respectively amongst
others, were not been recovered. No indication has however been seen to show
how the Ministry is addressing this clearly persistent and undesirable upward
trend of arrears of revenue.


REVENUE HEAD         1450000    –   OTHER     RECEIPTS     NOT    CLASSIFIED
ELSEWHERE

174. The Statement of Revenue Head 1450000 – Other Receipts Not
Classified Elsewhere for the year ended 30 June 2009 reflects actual receipts of
Kshs.4,431,514,947.80, while the Ledger for the Month of June 2009 shows a
figure of Kshs.4,431,760,786.80. The difference of Kshs.245,839.00 between
the two sets of records has not been reconciled or explained.

175. The Statement also reflects payments to the Exchequer totalling
Kshs.4,431,289,958.05, which differ with the amount of Kshs.8,105,009,979.80
reflected in the records maintained at the Exchequer Section in Treasury, by a
figure of Kshs.3,673,720,021.75. As in the previous instance, the difference has
not been reconciled or explained.

176. The Statement further reflects a balance brought forward of
Kshs.1,781,093,612.80, while the audited Statement for 2007/2008 shows a
balance carried forward of Kshs.46,512,835.25. This discrepancy has not been
explained.

177. The Statement shows an amount of Kshs.1,781,318,602.55 against
balance carried forward as at 30 June 2009, which differs by a figure of
Kshs.2,742,882,215.85 with the balance of Kshs.961,563,613.30 reflected under
Miscellaneous Revenue in the Statement of Assets and Liabilities for Deposits 07
for 2008/2009. Again, the difference has not been reconciled or explained. In
addition, no reason has been provided for failure to remit to the Exchequer the
significant balance of Kshs.1,781,318,602.55 as at 30 June 2009.


STATEMENT OF REVENUE HEAD 4510000 – REPAYMENTS FROM
DOMESTIC LENDING AND ON-LENDING

178. The Statement of Revenue for Head 4510000 – Repayments from
Domestic Lending and On-lending for the year ended 30 June 2009 reflects
actual receipts of Kshs.3,838,118,511.68 against estimated collections of
                                      41 
 
Kshs.638,275,630.00, resulting in an over-collection of Kshs.3,199,842,881.68 or
approximately 501% of the estimated amounts. The amount of
Kshs.3,838,118,511.68 includes receipts totalling Kshs.2,556,250,000.00 from
Telkom Kenya and two local financial institutions, against which nil amount was
expected during the year.

179. The Statement also reflects payments to the exchequer totalling
Kshs.3,838,118,511.68 as at 30 June 2009, while records maintained at the
Exchequer Section in Treasury show receipt of Kshs.679,252,376.10. The
Ledger for the month of June 2009 on the other hand shows a figure of
Kshs.1,264,239,324.05 against the item. No reconciliation or explanation has
been provided for the differences between the three sets of records.

180. The Statement reflects nil cash balance as at 30 June 2009, while the
Statement of Assets and Liabilities for Deposits 07 as at the same date shows an
amount of Kshs.996,140.90 against the same item. No reconciliation or
explanation has been provided for the anomaly.

181. The Statement of Arrears of Revenue due as at 30 April 2009 and
uncollected as at 30 June 2009 indicates that arrears of revenue increased by an
amount of Kshs.2,234,751,667.59, from Kshs.11,426,485,419.96 as at 30 June
2008 to Kshs.13,661,237,087.25 as at 30 June 2009. According to information
available, the increase was mainly attributed to arrears due from five (5)
organization/institutions including Coffee Board of Kenya, Horticultural
Development Authority, Catering Levy Trustee and Pyrethrum Board of Kenya,
all which were experiencing financial difficulties during the year.

182. The total Arrears of Kshs.13,661,237,087.25 includes a substantial
amount of Kshs.11,143,073,607.33 owed by five (5) organizations/institutions,
notably; Nairobi City Council, Agricultural Finance Corporation, Kenya Railways
Corporation,     Agro-Chemical and Food Company Ltd and Horticultural
Development Authority.

183. Although it had been indicated in the past that measures have been
considered to ensure that the organizations/institutions repay the loans promptly
and as appropriate, limited success appears to have been recorded in this regard
during the year.


UNACCOUNTED FOR GOODS, CUSTOMS BONDED WAREHOUSES –
MOMBASA

184. In the report for 2007/2008, reference was made to goods with a customs
value of Kshs.679,046,383.00 which were missing from various Customs
Warehouses in Mombasa.        In addition, goods with a customs value of
Kshs.566,428,551.00 for the year 2006/2007 could not be accounted for, due to

                                       42 
 
closure of some of the warehouses where the goods had been received and
deposited for tax purposes. As a result, Import Duty and VAT totalling
Kshs.237,937,994.00 and Kshs.331,755,126.00 respectively for 2006/2007 and
Import Duty, Excise Duty and Value Added Tax amounting to
Kshs.309,760,462.00,      Kshs.15,962,820.00       and Kshs.739,568,548.00
respectively for 2007/2008 could not be accounted for.

185. A review of the position in 2008/2009 disclosed that Import Duty and
Value Added Tax amounting to Kshs.86,161,277.00 and Kshs.74,417,359.00
respectively for 2006/2007 had been accounted for as at 30 June 2009, leaving
balances of Kshs.151,776,717.00 and Kshs.257,337,767.00 respectively
outstanding. Similarly, Import Duty, Excise Duty and Value Added Tax totalling
Kshs.170,943,507.00,      Kshs.15,962,820.00      and    Kshs.479,327,334.00
respectively for 2007/2008 had been accounted for by 30 June 2009, leaving
amounts of Kshs.138,816,955.00 under Import Duty and Kshs.260,241,214.00 in
respect of Value Added Tax unaccounted for.


STATEMENT OF SUBSCRIPTIONS                  BY   KENYA    GOVERNMENT        TO
INTERNATIONAL ORGANIZATIONS

186. The Statement of Subscriptions by Kenya Government to International
Organizations as at 30 June 2009 reflects subscriptions totalling
Kshs.99,395,233,817.29, remitted by the Government to various International
Organizations during the year.        However, subscriptions equivalent to
Kshs.311,794,669.80 relating to the International Finance Corporation had not
been confirmed by the Corporation as at 30 June 2009. Consequently, and in
absence of the confirmation, the accuracy of subscriptions totalling
Kshs.99,395,233,817.29 as at the same date could not be ascertained.


STATEMENT OF DEVELOPMENT REVENUE DR.1

187. The Statement of Development Revenue Head DR.1 for the year ended
30 June 2009 reflects actual receipts amounting to Kshs.21,919,680,971.00,
representing approximately 66% of the estimated collections of
Kshs.33,214,982,317.00.       The receipts however include amounts of
Kshs.2,924,718,696.00 received from eight (8) donors/lenders in respect of
fifteen (15) projects which had not been provided for in the approved estimates
for 2008/2009. Had these unbudgeted for receipts not been received, the
Statement would have reflected reduced collections of Kshs.18,994,962,275.00
or about 57% of the estimated total receipts of Kshs.33,214,982,317.00.

188. Further, no receipts were received during the year in respect of sixty six
(66) projects, against which collections of Kshs.7,596,649,741.00 were expected.
As similarly observed in 2007/2008, it has not been clarified why the underlying


                                      43 
 
weaknesses in the budgeting for Development Revenue have not been
addressed.

189. The reasons for material deviations between the estimated and the actual
receipts in respect of some fifty eight (58) projects were also not provided in the
Statement.

190. The Statement further shows a balance of Kshs.21,919,680,971.00 as
having been paid to the Exchequer during 2008/2009, while records maintained
at the Exchequer Section in Treasury                reflect an amount of
Kshs.21,103,893,719.65 as having been received.            The difference of
Kshs.815,787,251.35 between the two sets of records has not been reconciled or
explained.

191. The actual receipts of Kshs.21,919,775,075.40 reflected in the Statement
differ with the amount of Kshs.36,460,561,169.50 recorded in the Ministry’s
Ledger for the month of June 2009. As in the previous instance, the difference of
Kshs.14,540,786,094.10 has not been reconciled or explained.


STATEMENT OF PARTICIPATION BY THE GOVERNMENT OF KENYA IN
QUASI-GOVERNMENT AND OTHER STATUTORY ORGANIZATIONS

192. The financial statements of the Central Bank of Kenya (CBK) for the year
ended 30 June 2009 reflect a balance of Kshs.3,767,000,000.00 in respect of
advances made to various banks under liquidation, representing a decrease of
Kshs.4,570,000,000.00 from the previous year’s figure of Kshs.8,337,000,000.00.
The decrease of Kshs.4,570,000,000.00 has been attributed to the recovery of
an amount of Kshs.3,141,000,000.00 from the sale of the Grand Regency Hotel
and write-off of an irrecoverable sum of Kshs.1,429,000,000.00 from the
transaction. However, no records have been seen to indicate the basis on which
the write-off of Kshs.1,429,000,000.00 was approved.

193. Further, and as was previously reported, the CBK financial statements
continue to reflect a balance of Kshs.3,767,000,000.00, advanced to four (4)
financial institutions under liquidation.

194. Although as noted in 2007/2008 the Deposit Protection Fund had
indicated that recovery processes were on-going in respect of three (3)
institutions, limited success appears to have been recorded as at 30 June 2009.
Further, the official receiver of the remaining institution had not provided
information on the progress made as at 30 June 2009 in respect of recovery of
the debt of Kshs.43,000,000.00.




                                        44 
 
STATEMENT OF OUTSTANDING OBLIGATIONS GUARANTEED BY THE
KENYA GOVERNMENT

195. The Statement of Outstanding Obligations Guaranteed by the Kenya
Government as at 30 June 2009 reflects total contingent liability outstanding of
Kshs.164,286,742.60, compared to Kshs.526,589,563.61 recorded in 2007/2008.
The net decrease of Kshs.362,302,821.01 is attributed to settlement of
outstanding obligations relating to Telkom (K) Ltd, which the Government
honoured during the year on behalf of the company. However, documentary
evidence in support of the clearance of the obligations of Kshs.362,302,821.01
were not made available. Further, it has not been clarified the basis on which the
Government continues to honour obligations of Telkom (K) Ltd, considering the
fact that it is no longer the controlling shareholder in the company.

196. As reported in 2007/2008, obligations totalling Kshs.515,399,106.01
settled by the Government in 2006/2007 on behalf of Telkom (K) Ltd were not
supported with the relevant records, with the result that the validity of the
transaction could not be ascertained. A review of the position in 2008/2009
showed that the position had not changed and the records in question had not
been availed for audit review as at 30 June 2009.

197. The Statement also reflects a balance of Kshs.152,317,825.00 in respect
of capital and interest as at 30 June 2008, under the Cereals and Sugar Finance
Corporation. This balance has been in the books of account for a considerably
long period of time. Although, and as mentioned elsewhere in this report the
Government has since approved the winding-up of the Corporation and take-over
of its assets and liabilities by Ministry of Finance, no indication has however been
given as to when the process would be concluded.

198. The Statement further reflects a brought forward balance of
Kshs.153,997.60 against Reserve Account Deficiency in respect of the Kenya
Post Office Savings Bank. As noted in the report for 2007/2008, it is a matter of
concern that the Government has continued to recognize in its records, liabilities
in respect of compensation to the Kenya Post Office Savings Bank for losses
which largely appear to have been caused by weak management and poor
investment strategies.

199. As similarly observed in 2007/2008, the total outstanding obligations of
Kshs.164,286,742.60 as at 30 June 2009 include contingent liabilities amounting
to Kshs.11,814,920.00 relating to the Kenya Railways Corporation. The
accuracy of the figure of Kshs.11,814,920.00 could not however be ascertained
as the Corporation had not submitted a confirmation certificate in respect of its
liabilities as at 30 June 2009.




                                        45 
 
STATEMENT OF INVESTMENTS BY THE FINANCIAL SECRETARY IN
LOCAL COMPANIES

200. As stated in the report for 2007/2008, the Government continues to hold
significant investments in various local companies which did not pay any
dividends during 2008/2009. The Statement of Investments by the Financial
Secretary in Local Companies as at 30 June 2009 reflects total Government
shareholding of Kshs.29,441,788,688.00, which includes investments in twenty
one (21) companies where the Government holds 14,156,315,408 shares with
nominal value of Kshs.2,858,236,055.00. These companies did not remit any
dividends to the Government during the year although clearly some were not in
financial difficulties.

201. The Statement also includes some ten (10) other companies in which the
Government      holds     30,020,805    shares     with   nominal   value     of
Kshs.600,408,570.00. The companies are either dormant or under receivership
and as a result, the value of the Investments in these companies as reflected in
the Statement is doubtful and may not therefore be recoverable.

202. Further, and as similarly noted in the previous year, the Statement reflects
Government shareholding of 1,485,675 and 250,000 shares with nominal values
of Kshs.29,713,500.00 and Kshs.5,000,000.00 in Busia Sugar Company and
East Africa Sugar Industries respectively. The existence and value of these
shares could not however be confirmed due to non-availability of the respective
share certificates.

203. The Statement in addition reflects 1,433,529 shares out of 5,073,529 held
in Ken-Ren Chemical and Fertilizer Limited which are still not supported with
share certificates. Consequently, and in absence of the certificates, the
existence and valuation of these shares at a nominal value of Kshs.101,470,580
as at 30 June 2009 could not be confirmed. Further, information available
indicates that the company has since been liquidated and as a result, the
Government shareholding as reflected in the Statement may be valueless.

204. Information available indicates that Kenya Chemical and Food Corporation
in which the Government holds 4,335,000 shares with a nominal value of
Kshs.86,700,000.00 was placed under receivership and later sold in June 1999.
However, and as reported in the previous year, no documentary evidence has
been seen to confirm the sale, as well as the consideration paid for the company.

205. Records available show that dividends totalling Kshs.258,735,844.15 were
received during the year by the Government from four (4) organizations. A
further amount of Kshs.2,867,500.00 in respect of director’s fees from some five
(5) other companies was similarly received during the period. However, all the
nine (9) companies indicated above were excluded from the Statement under
review and no reason has been given for this anomaly.

                                       46 
 
206. As reported in 2007/2008, the Statement shows a Government
shareholding of 26,600,000 shares with nominal value of Kshs.532,000,000.00 in
Nzoia Sugar Company. The Accounts of the company for 2008/2009 however
reflect a reduced Government shareholding of 26,050,000 shares with nominal
value of Kshs.521,000,000.00. No clarification has been provided for the
difference of 550,000 shares with nominal value of Kshs.11,000,000.00.

207. The Ministry did not during the year open an Investments Register for
investments made by the Financial Secretary in Local Companies.
Consequently, it has not been possible to confirm that the thirty three (33)
companies listed in the Statement represent the total Government shareholding
as at 30 June 2009.


PENSION PAYROLL

208. Examination of various payroll data processed at the Pensions
Department using the Pensions Management Information System (PMIS) during
the year revealed a number of cases where several pensioners appeared in the
payroll, but their bank details including the accounts into which their dues are
paid were missing. In other instances, and for unclear reasons, more than one
pensioner shared the same bank account.

209. Although these anomalies do not appear to have been addressed during
the period, pension dues totalling Kshs.11,318,688.20 were nevertheless paid
into the accounts.

210. In absence of the bank accounts details amongst other data, and
considering the fact that other accounts were shared between various
pensioners, it is doubtful that the payments were made to the bona fide payees.
Accordingly, the propriety of the expenditure of Kshs.11,318,688.20 could not be
ascertained.

211. A further review of the payroll and pensioners’ personal files disclosed
that six (6) pensioners were paid lump sum pensions totalling Kshs.796,378.85
on diverse dates between April 1999 and August 2008. Inexplicably however,
their details had not been entered in the payroll as at the date of this report.

It has not been clarified how a pensioner would be paid his lump sum dues and
yet fail to have his details entered and captured in the payroll.

212. Forty nine (49) files for various pensioners were not made available for
audit review as they were apparently missing. Although this is clearly a
persistent challenge at the Pensions Department, it has not been indicated as to
how the Department is addressing the underlying causes.

                                      47 
 
BANK RECONCILIATION STATEMENT FOR RECURRENT ACCOUNT
NO. 01-010-R007

213. The Bank Reconciliation Statement for Recurrent Account No.01-010-
R007 as at 30 June 2009 reflects payments of Kshs.490,339,154.05 in the
Cashbook not recorded in the Bank Statement, which include stale cheques
totalling Kshs.70,194.70. It has not been explained as to why efforts have not
been made to replace or credit back the cheques in the Cashbook.

214. The Statement also reflects receipts of Kshs.820,685.60 in the Bank
Statement not recorded in the Cashbook described as CBK Direct Credits. The
total includes receipts of Kshs.797,126.80 relating to 2007/2008 and earlier
years. It has not been explained why these receipts had not been identified and
recorded in the Cashbook as at 30 June 2009.

215. The Statement further reflects payments of Kshs.1,962,958.05 in the Bank
Statement not recorded in the Cashbook, out of which an amount of
Kshs.703,383.10 relates to 2007/2008 and earlier years. No reason has been
given for failure to update the Cashbook with the payments, majority of which are
described as CBK Direct Debits.

216. The Statement in addition reflects receipts of Kshs.4,206,401.80 in the
Cashbook not recorded in the Bank Statement, which include two entries for a
sum of Kshs.24,000.00 relating to 2007/2008 and earlier years. As in the
previous instances, it has not been explained why action has not been taken to
have the amount of Kshs.24,000.00 banked.


BANK RECONCILIATION STATEMENT FOR DEVELOPMENT ACCOUNT
NO.01-010-D007

217. The Bank Reconciliation Statement for Development Account No.01-010-
D007 as at 30 June 2009 reflects receipts in the Bank Statement not recorded in
the Cashbook of Kshs.28,894,593.15, out of which an amount of
Kshs.28,876,549.00 relates to 2007/2008 and earlier years. No reason has been
provided for failure to update the Cashbook.

218. The Statement also reflects payments of Kshs.4,700,732.75 in the Bank
Statement not recorded in the Cashbook, which include two entries adding up to
Kshs.2,021,579.75, described as PA differences. No explanation has been given
for failure to record these entries in the Cashbook. In addition, it has not been
indicated what the PA differences of Kshs.2,021,579.75 represents.




                                       48 
 
219. The Statement further reflects receipts of Kshs.3,300,889,497.70 in the
Cashbook not recorded in the Bank Statement, out of which an amount of
Kshs.2,161,419.30 relates to 2007/2008 and earlier years. No effort however
appears to have been made during the year to establish what these long
outstanding receipts represent or why they had not been banked as at 30 June
2009.


BANK RECONCILIATION STATEMENT               FOR    DEPOSITS     CASHBOOK-
ACCOUNT NO.01-010-E007

220. The Bank Reconciliation Statement for the Deposits Cashbook (Account
No.01-010-E007) as at 30 June 2009 reflects payments in the Cashbook not
recorded in the Bank Statement of Kshs.1,165,203,145.85, which include stale
cheques totalling Kshs.146,675.00. No action appears to have been taken by
the Ministry to reverse the entries in the Cashbook or re-issue the cheques.

221. The Statement also reflects receipts of Kshs.1,546,028,043.65 in the
Bank Statement not recorded in the Cashbook, out of which, an amount of
Kshs.1,392,817,762.15 relates to 2007/2008 and earlier years.   Further, and
included in the figure of Kshs.1,392,817,762.15 is an unsupported amount of
Kshs.1,305,689,982.20 described as a brought forward balance relating to 1997.
It has not been explained why these long outstanding receipts had not been
recorded in the Cashbook as at 30 June 2009.

222. The Statement further reflects payments of Kshs.100,413,983.95 in the
Bank Statement not recorded in the Cashbook, out of which an amount of
Kshs.34,264,340.70 relates to 2007/2008 and earlier years. Although the items
are mainly described as Payment Authorities (PA’s) difference or unpaid
cheques, no reason has been given for failure to record the payments in the
Cashbook. Further, the PA difference has not been explained.

223. The Statement in addition reflects receipts in the Cashbook not recorded
in the Bank Statement of Kshs.1,805,467,508.40, out of which an amount of
Kshs.1,792,173,672.40 relates to 2007/2008 and earlier years. The amount of
Kshs.1,792,173,672.40 has also not been properly analysed with the result that
its validity and accuracy could not be ascertained.


BANK RECONCILIATION STATEMENT FOR DEPOSITS ACCOUNT NO.01-
010-E040

224. The Bank Reconciliation Statement for Deposits Account No.01-010-E040
as at 30 June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.2,549,254.70, which include stale cheques amounting
to Kshs.126,669.10. It has not however been clarified why the cheques have not
been replaced or credited back to the Cashbook.

                                     49 
 
225. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook totalling Kshs.4,748,003.40, received on 17 February 2009.
Apart from the fact that no reason has been provided for failure to enter the
receipts in the Cashbook, details relating to the balance of Kshs.4,748,003.40
including its source and how it was accounted for have not been seen.

226. The Statement further reflects payments of Kshs.11,700,361.15 in the
Bank Statement not recorded in the Cashbook, which include cheques totalling
Kshs.6,455,245.35 relating to 2007/2008 and earlier years. According to records
available, the payments represent dishonoured cheques payable to the Director
of Pensions, in respect of pension contributions and refund of contract gratuities.
No evidence has however been seen to show the efforts being made by the
Ministry to recover the amount of Kshs.6,455,245.35 from the parties concerned.

227. The Statement in addition reflects receipts of Kshs.180,090,754.75 in the
Cashbook not in the Bank Statement, which include an amount of
Kshs.179,878,667.40 described as Cashbook Opening Balance, relating to
2004/2005. It has not however been clarified as to why the receipts have not
been placed in the Bank. Further, documents in support of the amount of
Kshs.179,878,667.40 have not been made available for audit review, with the
result that the accuracy of the balance could not be ascertained.


BANK RECONCILIATION STATEMENT                   FOR    CONSOLIDATED         FUND
SERVICES ACCOUNT NO. 01-010-R050

228. The Bank Reconciliation Statement for Consolidated Fund Services
Account No.01-010-R050 as at 30 June 2009 reflects a balance of
Kshs.7,074,296,052.05 in respect of payments in the Cashbook not recorded in
the Bank Statement, out of which an amount of Kshs.2,111,225,417.00 relates to
2007/2008 and earlier years. No reason has been provided for failure to have
the long outstanding amount of Kshs.2,111,225,417.00 recorded in the Bank
Statement. Further, the balance of Kshs.7,074,296,052.05 includes figures of
Kshs.2,011,679,710.65, Kshs.59,203,613.55 and Kshs.40,208,313.95 under
Financial Secretary, Pas-Various credits and Pas-Difference respectively, which
have not been identified or explained as to what they represent.

229. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook of Kshs.32,939,614.85,         out of which an amount of
Kshs.20,856,452.75 relates to 2007/2008 and earlier years. It has not however
been explained why the amount of Kshs.20,856,452.75 had not been recorded
in the Cashbook as at 30 June 2009, considering the fact that the figure is
represented by “CBK Direct Credits”.




                                        50 
 
230. The Statement further reflects payments in the Bank Statement not
recorded in the Cashbook of Kshs.6,495,385,669.15, out of which an amount of
Kshs.3,501,653,636.05 relates to 2007/2008 and earlier years. No explanation
has been provided for failure to record this particular amount in the Cashbook.

231. The Statement in addition reflects receipts in the Cashbook not recorded
in the Bank Statement of Kshs.11,537,447,588.05 relating to the year under
review. Out of this figure, an amount of Kshs.4,813,000,000.00 in respect of
Exchequer Receipts has since been cleared in the Statement leaving a balance
of Kshs.6,724,447,588.05, indicated as representing various corrections in the
Cashbook. The nature of the errors corrected has not however been clarified.


BANK RECONCILIATION STATEMENT FOR CONSOLIDATED FUND
SERVICES CASHBOOK ACCOUNT NO.01-010-R051 – PENSIONS’S
DEPARTMENT

232. The Bank Reconciliation Statement for Consolidated Fund Services
Cashbook (Account No.01-010-R051) as at 30 June 2009 reflects payments of
Kshs.1,874,198,986.20 in the Cashbook not recorded in the Bank Statement,
which include stale cheques of Kshs.185,369,510.30.          The figure of
Kshs.185,369,510.30 also includes cheques totalling Kshs.33,103,333.20
payable to the Chief Accountant – Pensions, with some such cheques dating to
as far back as in November 2006.

No reason has been provided for failure to make appropriate adjustments and/or
entries to clear the long outstanding items.

233. The Statement also reflects payments in the Bank Statement not recorded
in the Cashbook of Kshs.15,702,709.00, which include six (6) cheques for
amounts totalling Kshs.12,432,395.45 that had been cancelled and replaced but
later fraudulently presented and paid by some banks. Yet another amount of
Kshs.957,324.10 was fraudulently paid twice in April and July 2008 using the
same cheque. The Ministry does not however appear to have taken adequate
action to recover the lost funds.

234. The Statement further reflects receipts of Kshs.1,102,595,560.00 in the
Cashbook not recorded in the Bank Statement which include a cancelled cheque
No.384329 for Kshs.1,510,485.10 that had been fraudulently presented and
honoured by a bank. In addition, three (3) other cheques for amount totalling
Kshs.2,557,306.70 indicated as banked in January 2009, had not been credited
in Pensions Account as at 30 June 2009.




                                      51 
 
BANK RECONCILIATION STATEMENTS FOR TREASURY BILLS AND
TREASURY BONDS ACCOUNTS

Treasury Bills

235. The Treasury Bills Bank Reconciliation Statement for Deposits Account
No.01-010-E306 as at 30 June 2009 reflects payments in the Cashbook not
recorded in the Bank Statement of Kshs.23,823,130,436.55, out of which an
amount of Kshs.21,514,234,519.53 relates to 2007/2008 and earlier years. No
reason has been provided for failure to reverse the unpresented cheques which
were in any case stale as at 30 June 2009.

236. The amount of Kshs.23,823,130,436.55 also includes balances of
Kshs.8,765,202,786.00 and Kshs.3,082,000,000.00 described as “Treasury Bills
Redemption” and “CBK Direct Debits” respectively. These particular balances
have not however been supported with the relevant analyses and as a result, it
has not been possible to establish what they represent or confirm their
correctness.

237. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook totalling Kshs.39,638,628,197.30, out of which an amount of
Kshs.22,559,872,965.89 relates to 2007/2008 and earlier years, with some
entries dating back to as far as in year 2000. It has not however been explained
why the substantial receipts had not been recorded in the Cashbook. Further,
other balances of Kshs.5,096,848,045.45 and Kshs.27,953,001,343.10 relating to
“Balance Not Brought Forward” and “CBK Direct Credits” respectively, included
in the figure of Kshs.22,559,872,965.89 have not been analysed. Consequently,
their accuracy could not be ascertained.

238. The Statement further reflects payments in the Bank Statement not
recorded in the Cashbook amounting to Kshs.34,469,118,031.50, relating to
2007/2008 and earlier years. No explanation has been provided for the failure to
update the Cashbook with the payments, many of which are described as CBK
debits.

239. The Statement shows receipts in the Cashbook not recorded in the Bank
Statement totalling Kshs.29,269,745,193.30, representing Treasury Bills receipts,
Commissions and other items referred to as “Direct Credits”. The total includes
balances      of    Kshs.19,645,651,524.65,      Kshs.1,701,183,472.50       and
Kshs.7,720,826,812.10 relating to 2001/2002, 2003/2004 and 2004/2005
respectively. It has not however been clarified why these receipts had not been
banked or adjusted in the Cashbook as at 30 June 2009.




                                       52 
 
Treasury Bonds

240. The Treasury Bonds Deposits Account No.01-010-E307 Bank
Reconciliation Statement as at 30 June 2009 reflects receipts in the Cashbook
not recorded in the Bank Statement amounting to Kshs.17,079,800,112.85
relating to 2001/2002 and earlier years. Although these entries are described in
the Reconciliation Statement as “Direct Credits”, it has not been explained how
the Credits could have been recorded in the Cashbook while there were no
corresponding entries in the Bank Statement.

241. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook of Kshs.13,232,225,356.05, which includes a balance of
Kshs.92,080,506.15 relating to 2004/2005 and earlier years. No clarification
has been made as to why bank receipts of Kshs.92,080,506.15 had not been
entered in the Cashbook as at 30 June 2009


BANK RECONCILIATION STATEMENT FOR DEPOSITS ACCOUNT

242. The Bank Reconciliation Statement for Deposits Account No. 01-010-
E312 as at 30 June 2009 reflects payments totalling Kshs.4,777,622,736.10 in
the Cashbook not recorded in the Bank Statement. The amount includes two
stale cheques for a sum of Kshs.160,792,427.00 payable to the Financial
Secretary. No reason has been given for failure to replace the cheques or having
them credited back in the Cashbook.           Also included in the figure of
Kshs.4,777,622,736.10 is an amount of Kshs.92,512,859.80 mainly made up of
two entries of Kshs.70,000,000.00 and Kshs.22,510,477.00 described as
Financial Secretary Treasury and Cashbook Undercast, and dated December
2001 and September 2006 respectively. Non-clearance of these two long
outstanding balances has not been explained.

243. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook totalling Kshs.22,446,446,384.32, out of which an amount of
Kshs.20,507,696,183.82 relates to 2007/2008 and earlier years. It has however
not been clarified why the amount of Kshs.20,507,696,183.82 had not been
recorded in the Cashbook as at 30 June 2009. Further, other items amounting to
Kshs.22,443,833,832.80 described as CBK Direct Credits have not been
explained.

244. The Statement further reflects payments of Kshs.14,586,088,175.50 in the
Bank Statement not recorded in the Cashbook relating to 2007/2008 and earlier
years. No reason has been provided for the delay in entering the amount in the
Cashbook. Further, CBK Direct Debits of Kshs.3,060,052,878.95 have not been
explained. In addition, a balance of Kshs.2,118,902,420.00 transacted in
September 1997 has been described as Recurrent Exchequer with no further
clarification as to what it represents.


                                      53 
 
245. The Statement in addition reflects receipts totalling Kshs.9,042,808,593.65
in the Cashbook not recorded in the Bank Statement, out of which
Kshs.5,668,766,988.75 relates to 2007/2008 and earlier years. It has not
however been explained why the long outstanding receipts of
Kshs.5,668,766,988.75 had not been banked as at 30 June 2009.


STATEMENT OF ASSETS AND LIABILITIES FOR CONSOLIDATED FUND
SERVICES

246. As similarly reported in 2007/2008, the Statement of Assets and Liabilities
for Consolidated Fund Services as at 30 June 2009 reflects various credit
balances under Agency Suspense - Vote 052, Sinking Fund, Agency Suspense –
Vote 050 and Recredited Cheques of Kshs.578,552,307.80, Kshs.2,093,437.50,
Kshs.527,177,405.05 and Kshs.68,846,544.50 respectively, brought forward from
2007/2008 and earlier years.

As in the previous year, no reason has been provided for failure to clear these
long outstanding balances from the books of account.


STATEMENT OF ASSETS AND LIABILITIES – CONSOLIDATED FUND
SERVICES PENSIONS AND GRATUITIES

247. The Statement of Assets and Liabilities for Consolidated Fund Services
Pensions and Gratuities as at 30 June 2009 reflects a balance of
Kshs.385,070,579.20, against the Paymaster General Account (PMG) which has
been reconciled with Cashbook balance as at 30 June 2009 of
Kshs.1,675,149.80. However, the Cashbook/Ledger Reconciliation Statement as
at 30 June 2009 includes net mispostings of Kshs.134,341.55 which have not
been explained. Consequently, the completeness and accuracy of the PMG
balance of Kshs.385,070,579.20 could not be confirmed.

248. The Statement also reflects a credit balance of Kshs.381,075,297.75
under Advance Payment to Post Bank, relating to 2006/2007 and earlier years.
However, a reconciliation carried out by the Pensions Department covering the
period between April 2002 to September 2006 revealed that the amount owing to
the Bank as at 30 June 2009 stood at Kshs.251,816,157.00, thereby occasioning
a difference of Kshs.129,259,140.75. The difference has not been reconciled or
explained. In addition, the financial statements for Post Bank for the year ended
31 December 2008 reflect debtors’ balances of Kshs.222,479,227.00 and
Kshs.523,845,746.00 described as Pension Receivable from GoK and Prepaid
GoK Pension – Payroll respectively totalling Kshs.746,324,973.00, while the
Statement under review shows a figure of Kshs.381,075,297.75 against the two
items. Consequently, the accuracy of the amount of Kshs.381,075,297.75 due to
the Bank as at 30 June 2009 could not be confirmed.

                                       54 
 
249. The Statement further reflects a balance of Kshs.246,623,514.75 against
the Re-credited Cheques Account, representing an increase of
Kshs.65,851,482.05 from an amount of Kshs.180,772,032.70 as at 30 June
2008. According to information available, the figure of Kshs.246,623,514.75
relates to pension cheques dispatched to various beneficiaries but not paid due
to various reasons, including wrong bank account numbers, incorrect bank codes
and closed pensioners’ bank accounts. It has not however been clarified how the
Pensions Department is addressing this matter.

250. In 2007/2008, a sum of Kshs.270,000,000.00 was paid to the Financial
Secretary from a Suspense Account in the CFS Cashbook, which payment
reduced the Re-credited Cheques Account balance to Kshs.180,772,032.70 as at
30 June 2008. The amount has not however been paid back to the Re-credited
Cheques Account and as a result, the figure of Kshs.246,623,514.75 appearing
against the Account as at 30 June 2009 has been understated by
Kshs.270,000,000.00. Further, a verification of a number of the returned
cheques in the CFS Register revealed that cheques totalling Kshs.75,945,924.54
had not been reversed in the Cashbook as at 30 June 2009. Consequently, the
Re-credited Cheques Account balance of Kshs.246,623,514.75 as at that date
had been understated by Kshs.75,945,924.54.

251. As similarly observed in 2007/2008, the difference of Kshs.21,617,612.60
between the balance of Kshs.180,772,032.70 under the Re-credited Cheques
Account appearing in the Statement under review and the figure of
Kshs.159,154,420.00 computed from the records containing returned and
subsequently paid pension cheques has not been reconciled or explained.

252. The Statement also shows a brought forward balance of
Kshs.151,501,064.15 under Contract Gratuity, representing gratuity paid back by
various female employees in 2006/2007 and earlier years. This particular
amount ought to have been cleared from the books of account by 30 June 2009.
Further, the balance of Kshs.151,501,064.15 includes an amount of
Kshs.65,661,380.50 received in 2004/2005, and against which a figure of
Kshs.65,154,726.00 had been analysed as at 30 June 2009 leaving an amount of
Kshs.506,654.50.

253. The Statement further shows a Suspense Account debit balance of
Kshs.2,360,628.20, which as in the previous instance has not been analysed,
with the result that its accuracy could not be ascertained. Although the Account
has been identified as representing stale cheques, no further information has
been provided explaining why the cheques had not been re-issued to the
respective pensioners.

254. The format of the Statement of Assets and Liabilities for CFS Pensions
and Gratuities as at 30 June 2009 does not conform with the approved format as

                                      55 
 
contained in Appendix 11.8.3 of the Government Financial Regulations and
Procedures.


STATEMENT OF ASSETS AND LIABILITIES                   FOR    PENSIONS      AND
GRATUITIES – FUNDS AND DEPOSITS

255. The Statement of Assets and Liabilities for Pensions and Gratuities –
Funds and Deposits as at 30 June 2009 reflects a balance of
Kshs.119,587,235.45 under Revenue (Widows and Children Pensions Scheme)
Account which excludes dishonored cheques totalling Kshs.3,728,296.50
indicated as reversed. Details of the cheques have not however been availed for
audit review with the result that the reason for reversing the same could not be
established.

256. The Statement also reflects a balance of Kshs.712,839,670.93 against the
Paymaster General Account (PMG), while the Cashbook as at 30 June 2009
shows a figure of Kshs.694,801,834.25 against the Item. The difference of
Kshs.18,037,836.68 between the two sets of records has not been reconciled or
explained.

257. The European Widows and Orphans Pension Scheme Fund, Asian
Officers Family Pension Fund and Provident Fund Accounts for the year ended
30 June 2009 reflect balances of Kshs.82,602,189.50, Kshs.167,659,784.15 and
Kshs.224,942,481.90 respectively, which exclude dividends income totalling
Kshs.25,878,364.80 for the period. Had the income been included in the
respective Fund Accounts, the Statement of Assets and Liabilities for Pensions
and Gratuities - Funds and Deposits would have reflected a PMG balance of
Kshs.738,718,035.73 against the three accounts. Details of the omissions have
been incorporated in the reports for the respective Fund’s Accounts for
2008/2009.

258. The Statement further reflects credit balances of Kshs.578,917.25,
Kshs.1,878,291.60 and Kshs.103,943.60 under Asiatic Widows and Orphans
Pension Fund (AWOP), Asian Officers Family Pension Fund (AOFPF) and
European Widows and Orphans Pension Scheme (EWOPS) respectively,
brought forward from 2007/2008 and earlier years. These balances have been
explained as representing Pensions payments relating to 2006/2007 and earlier
years, made from specific Fund Accounts, but without a corresponding
reimbursement from Consolidated Fund. No reason has been given for the delay
in processing reimbursements.




                                      56 
 
STATEMENT OF ASSETS AND LIABILITIES – GOVERNMENT CLEARING
AGENCY FUND

259. The Statement of Assets and Liabilities for the Government Clearing
Agency Fund as at 30 June 2009 reflects a Paymaster General Overdraft
balance of Kshs.901,217,332.75. The balance has not however been supported
with verifiable documents with the result that its accuracy could not be
ascertained. Further, the balance differs by Kshs.117,609,085.30 from the figure
of Kshs.1,018,826,418.05 shown in the Statement of Assets and Liabilities for
Deposits as at 30 June 2009. The difference has not been reconciled or
explained.

260. As similarly reported in the previous year, the overdraft balance of
Kshs.901,217,332.75 has been attributed to failure by various Government
Ministries/Departments and Parastatals to reimburse the Fund, expenditure
incurred on their behalf in 2007/2008 and prior years, and which stood at
Kshs.980,338,721.60 as at 30 June 2009. The Ministry has not however
indicated how it is addressing this long outstanding issue. Further, it has also not
been clarified how the overdraft was financed.

261. The debtors balance of Kshs.980,338,721.60 as at 30 June 2009
decreased by Kshs.5,161,825.45 from the amount of Kshs.985,500,547.05 as at
30 June 2008.        The decrease has been attributed to receipts of
Kshs.5,456,925.45 from some four organizations and a payment of
Kshs.295,100.00 made by the Ministry on behalf of another agency. The
receipts and payment balances have not however been supported with the
relevant documentary evidence and in consequence, the completeness and
accuracy of such balances could not be ascertained.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.07

262. The Statement of Assets and Liabilities for Vote R.07, as at 30 June 2009
reflects a debit balance of Kshs.1,246,944,524.31 against the Paymaster
General Account, while the Ledger for the month of June shows an amount of
Kshs.1,246,290,974.31. The Cashbook on the other hand reflects a figure of
Kshs.2,264,459.15 as at 30 June 2009. No reconciliations or explanations have
been provided for the differences between the three sets of records.

263. The Statement also reflects an Exchequer over-issue balance of
Kshs.556,921,290.00 relating to the current year, while records maintained at the
Exchequer Section in Treasury show an under-issue of Kshs.107,278,710.00
against the Account. The difference of Kshs.664,200,000.00 between the two
sets of records has not been reconciled or explained.




                                        57 
 
264. The balances reflected in the Statement against Provincial/District
Suspense, Net Salary Advance, Advance of Salary, Returned Salaries and
Temporary Imprests Accounts, differ by Kshs.670,777.55 with the figures
provided in the analyses in respect of the Accounts. Further, and as reported in
previous years, no effort appears to have been made to recover the outstanding
salary advances or pay the returned salaries to the respective staff.

265. The Statement further reflects a balance of Kshs.23,025,997.85 in respect
of stale cheques. No reason has been provided for failure to have the cheques
replaced.

266. The Statement in addition reflects Temporary, Standing and Special
Imprest Account balances of Kshs.8,642,290.15, Kshs.3,490,788.15 and
Kshs.1,145,000.00 respectively, relating to 2007/2008 and earlier years. No
reasons have been given for failure to have the balances surrendered or
otherwise accounted for.

267. The Statement shows a debit balance of Kshs.969,025,999.80 under
Items Awaiting Clearance, which includes an amount of Kshs.879,145,568.80
relating to 2007/2008 and earlier years. As in the previous instances, no reason
has been provided for failure to clear the long outstanding items. In addition, the
balance of Kshs.969,029,999.80 has not been analysed consequent upon which
it has not been possible to ascertain its correctness.

268. The Statement also shows a brought forward balance of
Kshs.112,920,298.20 in respect of Training DPM Account. The expenditure was
apparently incurred on training matters by the Ministry on behalf of the
Directorate of Personnel Management. However, documents in support of the
balance were not made available for audit review and as a result, its accuracy
could not be ascertained.

269. The Statement further shows an Excess Appropriations-In-Aid balance of
Kshs.38,717,321.25 brought forward from the previous years. No reason has
been provided for failure to remit this long outstanding balance to the Exchequer.
In addition, Excess Appropriations-In-Aid of Kshs.3,638,092.05 reflected in the
Appropriation Account for 2008/2009 has not been disclosed in the Statement.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.07

270. The Statement of Assets and Liabilities for Vote D.07 as at 30 June 2009
reflects a Paymaster General credit balance of Kshs.3,148,330,454.40, while the
Cashbook as at the same date shows an amount of Kshs.1,813,418.90. The
difference of Kshs.3,150,143,873.30 between the two sets of records has not
been reconciled or explained.



                                        58 
 
271. The Statement       also reflects an Exchequer Account balance of
Kshs.3,452,735,055.15 for 2008/2009, while records maintained at the
Exchequer Section, Treasury shows an amount of Kshs.2,900,047,000.00
against the Account. The difference of Kshs.552,688,055.15 has not been
reconciled or explained.

272. The Statement further reflects a Temporary Imprest Account balance of
Kshs.17,358,007.00, which includes a figure of Kshs.11,269,413.35 that has not
been analysed. Consequently, and in absence of an analysis, the accuracy of
the balance of Kshs.17,358,007.00 could not be ascertained. Further, and apart
from lack of an analysis, it has also not been explained why Imprests totalling
Kshs.17,325,480.25 relating to 2007/2008 had not been surrendered or
otherwise accounted for.

273. In addition, the Statement shows an unusual credit balance of
Kshs.17,492,206.30 under the Standing Imprest Account. No explanation has
similarly been provided as to why the Imprest Account shows a credit balance,
whereas under normal circumstances such an Account should reflect a nil or
debit balance.

274. The Statement shows a nil balance as at 30 June 2009 on Training-
Directorate of Personnel Management Account, implying that the outstanding
balance of Kshs.3,865,730.25 as at 30 June 2008 was received during the year
under review. However, such receipts were not supported with any verifiable
documentation, raising doubts on the manner and basis on which the balance of
Kshs.3,865,730.25 was cleared from the Statement.

275. The Statement also shows a balance of Kshs.34,375,073.05 in respect of
RD/Stale cheques, indicated as having been paid between the months of May
1977 and June 1994. As previously reported, no explanation has been provided
for failure to reverse the long outstanding cheques in the books of account.

276. The Statement further shows debit balances of Kshs.699,840,296.10 and
Kshs.881,957.30 against Items Awaiting Clearance and Provincial/District
Suspense Accounts respectively. The two balances have not however been
analysed, with the result that their completeness and accuracy could not be
ascertained. Further, amounts of Kshs.93,732,454.35 and Kshs.881,957.30
under the two Accounts respectively had not been cleared as at 30 June 2009
although they relate to 2007/2008 and earlier years.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

277. The Statement of Assets and Liabilities for Deposits 07 as at 30 June
2009 reflects a Paymaster General Account (PMG) debit balance of
Kshs.14,366,468,454.82, while the Cashbook as at 30 June 2009 shows an

                                      59 
 
amount of Kshs.572,538,406.00. The difference of Kshs.13,793,930,048.82
between the two sets of records has not been reconciled or explained. Further,
the brought forward PMG figure of Kshs.3,701,583,673.95 differs with the
balance of Kshs.73,205,893.23 reflected in the audited Statement for 2007/2008
by Kshs.3,628,377,834.72. These differences have not been reconciled or
explained.

278. The      Statement      also    reflects    cash     balances    totalling
Kshs.12,113,428,853.02 in respect of nine (9) Statements of Revenue including
Customs and Excise, Income Tax, Loan Interest Receipts, Value Added Tax,
Traffic Revenue and Investment Revenue amongst others, which had not been
surrendered to the Exchequer as at 30 June 2009. Failure to remit to the
Exchequer the substantial balance has not been explained.

279. The Statement further reflects overpayments to the Exchequer of
Kshs.961,338,612.35 and Kshs.248,102,136.85 under Miscellaneous Revenue
and Pre-shipment respectively, which have not been supported with relevant
documents. Consequently, it has not been possible to ascertain the origin and
accuracy of the balances.

280. The Statement in addition shows other balances under Investment
Revenue, Petroleum Development Levy, Issue of new stock and Non-existing
Annual Revenue Accounts amongst others, relating to 2008/2009 and which
have not been supported with relevant analyses. Consequently, it has not been
possible to confirm the completeness and accuracy of the balances.

281. The Statement shows various closing balances under E. A. Community,
Pre-shipment, Rural Development Funds Grant and Provincial/District Suspense
Accounts, amongst others, which as in the previous instance have not been
supported with relevant analyses or other documentary evidence. In absence of
the analyses, it has not been possible to confirm completeness and accuracy of
the balances.

282. As reported in 2007/2008, the brought forward balance of
Kshs.70,042,400.25 under the Provincial/District Suspense Account in the
Statement includes various erroneous balances brought forward from 2004/2005.
In the circumstances, it has not been possible to ascertain the completeness and
accuracy of the Account balance of as at 30 June 2009.

283. The Statement also shows a number of balances relating to 2008/2009
under Customs and Excise, Traffic Revenue, LATF and Paymaster General
among other Accounts, which were brought forward from 2007/2008 with various
errors.  No reconciliations or explanations have been provided for the
discrepancies.




                                      60 
 
284. The Statement further shows various Accounts under references
Nos.2-210-8070-1140501, 9-125-0000-9910210, 9-125-0000-9910217, 9-128-
0000-9910101, 9-128-001-9910209,    Non-Existing Other Fund Accounts, and
Non-Existing Annual Revenue Accounts, all which have not been identified or
analysed.

In absence of the identification and analyses, it has not been possible to
establish what the Accounts represent or to confirm the completeness and
accuracy of the respective balances.




         MINISTRY OF STATE FOR PROVINCIAL
       ADMINISTRATION AND INTERNAL SECURITY

APPROPRIATION ACCOUNT FOR VOTE R.01 FOR THE YEAR ENDED 30
JUNE 2009

Discrepancies between the Appropriation Account and the Ledger

285. The Appropriation Account for Vote R.01 for the year ended 30 June 2009
reflects various balances under Sub-Votes 010, 011, 012, 013 and 017, which do
not agree with the corresponding amounts appearing in the Ledger for the month
of June 2009. No reconciliation or explanation has been provided for the
discrepancies between the two sets of records.

Excluded Expenditure

286. Examination of other records relating to the Appropriation Account
revealed that expenditure totalling Kshs.5,666,850.00 was charged against Item
3110302 – Refurbishment of Non-Residential Buildings, under Head 001, Sub-
Head 0000 – Headquarters. The expenditure related to supply and fitting of a
carpet worth Kshs.5,169,850.00 and supply of a safe and a reception counter
both valued at Kshs.497,000.00.

287. However, Item 3110302 does not exist in the Estimates for 2008/2009 and
therefore no expenditure would have been incurred and charged against the item
during the year. Consequently, the expenditure of Kshs.5,666,850.00 has been
excluded in the Account.

No reason has been provided for the anomaly and no indication has been given
on how the expenditure was treated in the books of account.



                                     61 
 
Purchase of Vehicles

288. During the year under review, the Ministry purchased three hundred and
eighty eight (388) vehicles at a cost of Kshs.1,272,051,764.00 and charged the
expenditure to Heads 001, 011, 279, 085 and 102 in the Appropriation Account.
However, payment vouchers for one hundred and four (104) vehicles valued at
Kshs.249,569,446.00 were not accompanied with documents confirming delivery
and receipt of the vehicles. Consequently, the propriety of the expenditure of
Kshs.249,569,446.00 could not be confirmed.

289. Further, pre-delivery inspection reports for two hundred and seventy (270)
units valued at Kshs.814,680,539.00 were not made available for audit
verification and as a result, it has not been possible to ascertain that the vehicles
fulfilled the specifications set by Ministry of Public Works.


APPROPRIATION ACCOUNT FOR VOTE D.01 FOR THE YEAR ENDED 30
JUNE 2009

Under expenditure and Under collection of Appropriations-In-Aid

290. The Appropriation Account for Vote D01 for the year ended 30 June 2009
reflects under-expenditure of Kshs.530,806,882.00 or approximately 18% of the
approved estimates of Kshs.2,995,890,000.00. The Appropriation Account also
reflects under-collection of Appropriations-In-Aid of Kshs.6,250,000.00,
representing 100% of the estimated receipts.

291. According to the footnotes to the Account, the under-expenditure has
been attributed to delayed disbursements of funds by development partners,
delayed completion of tendering procedures and non-completion of various
works by the contractors during the year, while the under-collection of
Appropriations-In-Aid was caused by delayed grants by partners.

No indication has however been provided on the action being taken by the
Ministry to address the underlying causes of under-expenditure and under-
collection of Appropriations-In-Aid.

Variances between the Appropriation Account and the Ledger

292. The Appropriation Account also reflects various balances under Sub-
Votes 011, 012, 013, 017 and 019, which differ with the corresponding figures in
the Ledger for the month of June 2009. No reasons have been given for the
discrepancies.




                                         62 
 
Excluded Expenditure

293. Expenditure totalling Kshs.125,814,494.25 incurred under Sub-Votes 011,
012, 013 and 017 against various items was excluded from the Appropriation
Account although it appears in the Ledger for the month of June 2009. No
reason has been provided for the omission which has resulted in the Net Surplus
in the Account being over-stated by an equivalent amount.


PENDING BILLS

294. Records maintained at the Ministry’s Headquarters indicated that bills
totalling Kshs.468,327,710.40 and Kshs.459,708,566.45 chargeable to Recurrent
and Development Votes respectively were not settled during the year, but were
instead carried forward to 2009/2010.

295. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.01 for the period would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.4,755,030,423.60 instead of Kshs.5,223,358,134.00 now shown, while the
Appropriation Account for Vote D.01 would have reflected a reduced Net Surplus
of Kshs.1,385,320,117.55 instead of the Kshs.1,845,028,684.00 now recorded.


OUTSTANDING IMPRESTS

296. Records maintained at the Ministry’s Headquarters indicated that imprests
totalling Kshs.11,868,270.50 which ought to have been surrendered or otherwise
accounted for, on or before 30 June 2009 were still outstanding at that date. Out
of the total, imprests amounting to Kshs.2,256,933.05 were owed by officers on
Job Group ‘M’ and above, Kshs.3,139,045.75 by officers on Job Group ‘L’ and
below, while the balance of Kshs.6,472,291.70 was due from officers whose Job
Groups have not been provided.

297. Further, it was observed that additional imprests were issued to officers
who had not surrendered or accounted for balances previously issued.

298. A review of the position as at 18 February 2010 disclosed that imprests
amounting to Kshs.2,085,442.25 had been surrendered, leaving a balance of
Kshs.9,782,828.25 outstanding.




                                       63 
 
PROCUREMENT OF OTHER GOODS AND SERVICES

Procurement Records

299. During the year under review, the Ministry procured various goods
including portable radios, self supporting masts, automatic antennas, webbing
and communication equipment, VX120 main pack and desktop computers all at a
cost of Kshs.176,091,204.00. However, tender documents including the contract
agreements between the Government and the suppliers of the goods were not
made available for audit verification. Consequently, it has not been possible to
ascertain that proper procedures were followed during the transactions and that
the Government obtained reasonable value for money from the procurement.
For the same reason, it has also not been possible to ascertain that the goods in
question were delivered and properly accounted for.

Non-Competitive sourcing of Goods and Services

300. The Ministry procured during the year various goods and services
including hardware items, cargo handling charges and repair of motor vehicles,
all worth Kshs.7,555,232.00 on a single sourcing basis.      Apart from the fact
that the procurement contravened Section 74 of the Public Procurement and
Disposal Act, 2005, it has not been clarified how the suppliers of the goods and
services were identified and their prices agreed upon as representing reasonable
value for money.


STATEMENT OF REVENUE HEAD 210 – 010: TRADING LICENCES

301. The Statement of Revenue for Head 210 – 010: Trading Licences for the
year ended 30 June 2009 reflects revenue totalling Kshs.1,710,600.00 as having
been collected during the year, in respect of Motor Vehicle Components and
Scrap Metal Licences. Records maintained at the Nairobi Provincial Police
Office however show that such revenue amounted to Kshs.1,620,500.00, thus
occasioning a difference of Kshs.90,100.00 between the two sets of records. No
reconciliation or explanation has been provided for the difference.

302. Further, the Statement shows a balance brought forward of negative
Kshs.345,246.00, while the audited Statement for 2007/2008 reflects a figure of
Kshs.832,154.00 against the item. No explanation has been given for the
anomaly.

IRREGULAR PROCUREMENT AT THE DISTRICT COMMISSIONER’S OFFICE
WAJIR SOUTH

303. During the month of November 2008, the District Commissioner’s Office,
Wajir South hired transport services for distribution of relief food at a cost of

                                       64 
 
Kshs.862,500.00. Although the expenditure of Kshs.862,500.00 was well within
the threshold for using quotations, no such quotations were invited, raising the
question of how the transport charges were arrived at. Further, it has not been
indicated how the transporters were identified.

In the circumstances it has not been possible to ascertain that the office obtained
reasonable value for money in the procurement.


UNACCOUNTED FUEL AT THE KILIFI DISTRICT COMMISSIONER’S OFFICE

304. Examination of fuel records at the Kilifi District Commissioner’s Office
during the year indicated that out of 11,314 litres of bulk diesel worth
Kshs.980,722.00 purchased at the Office during the year, 5,314 litres valued at
Kshs.470,472.00 were not accounted for through delivery notes, detail orders
and work tickets.

Consequently, it has not been possible to confirm propriety of the expenditure of
Kshs.470,472.00 as at 30 June 2009.


UNACCOUNTED FOR BULK FUEL AND LUBRICANT OILS AT TANA RIVER
DISTRICT COMMISSIONER’S OFFICE

305. Examination of records maintained at the Tana River District
Commissioner’s Office revealed that 14,632.37 litres of bulk fuel (diesel) worth
Kshs.1,402,348.00 and various types of lubricant oils priced at Kshs.210,560.00,
all totalling Kshs.1,612,908.00 were purchased during the year under review.
However, documents indicating receipt, usage and accountability for the supplies
were not made available for audit verification, with the result that the propriety of
the expenditure of Kshs.1,612,908.00 could not be ascertained.


UNSUPPORTED EXPENDITURE ON MEALS

306. Expenditure totalling Kshs.9,921,520.00 was incurred at the Eldoret
OCPD’s Office, in respect of supply of various meals by a firm based in Eldoret,
to three hundred and nineteen (319) security officers involved in the “Rudi
Nyumbani” operation in February 2008. Apart from the fact that the tender for
supply of the meals was single sourced, the Office does not also appear to have
maintained adequate records of meals supplied and taken as well as of the
officers to whom the meals were served. In consequence, the propriety of the
expenditure of Kshs.9,921,520.00 could not be ascertained.




                                         65 
 
LEGAL, ARBITRATION AND COMPENSATION PAYMENTS

307. Examination of the Statement of Legal, Arbitration and Compensation
Payments made during the year by the Ministry revealed that expenditure
totalling Kshs.113,354,016.90 was incurred under Account No.0-001-000-
2211308, in respect of a number of awards relating to various court cases
involving the Government, through the Attorney General, and other parties.
However, and according to additional records seen, the payment of
Kshs.113,354,016.90 included an amount of Kshs.32,083,882.30 representing
interest charged on delayed settlements of court awards. No reason has been
provided for the delay in settling the awards.


CONSTRUCTION OF POLICE POSTS

308. Expenditure records relating to the Development Vote for the year ended
30 June 2009 indicate that in February 2008, the Ministry signed an agreement
with a local company based in Elburgon, for construction of thirty two (32) Police
Posts in the Rift Valley Province, notably Nakuru, Koibatek, Bomet, Chepilat,
Mlango Tatu and Sinendet areas using pre-fabricated timber, at a contract sum
of Kshs.471,094,522.88 inclusive of VAT.

309. According to information available, the works were to be executed in three
phases, within a contract period of twenty (20) weeks commencing 7 February
2008. However, and although records available appear to indicate that the Posts
were completed in February 2009, procurement documents showing how the
company was identified and awarded the contract to construct the Posts at a
sum of Kshs.471,094,522.88 were not availed for audit review. Further, and in
absence of the documents, it has not been possible to ascertain that Government
obtained full value for money from the project.


CONSTRUCTION OF FLATS AT CENTRAL POLICE LINES – NAIROBI

310. A contract for building three (3) blocks – each comprising sixteen (16) type
‘E’ flats and related civil works at the Central Police Lines – Nairobi was awarded
on 23 March 2006 by the Ministry to a company based in Nairobi, at a contract
sum of Kshs.91,441,195.00.

311. According to records available, the works were scheduled to commence
on 28 August 2006 for a contract period of twenty eight (28) weeks, thus ending
on 12 March 2007. However, and due to apparent unplanned circumstances, the
works commenced on 23 October 2006, in order to allow and facilitate necessary
demolitions that had to be undertaken before construction started, construction of
temporary houses, as well as relocation of various officers displaced at the Lines.



                                        66 
 
Examination of additional records in respect of the project revealed the following
other unsatisfactory matters:-

Progress of Work

312. Although the project was expected to be completed and handed over in
March 2007, information available indicates that the construction had not been
concluded as at 30 June 2009. No reason has however been provided for the
slow progress of work.

Suspension of Works

313. The minutes of a site meeting held on 25 January 2008 revealed that
Block B of the project apparently stands on a road reserve linking Globe Cinema
round-about and Uhuru Highway. For this reason therefore, work on the Block
had to be temporarily suspended during the contract period, while the matter was
being reviewed by the relevant parties. No explanation has however been
provided why this issue was not identified and addressed at the project design
stage or before actual construction commenced.

Variation Order

314. Additional information shows that a variation order for revising the project
was introduced during its implementation and the contract sum of
Kshs.91,441,195.00 was revised upwards by an amount of Kshs.27,414,765.47
to stand at Kshs.118,885,960.47 as at 30 June 2009. The increase represented
approximately 29% of the original contract price. However, the minutes of the
Tender Committee approving the variation, as provided for under Section 47 of
the Public Procurement and Disposal Act, 2005 have not been seen.

Payments

315. According to the latest interim payment, that is, No.16 of 26 June 2009,
the contractor had been paid a sum of Kshs.89,623,390.70 as at 30 June 2009,
while an additional amount of Kshs.9,492,931.81 was also due as at that date.
However, and in making the above payments, the Ministry had not yet clarified as
to whether or not the issue of Block B which stands on a road reserve as
indicated above had been conclusively addressed.


UNSERVICEABLE VEHICLES AND EQUIPMENT

316. Although Section 129 of the Public Procurement and Disposal Act, 2005
provides guidelines and procedures for disposal of unserviceable and obsolete
stores and equipment, an audit inspection exercise carried out at various District

                                       67 
 
Headquarters across the country revealed that two hundred and sixty (260)
pieces of equipment including motor vehicles, tractors and motor cycles, all
estimated at a value of Kshs.23,422,250.00 were found parked or lying at the
Headquarters, with no indication that such equipment had been prepared for
disposal as provided for in the Act. Some of the equipment, particularly vehicles,
had been lying at the yards for over ten (10) years.

Apart from the clear deterioration in value, such equipment is also occupying
prime space at the Headquarters, which would otherwise be utilized for other
purposes.


DISTRICT CASH FUND

317. The District Cash Fund as at 30 June 2009 reflects amounts totalling
Kshs. 173,500,169.05 which had not been surrendered by the District Treasuries
to the Office of the President, for onward transmission to the Treasury. No
reason has been provided for the failure to surrender the amounts as required.

318. The Cash Fund also reflects a balance of Kshs.162,302,451.80 carried
down as at 30 June 2009 and held in a Deposits Account. As similarly observed
in the previous year, this amount ought to have been remitted to the Exchequer
on or before 30 June 2009.

319. Although, and as indicated above the Fund reflects a Cash balance of
Kshs.162,302,451.80 held in a Deposits Account as at 30 June 2009, the
Account’s Reconciliation Statement as at that date however shows a figure of
Kshs. 43,167,165.35 against the item, occasioning a difference of
Kshs.119,135,286.45 between the two sets of records. The difference has not
been explained.


GOVERNMENT PRESS FUND

320. The Fund Balance Sheet as at 30 June 2009 reflects nil debts during the
year, an indication that there were no debtors to the Fund as at 30 June 2009.
However, records available show that debts totalling Kshs.39,741,453.08 were
outstanding from various Ministries, Departments and Agencies as at that date.
No clarification has been provided for excluding the balance in the Balance
Sheet.

321. The Balance Sheet also reflects a Cash and Bank balance of
Kshs.104,098,087.00, while both the Cashbook and Board of Survey Report
show a figure of Kshs.51,574,241.00. The difference of Kshs.52,523,846.00
between the two sets of records has not been reconciled or explained.



                                       68 
 
322. The Balance Sheet further reflects an Inventories balance of
Kshs.354,766,804.00, which differs with the amount of Kshs.349,677,769.00
appearing under Note 3 to the Accounts. No reconciliation or explanation has
been provided for the difference of Kshs.5,089,035.00.

323. The Closing Stock of Finished Goods as at 30 June 2009 as shown under
Note 3 to the Accounts stood at Kshs.25,796,873.00, while the corresponding
Stock Sheets show a balance of Kshs.76,869,854.00 under the item. As in the
previous instance, the difference of Kshs.51,072,981.00 has     not   been
explained.

324. The Income and Expenditure Account for the year ended 30 June 2009
reflects a figure of Kshs.778,363.00 relating to Other Costs. This figure has not
however been analysed with the result that its completeness and accuracy could
not be ascertained.

325. Note 3 to the Accounts shows that a sum of Kshs.270,060,599.00 was
incurred in respect of purchases during the year. However, and out of the sum,
an amount of Kshs.76,450,992.00 was not supported with payment vouchers and
other related documents. As a result, the propriety of the expenditure of
Kshs.76,450,992.00 could not be confirmed.


BANK RECONCILIATIONS STATEMENTS

Recurrent Cashbook

326. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.3,188,065.25, which include stale cheques amounting to
Kshs.14,633,963.50. No reason has been provided for failure to replace the
cheques or reverse the Cashbook.

327. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook amounting to Kshs.21,089,609.50, which include a figure of
Kshs.6,980,226.30 relating to the period between 25 July 2006 and 23 April
2009. Failure to update the Cashbook with the receipts has not been clarified.

328. The Statement further reflects payments in the Bank Statement not
recorded in the Cashbook totalling Kshs.41,703,383.85, which include an amount
of Kshs.41,535,692.85 relating to the period between 4 July 2006 and 24 April
2009. No explanation has been provided for failure to update the Cashbook with
the payments entries.

329. The Statement in addition reflects receipts in the Cashbook not recorded
in the Bank Statement amounting to Kshs.2,963,408,681.45, which include a

                                       69 
 
figure of Kshs.27,141,436.45 relating to the period between 28 July 2006 and 17
April 2009. As in the previous instance, no reason has been given for failure to
bank the long outstanding amounts.

Development Cashbook

330. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.533,035,766.00, which include stale cheques amounting
to Kshs.13,915,444.25. Failure to replace or reverse the cheques has not been
clarified.

331. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook amounting to Kshs.7,425,516.25, relating to the period between
10 July 2006 and 21 February 2009. No reason has been provided for failure to
update the Cashbook.

332. The Statement further reflects payments in the Bank Statement not
recorded in the Cashbook totalling Kshs.18,023,466.35, relating to the period
between 11 July 2006 and 4 March 2009, and which ought to have been
recorded in the Cashbook by 30 June 2009. It has not however been explained
why the long outstanding payments have not been recorded in the Cashbook.

333. The Statement in addition reflects receipts in the Cashbook not recorded
in the Bank Statement totalling Kshs.7,818,232.10, which include an amount of
Kshs.7,817,480.10 relating to the period between 27 June 2007 and 20 February
2009. No explanation has been provided as to why the receipts of
Kshs.7,817,480.10 had not been recorded in the Bank Statement as at 30 June
2009.

Deposits Cashbook

334. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 shows payments in the Cashbook not recorded in the Bank Statement
totalling Kshs.5,459,300.00, which include stale cheques amounting to
Kshs.2,034,700.00. No reason has been given for failure to replace the cheques
or reverse them in the Cashbook.

335. The Statement also shows receipts in the Bank Statement not recorded in
the Cashbook amounting to Kshs.51,880,082.50, relating to the period between 6
August 1997 and 7 November 2008. Failure to update the Cashbook with the
entries has not been explained.

336. The Statement further shows payments in the Bank Statement not
recorded in the Cashbook of Kshs.22,714,533.15 relating to 2007/2008 and
earlier years, and which ought to have been recorded in the Cashbook on or

                                      70 
 
before 30 June 2009. No reason has been provided for failure to update the
Cashbook as appropriate.

337. The Statement in addition shows receipts in the Cashbook not recorded in
the Bank Statement amounting to Kshs.48,982,395.20, which include collections
totalling Kshs.35,748,244.90 relating to 2007/2008 and earlier years. As in the
previous instance, no reason has been provided for failure to bank the long
outstanding receipts.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.01

338. The Statement of Assets and Liabilities for Vote R.01 as at 30 June 2009
reflects under Advances, General Suspense Headquarters, General Suspense
and Excess A.I.A various debit and credit Account balances totalling
Kshs.161,148,135.00 and Kshs.1,000,401,921.95 respectively brought forward
from 2007/2008 and cleared in 2008/2009.

However, no documentary evidence or otherwise has been produced to indicate
or confirm how the balances were cleared.

339. The Statement also reflects an Imprests Account debit balance of
Kshs.74,208,892.95 relating to 2007/2008 and earlier years, and which had not
been surrendered or accounted for as at 30 June 2009. No reason has been
provided for failure to surrender or otherwise account for the balance. Further,
the amount of Kshs.74,208,892.95 differs by a figure of Kshs.59,817,097.25 from
the figure of Kshs.14,391,795.70 reflected in the supporting schedules. No
reconciliation or explanation has been given for the difference.

340. The Statement further reflects an Agency Account debit balance of
Kshs.118,130,830.10, which has not been analysed with the result that its
completeness and accuracy could not be ascertained. The balance also ought to
have been cleared on or before 30 June 2009 as it relates to 2007/2008 and
earlier years.

341. The Statement shows a debit balance of Kshs.1,917,647,901.45 under the
District Suspense Account which relates to 2007/2008. No reason has however
been provided for failure to clear the balance. In addition, the figure has not
been supported with an analysis consequent upon which its completeness and
accuracy could not be confirmed.

342. The Statement also shows an Exchequer Headquarters Account debit
balance of Kshs.12,740,716,987.40, which includes an amount of
Kshs.12,708,933,187.40 relating to 2007/2008 and earlier years. As in the
previous instances, no reason has been given for non-clearance of the balance.



                                      71 
 
343. The Statement further shows a Clearance Account credit balance of
Kshs.157,502,395.15 relating to 2007/2008 and earlier years, which has not
been analysed. As a result, its completeness and accuracy could not be
confirmed. The balance also relates to 2007/2008 and earlier years and
therefore ought to have been cleared from the books of account by 30 June
2009.

344. The Statement also reflects a General Account of Vote balance of
Kshs.4,998,822,309.60 for 2008/2009, while the Appropriation Account for Vote
01 for the year shows a Net Surplus to be Surrendered to the Exchequer of
Kshs.1,831,168,788.80. The variation of Kshs.3,167,653,520.80 between the
two sets of records has not been reconciled or explained.

345. The Statement in addition reflects various incorrect balances brought
forward from the 2007/2008 audited Statement. No explanation has been given
for the anomaly.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.01

346. The Statement of Assets and Liabilities for Vote D.01 as at 30 June 2009
reflects a General Suspense Account debit balance of Kshs.23,229,201.10,
relating to 2007/2008 and earlier years, and which has not been cleared. No
analysis has also been provided in support of the balance.

347. The Statement also reflects a balance of Kshs.3,269,479,471.60 under the
District Suspense Account which has not been analyzed, with the result that its
accuracy could not be ascertained. The balance also includes an amount of
Kshs.2,442,060,247.05 relating to 2007/2008 and earlier years. No reason has
been provided for non-clearance of the latter balance.

348. The Statement further reflects an Agency Suspense Account net debit
balance of Kshs.26,966,894.60, which has not been cleared although it relates to
2007/2008 and earlier years. The balance has also not been analyzed
consequent upon which its completeness and accuracy could not be ascertained.

349. The Statement in addition reflects an Exchequer Under-Issues debit
balance of Kshs.11,190,627,806.60, out of which an amount of Kshs.
11,180,987,807.60 relates to 2007/2008 and earlier years. No reason has been
provided for failure to clear the long outstanding balance of
Kshs.11,180,987,807.60.

350. The Statement similarly reflects an Arid Lands Imprest Account debit
balance of Kshs.14,996,824.75, which had not been surrendered or accounted
for as at 30 June 2009, although it related to 2007/2008 and earlier years. No
reason has been given for failure to surrender or account for this balance.

                                      72 
 
351. The Statement shows a Paymaster General net credit balance of
Kshs.3,023,422,815.55,     while   the    Cashbook    shows a   figure   of
Kshs.2,033,734.15. The difference of Kshs.3,025,456,549.70 between the two
sets of records has not been reconciled or explained.

352. The Statement also shows a General Account of Vote credit balance of
Kshs.11,501,877,383.10, which includes an amount of Kshs.8,888,195,440.15
relating to 2006/2007 and earlier years. No reason has been provided for failure
to clear this long outstanding balance. Besides, the General Account of Vote
balance of Kshs.1,845,028,684.00 for 2008/2009 reflected in the Statement
differs with the Net Surplus of Kshs.524,556,882.00 shown in the Appropriation
Account for Vote R.01 for the year ended 30 June 2009. No reconciliation or
explanation has been provided for the resultant difference of
Kshs.1,320,471,802.00.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

353. The Statement of Assets and Liabilities for Deposits 01 as at 30 June
2009 reflects various balances brought forward under the Paymaster General
and Headquarters & District Accounts, which differ from the closing amounts as
reflected in the audited Statement for 2007/2008.

No clarification has however been made in respect of the discrepancies.

354. The Statement also reflects seven (7) Accounts with four (4) debit
balances totalling Kshs.467,736,794.80 and three (3) credit amounts totalling
Kshs.418,137,830.90, which have not been supported with relevant schedules.
Consequently, it has not been possible to ascertain the validity and accuracy of
the balances.

355. The Statement further reflects a Government Press Fund Account debit
balance of Kshs.69,536,322.55, while the Government Press Fund Balance
Sheet as at 30 June 2009 shows a Paymaster-General Account balance of
Kshs.104,098,037.00 against the item. The difference of Kshs.34,561,714.45
between the two sets of records has not been reconciled or explained.

356. The Statement shows a District Cash Fund balance of
Kshs.162,302,451.80 relating to 2007/2008 and earlier years, and which has not
been analysed. As in the previous instances, no reason has been given for
failure to analyse or clear the balance from the books of account.

357. As similarly noted in the previous year’s report, retention money totalling
Kshs.14,509,989.54 owed to various contractors as at 30 June 2009 was still



                                       73 
 
being held in the Development Vote Suspense Account instead of the Deposits.
It has not been clarified why this long outstanding issue has not been resolved.



                             STATE HOUSE

APPROPRIATION ACCOUNT FOR VOTE R.02 FOR THE YEAR ENDED 30
JUNE 2009

358. The Appropriation Account for Vote R.02 for the year ended 30 June 2009
reflects total actual expenditure of Kshs.1,086,725,524.00, while the Ledger for
the month of June 2009 against which the Account was drawn shows a figure of
Kshs.822,985,311.50 as at 30 June 2009.

According to information available, the difference of Kshs.263,740,212.50 was
occasioned by failure to capture through IFMIS expenditure data for February,
March and April 2009.


APPROPRIATION ACCOUNT FOR VOTE D.02 FOR THE YEAR ENDED 30
JUNE 2009

Accuracy of the Appropriation Account

359. The Appropriation Account for Vote D.02 for the year ended 30 June 2009
reflects balances totalling Kshs.132,693,783.10 under Heads 020, 021 and 022,
against items 3110301, 3110302 and 3110504, which differ with the
corresponding amounts adding up to Kshs.111,493,584.70 as shown in the
Ledger, by Kshs.21,200,198.40.

Similar to the Recurrent Account, the difference was caused by failure to capture
through IFMIS expenditure data for the months of February, March and April
2009.

Under-Expenditure

360. The Appropriation Account also reflects surplus of gross estimates over
expenditure of Kshs.89,306,216.90, representing approximately 40% of the
approved provision of Kshs.222,000,000.00.

According to the footnotes to the Account, the under-expenditure was caused by
late release of exchequer by Treasury and non-completion of various
construction projects during the year.



                                       74 
 
PENDING BILLS

361. Records maintained at the State House indicated that bills totalling
Kshs.12,770,164.15 chargeable to the Recurrent Vote and relating to 2008/2009
were not settled during the year but were instead carried forward to 2009/2010.

362. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.02 would have reflected an
Excess Vote of Kshs.10,942,688.15 instead of Net Surplus to be Surrendered to
the Exchequer of Kshs.1,827,476.00 now shown.

According to information available, the bills were not settled during the year due
to inadequate budgetary provision.


OUTSTANDING IMPRESTS

363. Imprest records indicated that Temporary Imprests totalling
Kshs.2,563,992.45 which ought to have been surrendered or otherwise
accounted for, on or before 30 June 2009 were still outstanding as at that date.
Out of the above total, Imprests amounting to Kshs.670,430.90 were owed by
officers in Job Group M and above, while the balance of Kshs.1,893,561.55 was
due from officers in Job Group ‘L’ and below.

364. A review of the position as at 20 April 2010 indicated that imprests
amounting to Kshs.2,432,132.15 had been recovered leaving a balance of
Kshs.131,860.30 outstanding.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.02

365. The Trial Balance for the month of June, the basis on which the Statement
of Assets and Liabilities for Vote R.02 as at 30 June 2009 was drawn was not
availed for audit review. No reason has been provided for failure to provide the
Trial Balance.

366. The Statement reflects an Exchequer Account balance of
Kshs.29,976,908.00, which includes an amount of Kshs.28,523,908.00 relating
to 2007/2008 and earlier years. Failure to clear the long outstanding balance
from the books of account has not been clarified.

367. The Statement also reflects a Paymaster General Account (PMG) balance
of Kshs.1,079,235.85, while the Cashbook shows a figure of Kshs.7,521,575.90
as at 30 June 2009. The difference of Kshs.6,442,340.05 between the two sets
of records has not been reconciled or explained.

                                        75 
 
368. The Statement further reflects a Clearance Account balance of
Kshs.2,297,619.90 which has not been cleared from the books of account
although it relates to 2007/2008 and earlier years.

369. The Statement also shows a Suspense Account balance of
Kshs.4,110,591.55 whose analysis has not been provided. Consequently, the
completeness and accuracy of the balance could not be ascertained. The
balance also includes an amount of Kshs.3,593,016.25 relating to 2007/2008 and
earlier years. Non-clearance of the amount of Kshs.3,593,016.25 has not been
clarified.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.02

370. The Statement of Assets and Liabilities reflects an Advance Account
balance of Kshs.2,971,455.15, which includes an amount of Kshs.9,956.45
relating to 2005/2006. No reason has been provided for failure to clear this long
outstanding amount.

371. The Statement also reflects under the Exchequer Account a balance of
Kshs.236,079,675.50, which has been outstanding since 2004/2005. As in the
previous instance, no reason has been provided for non-clearance of the
balance.

372. The Statement further reflects a General Account of Vote (GAV) balance
of Kshs.372,075,079.40, which includes a figure of Kshs.178,521,958.45 relating
to 2003/2004 and earlier years. The amount of Kshs.178,521,958.45 ought to
have been cleared from the books of account on or before 30 June 2009.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

373. The Statement of Assets and Liabilities as at 30 June 2009 reflects a
Cash on Hand balance of Kshs.87,718.95, while both the Board of Survey Report
and the Cashbook show a figure of Kshs78,718.95.             The difference of
Kshs.9,000.00 has not been reconciled or explained. The Statement also reflects
a bank balance of Kshs.14,290,996.80 as at 30 June 2009, which differs with
both the Bank Reconciliation Statement and Bank Certificate amount of
Kshs.1,733,345.55. As in the previous instance, no reconciliation or explanation
has been provided for the difference of Kshs.12,557,651.25.

374. The Statement also reflects a Deposits Account balance of
Kshs.14,278,890.05, which has not been analysed or supported with the relevant
schedules. Consequently, its correctness could not be ascertained.



                                       76 
 
          OFFICE OF THE PRIME MINISTER AND
        MINISTRY OF STATE FOR PUBLIC SERVICE

APPROPRIATION ACCOUNT FOR VOTE D.03 FOR THE YEAR ENDED 30
JUNE 2009

375. The Appropriation Account for Vote D.03 for the year ended 30 June 2009
reflects gross total expenditure of Kshs. 324,407,703.55 against approved
estimates of Kshs.323,100,000.00, resulting in an Excess Vote of
Kshs.1,307,703.55.

The Excess Vote appears to have been caused mainly by an over-expenditure of
Kshs.8,552,845.00 recorded under Sub-Vote 031 – Training, Head 033.


BANK RECONCILIATION STATEMENT FOR THE RECURRENT CASHBOOK

376. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects receipts in the Bank Statement not recorded in the Cashbook
totalling Kshs.1,949,934.45, which include an amount of Kshs.1,074,791.40
relating to 2007/2008. It has not been clarified why the latter receipts had not
been entered in the Cashbook as at 30 June 2009.

377. The Statement also reflects a payment of Kshs.27,006.90 in the Bank
Statement not recorded in the Cashbook. No reason has been provided for
failure to record the payment in the Cashbook.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.03

378. The Statement of Assets and Liabilities for Vote R.03 as at 30 June 2009
reflects a debit balance of Kshs.22,476,620.90 against Exchequer Under-Issues
for 2007/2008. It has not however been clarified why these long outstanding
Under-Issues had not been cleared from the books of account as at 30 June
2009.

379. The Statement also reflects a District Suspense Account credit balance of
Kshs.17,278,868.35, which includes an amount of Kshs.8,048,776.50 relating to
2007/2008 and earlier years. No reason has been provided for failure to clear
the latter balance. The balance of Kshs.17,278,868.35 also includes a figure of
Kshs.2,206,896.00 indicated as representing a General Suspense Account. This
particular Account has not however been analysed with the result that its
completeness and accuracy could not be ascertained.

                                      77 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.03

380. The Statement of Assets and Liabilities for Vote D.03 as at 30 June 2009
reflects     balances      of      Kshs.52,000,000.00,     Kshs.5,724,777.05,
Kshs.60,294,046.30 and Kshs.4,418,281.00 under Exchequer Under-Issues,
District Suspense, GAV and Excess Appropriations-In-Aid Accounts respectively,
brought forward from 2007/2008 and which were cleared during the year under
review. However, no documentary evidence has been produced to support
clearance of these balances from the books of account.

381. The Statement also reflects a District Suspense Account brought forward
balance of Kshs.7,122,896.35, while the audited Statement for 2007/2008 shows
a closing figure of Kshs.11,309,649.75 against the Account. Similarly, the
Statement reflects an Inter-ministerial Agency brought forward balance of
Kshs.4,186,753.40, while the audited Statement for 2007/2008 shows no such an
item. These discrepancies have not been reconciled or explained.

382. The Statement further reflects balances of Kshs.1,398,119.30 and
Kshs.4,186,753.40 under District Suspense and Inter-Ministerial Agency
Accounts respectively, relating to 2007/2008 and earlier years. No reason has
been provided for failure to clear the two balances, which have been outstanding
for a considerably long period of time. In addition, the two balances have not
been analysed with the result that it has not been possible to determine what
they represent.




                MINISTRY OF FOREIGN AFFAIRS

APPROPRIATION ACCOUNT FOR VOTE R.04 FOR THE YEAR ENDED 30
JUNE 2009

Inaccuracy of the Appropriation Account

383. The Appropriation Account for Vote R.04 for the year ended 30 June 2009
reflects  under    various  Heads     and     Items    expenditure   totalling
Kshs.2,797,945,868.35, which differs with the corresponding figure of
Kshs.2,054,817,218.15 appearing in both the Ledger and Trial Balance for the
month of June 2009. No reasons have been provided for the discrepancies.




                                      78 
 
Failure to Provide Footnotes for Material Variances

384. The Appropriation Account also reflects various material variances
between approved estimates and actual expenditure or collection of
Appropriations-In-Aid, against which no footnotes to the Account were provided.
Failure to provide the footnotes has not been clarified.

Unvouched Expenditure

385. Payment vouchers and other related records in support of expenditure
totalling Kshs.636,706,487.40 incurred under Heads 070, 071, 072, and 087
during the year were not made available for audit review. Consequently, the
propriety of the expenditure could not be ascertained.

Under-collection of Appropriations-In-Aid

386. The Appropriation Account further reflects under-collection of
Appropriations-In-Aid of Kshs.92,838,306.00, representing approximately 12% of
the estimated receipts of Kshs.772,278,561.00. According to the footnotes
provided, the under-collection was caused by failure by the Ministry to capture
through the Integrated Financial Management Information System (IFMIS)
various collections realized during the year.


APPROPRIATION ACCOUNT FOR VOTE D.04 FOR THE YEAR ENDED 30
JUNE 2009

Accuracy of the Appropriation Account

387. The Appropriation Account for Vote D.04 for the year ended 30 June 2009
reflects various balances under Heads 043 – Headquarter Services, item
3110101, 056 – Abuja, item 3540102, and 075 – The Hague, item 3110300,
which differ with the corresponding figures in the Ledger for the month of June
2009.

No reason has been provided for these discrepancies. Further, the Account
appears to have been prepared from manual records instead of the IFMIS and as
a result, its completeness and accuracy could not be ascertained.

Unvouched Expenditure – Refurbishment

388. The Appropriation Account also reflects expenditure totalling
Kshs.108,922,171.80 relating to purchase of residential buildings, refurbishment
of non-residential and other buildings in New York and Windhoek Missions and at
the Ministry’s Headquarters.



                                      79 
 
The expenditure of Ksh.108,922,171.80 has not however been supported with
payment vouchers and other related records and as a result, its propriety could
not be ascertained.

Excluded Expenditure

389. Expenditure totalling Kshs.19,484,224.05 incurred in Lusaka and Rome
Missions and at the Ministry’s Headquarters during the year under Heads 043,
051 and 063 was not captured and accounted for in the Appropriation Account.

Consequently, the total actual expenditure of Kshs.1,610,569,287.50 recorded
against Vote D04 has been understated by an amount of Kshs.19,484,224.05.
No reason has been provided for failure to include the expenditure in the
Account.

Excess Expenditure

390. The Appropriation Account further reflects under Sub-Vote 041, Head
422 – Windhoek expenditure amounting to Kshs.63,324,986.00, incurred by
Windhoek Mission on refurbishment of buildings during the year. However, and
according to the Printed Estimates for 2008/2009, only a provision of
Kshs.50,000,000.00 had been made for the refurbishment. Consequently, the
excess expenditure of Kshs.13,324,906.90 over and above the approved
provision constituted an unauthorized expenditure.

Under-Expenditure and Under-Collection of Appropriations-In-Aid

391. The Appropriation Account shows gross under-expenditure of
Kshs.207,149,792.50 during the year, representing approximately 11% of the
estimated provision of Kshs.1,817,709,080.00. The Account also reflects under-
collection of Appropriations-In-Aid of Kshs.117,165,919.60 or about 10% of the
estimated receipts of Kshs.1,101,875,000.00. The under-expenditure and under-
collection of Appropriations-In-Aid have been attributed to delays in finalizing of
various procurement processes, delay in granting approval for projects,
insufficient funds and foreign exchange losses, amongst other reasons.


PENDING BILLS

392. Examination of records held at the Ministry’s Headquarters indicated that
bills totalling Kshs.49,674,593.16 relating to both the Ministry and Missions
abroad, and chargeable to the Recurrent Vote were not settled during the year
2008/2009 but were instead carried forward to 2009/2010.




                                        80 
 
393. Had the bills been settled and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.04 for the year would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.287,090,142.89 instead of Kshs.336,764,736.05 now shown.


OUTSTANDING IMPRESTS

394. Examination of imprest records maintained at the Ministry’s Headquarters
indicated that imprests totalling Kshs.35,699,228.00, which ought to have been
surrendered or otherwise accounted for, on or before 30 June 2009 were still
outstanding as at that date.

395. Out of the above total, imprests amounting to Kshs.3,334,838.15 were
owing from officers in Job Group M and above, Kshs.7,440,906.50 from officers
in Job Group L and below, Kshs.8,152,527.35 from officers who have since been
transferred to other Ministries, Kshs.16,401.00 from the Standing Imprest
Account (Headquarters), while the balances of         Kshs.13,565,409.15 and
Kshs.3,189,145.85 were outstanding against retired and deceased officers
respectively. The Ministry has not however indicated the steps it is taking to
recover the imprests. Further, it was observed that some imprests had been
issued to officers who had not surrendered or accounted for various amounts
previously issued.

396. An additional review of the records disclosed that other imprests totalling
Kshs.858,701.60, similarly outstanding as at 30 June 2009 had been excluded in
the Imprest Returns as at the same date and in the total balance of
Kshs.35,699,228.00 as well. No reason has been given for failure to include the
amount of Kshs.658,701.60 in the Returns.


NON-SUBMISSION OF MISSIONS FLOAT FUND ACCOUNT

397. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects deposits totalling Kshs.85,400,000.00 held by the Ministry in respect of
the Missions Float Fund Account. However, the Ministry did not prepare and
submit for audit the Float Fund Account as at 30 June 2009 as required by
Section 6 of the Public Audit Act, 2003.

398. Although the Ministry has indicated that the amount of
Kshs.85,400,000.00 represented part of the excess cash earlier mopped up and
surrendered to the Exchequer, no documentary evidence to support this position
has been produced for audit verification. Further, the Ministry has not explained
why the Fund Account balance of Kshs.85,400,000.00 was still being reflected in
the Statement of Assets and Liabilities for Deposits, if indeed it had been cleared
and surrendered to the Exchequer.

                                        81 
 
MISALLOCATED AND UNSUPPORTED EXPENDITURE

Misallocation of Expenditure

399. During the year, the Ministry incurred expenditure totalling
Kshs.25,328,493.60 on various goods, services and allowances, which was
charged against incorrect accounts. According to information available, the
expenditure mainly related to water bills, meals, accommodation, transfer and
outfit allowance, hire of transport, purchase of utensils and foodstuffs,
decorations, air-tickets, entertainment and advance funds to the Kenya High
Commission – London. No reasons have however been provided for charging
the expenditure against erroneous accounts.

Unsupported Expenditure

400. Payments totalling Kshs.11,969,464.40 were made to two local companies
for supply of various services during the year. Payment vouchers and other
related records in support of the expenditure of Kshs.11,969,464.40 were not
however made available for audit review, consequent upon which it has not been
possible to establish what the amount represents.


AVOIDABLE EXPENDITURE AT THE SEOUL MISSION

401. An audit inspection exercise carried out at the Embassy of Kenya in
Seoul, South Korea in August 2009 revealed that the Embassy entered into a
lease agreement on 22 May 2007 with a Korean national, to lease residential
premises at E-Ho, Samho Villa, 193-3 Itaewon – dong, Yongsan-Ku, Seoul for
the then yet to be posted ambassador. The lease was to take effect from 15 June
2007 to 14 June 2008, but was later extended for an additional twelve (12)
months period to end on 14 June 2009.

402. According to information available, the premises occupying a space of
226.173m2 were leased at a monthly rent of Kshs.359,928.00 (Korean won
6,000,000).    In addition, the embassy was to pay an agency fee of
Kshs.359,928.00 (Korean won 6,000,000) per year. Rent and agency fees
totalling Kshs.8,640,000.00 (Korean won 144,000,000) and Kshs.720,000.00
(Korean won 12,000,000) respectively, were therefore paid for the two years up
to 14 June 2009, the date on which the lease was to end.

403. During the period however, and according to information available, the
premises remained vacant and unoccupied as no ambassador had been posted
to the Mission as of June 2009. A further amount of Kshs.250,744.60 (Korean
won 4,261,530) was incurred during the same period on fixed utility charges
including Kshs.4,833.50 in respect of telephone, Kshs.26,076.55 against

                                      82 
 
electricity, Kshs.112,839.20 for heating/cooking gas and Kshs.106,995.40 in
respect of water.

No reason has been provided for renting the property for two years while no
ambassador had been posted to the Mission.

404. Additional records show that on termination of the lease on 14 June 2009,
the embassy contracted a packaging firm to pack, move and store household
items for the ambassador’s residence for three months, at the rate of
Kshs.19,680.00 (Korean won 328,000) per month. A handling fee of
Kshs.135,300.00 (Korean won 2,255,000) was separately paid.

405. As may be noted from the foregoing, the total expenditure of
Kshs.9,747,044.60 could have been clearly avoided had renting of the premises
been delayed until an ambassador was posted to the station.


ABUJA MISSION – UNACCOUNTED FOR RECEIPTS

406. Records maintained at the Ministry’s Headquarters indicate that the
Kenya’s Mission in Abuja, Nigeria received an amount of Kshs.984,709,080.40
during the year, from sale of land including a former chancery and residences in
Lagos. However, a review of the Mission’s Cashbook and Bank Statement,
carried out in September 2009 indicated that a sum of sterling pounds 8,730,820
(equivalent to Kshs.1,050,317,646.00 @ Kshs.120.30 to 1 sterling pound) was
received from the transaction, occasioning a significant difference of
Kshs.65,608,565.60 between the two sets of records. The difference has not
been reconciled or explained.

407. Further, the sale agreement and other related records including the bids
for the property were not made available for audit review, with the result that the
terms and conditions of the sale could not be established.


KENYA HIGH COMMISSION – HARARE

Non Preparation of Bank Reconciliation Statements

408. During the year under review, the Kenya High Commission in Harare,
Zimbabwe did not prepare Bank Reconciliation Statements for its various bank
accounts as required by Section 5.9.2 of the Government Financial Regulations
and Procedures.         Consequently, and in absence of the Reconciliation
Statements, it has not been possible to ascertain the accuracy of the bank and
cash balances at the Mission as at 30 June 2009. No reason has been provided
for failure to prepare the Statements.



                                        83 
 
Property and Equipment

409. The Mission owns four (4) properties comprising the Chancery and three
residential houses, currently under occupation by staff. Ownership documents
for the properties were not however made available for audit review and as a
result, the ownership status of such properties could not be ascertained. The
Mission did not also during the year maintain a Fixed Assets Register, with the
result that it has not been possible to determine the value of the Mission’s assets
as at 30 June 2009.


KENYA HIGH COMMISSION – DAR ES SALAAM

Construction of the Chancery and High Commissioner’s Residence

410. The contract for construction of the proposed Chancery and High
Commissioner’s residence in Dar es Salaam was awarded through competitive
bidding to a Tanzanian company based in Dar es Salaam, at a tender sum of
Kshs.281,152,702.00 (Tsh.4,779,595,948.80) on 7 December 2005.

411. According to information available, the works commenced on 10 April
2006 and were scheduled for completion within a period of seventy two (72)
weeks, thus on 20 August 2007.

Scope of Work

412. The scope of work included construction and completion of two storey
reinforced concrete framed Chancery, two storey residence, access roads and
motor vehicle parking, power and water supply, telecommunication infrastructure
and a swimming pool.

Slow progress

413. Although as indicated above the construction of the Chancery and
residence was scheduled for completion on 20 August 2007, the project was not
ready as of May 2009, over one and a half years after the end of the contract
period. No reason has been provided for the slow progress of the work.

414. Further, and as a result of delayed completion of work, the Ministry
incurred additional expenditure of Kshs.69,000,000.00 (US$.920,000.00) on
rented premises for the Chancery and residence of the High Commissioner.

Quality of work

415. A review by the Ministry, of work done on the project, disclosed various
defects in the Chancery and residence, which included; leaking washrooms,

                                        84 
 
416. Although the contractor was instructed by the Project Consultant to rectify
these defects, no evidence has been seen to confirm he had done so as at 30
June 2009. Other records indicate that another firm also in Dar-es-salaam was
later contracted by the Ministry at a fee of Kshs.284,400.00 to rectify the defects.

Unapproved Variation

417. An examination of payment vouchers and other related records showed
that the certified amount as at 30 June 2009 stood at Kshs.366,815,477.40
(Tsh.1,731,913,562.03) representing a cost overrun of Kshs.101,877,268.00 or
approximately 36% of the original contract sum of Kshs.281,152,702.00
(Tsh.4,779,595,948.80). According to financial appraisal reports and minutes of
site meetings seen, the overrun was caused by site instructions issued by the
Consultant and the Mission during the contract period. However, the relevant
Ministerial Tender Committee minutes which gave approval for the variation have
not been made available for audit review.

Irregular Procurements

418. The Ministry through the Ministerial Tender Committee minutes under
ref.No.MFA/MTC/09/02/2008-2009 of 12 June 2009 awarded another firm in Dar-
es-salaam a contract for supply of assorted office furniture and household goods
at a cost of Kshs 4,196,461.00, for the new Chancery and High Commissioner’s
residence. However, and according to payment voucher No.01209 of 23 June
2009, a sum of Kshs.6,951,924.00 was paid to the supplier, occasioning an
overpayment of Kshs.2, 755,463.00.

Apart from the fact that no reason has been provided for the excess expenditure,
an approval by the Ministerial Tender Committee for the procurement does not
appear to have been sought.

419. Further examination of records revealed that the High Commission also
paid various firms for supply and delivery of additional household, office furniture
and carpets at a cost of Kshs. 8,112,488.40. However, Tender Committee
minutes, quotations, invoices and other relevant documents for the expenditure
were not produced for audit verification. In absence of these documents, it has
not been possible to confirm propriety of the expenditure of Kshs.8,112,488.40
as at 30 June 2009.

Unsupported Expenditure

420. A review of expenditure vouchers in respect of Travel and Subsistence
and Other Transport Expenses at the Mission showed that an amount of

                                        85 
 
Kshs.5,286,521.15 was paid to various officers at the Mission to cover
accommodation and subsistence while on official duties. However, the payments
were not supported with verifiable evidence and in consequence as in other
instances discussed above, the propriety of the expenditure could not be
ascertained.


KENYA HIGH COMMISSION – NEW DELHI

421. Records maintained at the Kenya High Commission in New Delhi, India
indicate that bills totalling Kshs.9,846,461.70 were not settled during the year but
were instead carried forward to 2009/2010. According to information gathered
during examination of records at the Mission, the bills were not paid due to
liquidity problems.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

422. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Ksh.885,572,711.00, which include stale cheques amounting
to Kshs.3,522,590.75. It has not however been clarified why the cheques had
not been reversed in the Cashbook as at 30 June 2009.

423. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook of Ksh.19,496,872.15, which have been described as “VR IC”,
“VR OC”, “VR OD” and “CQ ID”. It has not however been explained what these
receipts represent or why they have not been recorded in the Cashbook.

424. The Statement further reflects payments in the Bank Statement not
recorded in the Cashbook totalling Ksh.4,154,845.30, which include an amount of
Kshs.3,683,087.55 relating to 2007/2008 and earlier years. No reason has been
provided for failure to record the long outstanding entries in the Cashbook.

425. The Statement in addition shows receipts in the Cashbook not recorded in
the Bank Statement of Kshs.937,809,536.35, which include an amount of
Kshs.3,778,961.35 relating to 2007/2008 and earlier years. Failure to bank the
receipts of Kshs.3,778,961.35 has not been explained.

Development Cashbook

426. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects receipts in the Bank Statement not recorded in the
Cashbook totalling Kshs.3,156,699.15 relating to 2007/2008 and earlier years.

                                        86 
 
No reason has been given for the delay in recording the receipts in the
Cashbook.

427. The Statement further reflects payments in the Bank Statement not
recorded in the Cashbook amounting to Kshs.62,168,837.30, out of which a
payment of Kshs.5,239,500 made on 24 June 2008 under reference VCR
OC000635 had not been entered in the Cashbook as at 30 June 2009. The
anomaly has not been explained.

Deposits Cashbook

428. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement of Kshs.20,155,978.55, which include stale cheques amounting to
Ksh.3,838,886.65. No proper explanation has been provided for failure to
reverse the cheques in the Cashbook as at 30 June 2009.

429. The Statement further reflects receipts in the Bank Statement not
recorded in the Cashbook totalling Ksh.3,450,911.85. The sources of these direct
credits in the Bank Statement had not been identified as at 30 June 2009.

430. The Statement also reflects payments in the Bank Statement not recorded
in the Cashbook amounting to Kshs.47,356,963.90, which include a balance of
Kshs.40,816,503.95 relating to 2007/2008 and earlier years. It has not however
been clarified why the significant payment of Kshs.40,816,503.95 had not been
recorded in the Cashbook as at 30 June 2009.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.04

431. The Statement of Assets and Liabilities for Recurrent Vote R.04 as at 30
June 2009 reflects an Exchequer Account balance of Kshs.251,843,447.00,
which includes an amount of Kshs.250,389,827.00 relating to 2006/2007 and
earlier years. No reason has been provided for failure to clear the long
outstanding Exchequer under-issues from the books of account.

432. The Statement also reflects a General Account of Vote net debit balance
of Kshs.449,541,250.15 in respect of Excess Votes for 2002/2003 and earlier
years. No effort appears to have been made to regularize these long outstanding
Excess Vote balances in line with the Government Financial Regulations and
Procedures.

433. The Statement further reflects a Temporary Imprests Account net debit
balance of Kshs.37,214,671.15, representing imprests cleared during the year.
However, no documentary evidence has been provided to support the clearance



                                      87 
 
of the balance.    Consequently, the accuracy of the closing balance of
Kshs.37,001,334.75 as at 30 June 2009 could not be ascertained.

434. The Statement in addition reflects a Clearance Account debit balance of
Kshs.3,792,358,229.75, which has not been analysed with the result that its
completeness and accuracy could not be ascertained. The balance also includes
a figure of Kshs.1,612,004,615.80 relating to 2007/2008 and earlier years and
which ought to have been cleared on or before 30 June 2009. No reason has
however been provided for failure to clear this long outstanding amount.

435. The Statement shows a General Deposits Account debit balance of
Ksh.318,850,516.15. It has not however been clarified why a Deposits Account
should be reflected in the Recurrent Statement instead of the Deposits.

436. The Statement also shows a Paymaster General Account balance of
Kshs.336,764,736.05, while the Cashbook as at 30 June 2009 reflects a figure of
Kshs.61,973,911.30. The difference of Kshs.274,790,824.75 between the two
sets of records has not been reconciled or explained.

437. The Statement further shows an Advances Account net debit balance of
Kshs.1,217,506.25 which has been arrived at after clearance of a figure of
Kshs.10,263,584.70 during the year. However, no supporting documents have
been provided for the clearance or recovery of this particular amount, with the
result that the completeness and accuracy of the balance of Kshs.1,217,506.25
as at 30 June 2009 could not be ascertained.

438. The Statement in addition shows a General Account of Vote credit
balance of Kshs.1,569,907,623.90, which includes an amount of
Kshs.392,722,047.25 relating to 2005/2006. No reason has been given for
failure to clear the balance.

439. The Statement also reflects a Salary Clearance credit balance           of
Kshs.2,462,048.00, which has not been analysed.     Consequently,           its
completeness and accuracy could not be ascertained.   In addition,          no
documentary evidence has been provided to show how the amount                of
Kshs.13,942,322.00 was cleared during 2008/2009.

440. The Statement further reflects a Suspense Account debit balance of
Kshs.3,054,261,032.90, which has not been analysed and as in the previous
instance, its completeness and accuracy could not be ascertained.

441. The Statement further reflects Excess Appropriations-In-Aid net balance of
Kshs.560,946,315.90 relating to 2004/2005 and earlier years. Failure to remit
the long outstanding Appropriations-In-Aid has not been explained.




                                      88 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.04

442. The Statement of Assets and Liabilities for Vote D.04 as at 30 June 2009
reflects an Exchequer Account debit balance of Kshs.606,611,370.00, which
includes an amount of Kshs.336,902,390.00 relating to 2006/2007 and earlier
years. No reason has been provided for non-clearance of the long outstanding
Exchequer Under-Issues from the books of account.

443. The Statement also reflects a General Account of Vote debit balance of
Kshs.57,618,127.60 in respect of Excess Votes for 2003/2004 and earlier years.
It has not however been clarified why the Excess Votes have not been
regularized.

444. The Statement further reflects an Imprest Clearance Account debit
balance of Kshs.32,240,818.05 relating to 2007/2008 and earlier years. No
reason has been provided for non-clearance of the balance. In addition, the
balance has not been analysed with the result that its accuracy could not be
ascertained.

445. The Statement shows a Paymaster General Account balance of
Kshs.89,853,872.90, while the Cashbook as at 30 June 2009 reflects a figure of
Kshs.107,938,185.35. The difference of Kshs.18,084,312.45 between the two
sets of records has not been reconciled or explained.

446. The Statement also shows a General Account of Vote credit balance of
Kshs.564,750,345.00 which includes an amount of Kshs.356,006,242.10 relating
to 2005/2006 and earlier years.

The amount of Kshs.356,006,242.10 ought to have been surrendered to the
Exchequer as at 30 June 2009.

447. The Statement further shows an Excess Appropriations-In-Aid balance of
Kshs.5,239,500.00 relating to 2006/2007. As in the previous instance, this
balance ought to have been remitted to the Exchequer on or before 30 June
2009.

448. The Statement finally reflects total Assets of Kshs.786,324,188.55 and
total Liabilities of Kshs.569,859,845.00. The Statement is therefore out of
balance by a figure of Kshs.214,464,343.55.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

449. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects various long outstanding debit and credit balances totalling
Kshs.502,518,253.50 and Kshs.464,224,358.75 respectively, relating to

                                     89 
 
450. The Statement also reflects various debit balances under Suspense,
Miscellaneous Deposits and Deposits Clearance Accounts in the amounts of
Kshs.195,859,633.20, Kshs.3,945,245.95 and Kshs.619,845,861.00 respectively
and a credit balance of Kshs.391,991,873.15 under Agency Account, which have
not been analysed. Consequently, their completeness and accuracy could not
be ascertained.

451. The Statement further reflects a Paymaster General Account credit
balance of Kshs.63,601,711.65, while the Cashbook reflects a debit balance of
Kshs.63,601,711.65 as at 30 June 2009.          The resultant difference of
Kshs.127,203,423.30 between the two sets of records has not been reconciled or
explained.

452. The Statement in addition reflects a Miscellaneous Deposit Account debit
balance of Kshs.3,945,245.95, while the Account under normal circumstances
should reflect a credit or nil balance. No reason has been provided for the
anomaly.

453. The Statement shows total Assets of Kshs.819,650,740.15 against total
Liabilities of Kshs.540,993,584.80. No explanation or reconciliation has been
provided for the resultant difference of Kshs.278,657,155.35.




           OFFICE OF THE VICE-PRESIDENT AND
               MINISTRY OF HOME AFFAIRS

APPROPRIATION ACCOUNT FOR VOTE D.05 FOR THE YEAR ENDED 30
JUNE 2009

Under Expenditure

454. The Appropriation Account for Vote D.05 for the year ended 30 June 2009
reflects under-expenditure of Kshs.161,445,715.70, representing approximately
14% of the approved estimates of Kshs.1,139,000,000.00.          The under-
expenditure was mainly recorded under Sub-Votes 053 and 055 relating to
Prison Service and Probation & Aftercare Services respectively.

455. The reasons provided in the footnotes to the Account for the under-
expenditure include delayed completion of various procurement procedures,


                                     90 
 
delayed submission of invoices by contractors and delayed submission of
completion certificates to facilitate payments during the year.

Reallocation of Expenditure

456. During the year, the Ministry charged expenditure totalling
Kshs.24,352,718.25 to erroneous items in the Appropriation Account. No
Treasury authority for re-allocation of the expenditure was however seen.


PENDING BILLS

457. Records maintained at the Office of the Vice - President and Ministry of
Home Affairs indicated that bills totalling Kshs.321,666,496.56 relating to
2008/2009 were not settled during the year, but were instead carried forward to
2009/2010. Out of the total, bills amounting to Kshs.235,202,210.98 related to
the Recurrent Vote while the balances of Kshs.85,963,485.58 and
Kshs.500,800.00 were in respect of Development Vote and Deposits
respectively.

458. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Recurrent Appropriation Account for Vote 05 for the year ended
30 June 2009 would have reflected an Excess Vote of Kshs.16,388,933.12
instead of the Net Surplus to be Surrendered to the Exchequer of
Kshs.218,813,277.86 now shown. Similarly, the Development Appropriation
Account for the same period would have reflected a Net Surplus of
Kshs.26,766,930.12 instead of Kshs.112,730,415.70 now recorded.

Pending Bills – Kodiaga Prison

459. Included in the above figure of Kshs.235,202,210.98 under Recurrent Vote
were bills totalling to Kshs.44,461,098.15 relating to Kodiaga Main Prison in
Kisumu which were not settled during the year but were instead carried forward
to 2009/2010. Out of the above total, bills amounting to Kshs.42,751,098.65
related to food and ration, while the balance of Kshs.1,710,000.00 was in
respect of purchase of firewood.

According to information available, the Ministry attributes failure to pay the bills to
inadequate budgetary provision during the year.


OUTSTANDING IMPRESTS

460. Examination of records maintained at the Ministry’s Headquarters
indicated that imprests totalling Kshs.4,265,635.05 which ought to have been



                                          91 
 
surrendered or otherwise accounted for, on or before 30 June 2009 were still
outstanding as at that date.

461. Out of the total, imprests amounting to Kshs.1,108,483.65 were owed by
officers in Job Group ‘M’ and above, Kshs.1,816,246.75 by officers in Job Group
‘L’ and below, Kshs.418,824.50 by politicians, while the balance of
Kshs.922,080.15 was due from officers whose designations have not been
disclosed. No reasons have been provided for failure to have the imprests
surrendered or accounted for as at 30 June 2009.

462. Further, it was observed that some officers were issued with additional
imprests totalling Kshs.1,385,887.30 before they had surrendered balances
previously issued.


OUTSTANDING ADVANCES

463. An examination of the Advances records at the Ministry’s Headquarters
revealed that Salary Advances totalling Kshs.1,047,215.55 and which ought to
have been recovered on or before 30 June 2009 were still outstanding as at that
date. The amount includes a figure of Kshs.995,870.55 relating to 2007/2008
and earlier years. It has not been clarified why the long outstanding Advances
had not been recovered as at 30 June 2009.


IRREGULAR ENCASHMENT OF TRAINING LEVY REFUNDS - PRISONS
DEPARTMENT

464. Examination of records maintained at the Prisons Department indicated
that between April 2008 and June 2008, the Ministry deducted training levy from
1,462 Prison recruits, who were undergoing training at Ruiru Prison Training
College. The deduction was however made at the rate of 20% of the recruit’s
basic pay instead of the approved 10%.             Consequently, a total of
Kshs.18,352,883.00 of such levy was deducted.

465. According to further information available, cheque no. 166191 dated 21
April 2008 for Kshs.18,352,883.00 payable to the Permanent Secretary, Ministry
of State for Public Service (DPM), was drawn but was later cancelled upon
detection of the above anomaly. Thereafter two payment vouchers each for
Kshs.9,176,441.00 were prepared in favour of DPM and the Commandant,
Prisons Staff Training College (PSTC), Ruiru respectively. However, the
payment voucher payable to the Commandant, Ruiru PSTC was amended to
read the Commissioner of Prisons, subsequent to which cheque no. 166595
dated 14 May 2008 for the same amount was drawn in favour of Commissioner
of Prisons. No reason has been provided for the amendments.



                                      92 
 
466. Additional records indicate that upon receipt of the cheque payable in
favour of the Commissioner of Prisons, the then Chief Human Resources Officer,
proceeded and encashed the cheque at the Central Bank of Kenya, but failed to
record the amount in the Prison Department Cashbook or in any other relevant
record. Further, and although other information show that each recruit was
supposed to be paid a refund of Kshs.6,277.00 out of the amount of
Kshs.9,176,441.00, no evidence has been seen confirming that such refunds had
been made as at 30 June 2009.

467. Consequently, and in absence of any other evidence to the contrary,
indications are that the amount of Kshs.9,176,441.00 encashed by the Chief
Human Resource Officer may have been misappropriated.


PRISON FARMS REVOLVING FUND ACCOUNTS

Accuracy of the Account

468. The Trading, Profit and Loss Account reflects sales revenue of
Kshs.75,838,932.05 against total expenditure of Kshs.19,516,825.95. However,
these balances are not reflected in the Ministry’s Ledger and appear to have
been derived from various manual records kept at the Prison’s Department.
Consequently, the accuracy of the two figures could not be ascertained.

Paymaster General Account

469. The Balance Sheet as at 30 June 2009 reflects a Paymaster General
Account figure of Kshs.10,809,987.60, while the Statement of Assets and
Liabilities for Deposits and Funds as at 30 June 2009 shows an amount of
Kshs.77,561,286.40 against the Account. The difference of Kshs.66,751,298.80
between the two sets of records has not been reconciled or explained.

Debtors

470. The Balance Sheet further reflects an amount of Kshs.53,227,764.10
under the Debtor’s Account, representing an increase of Kshs.13,657,428.60 or
approximately 34% from the previous year’s figure of Kshs.39,570,335.50. As
indicated in 2007/2008, the significant increase in debtors during 2008/2009 is
indicative of inadequate efforts by the Ministry in the collection of debts as and
when they fall due.

Scrap Machinery

471. As was reported in the previous year, the Balance Sheet shows a Scrap
Machinery balance of Kshs.1,775,580.00, which has not been depreciated over



                                       93 
 
Suspense Account

472. The Balance Sheet in addition shows a Suspense Account balance of
Kshs.36,048,123.46, against a corresponding figure of Kshs.41,867,571.56
reflected in the Accounts for 2007/2008. Apart from failure to provide an analysis
for the figure of Kshs.36,048,123.46, no records in support of the decrease of
Kshs.5,819,448.10 during the year in respect of the Account have been seen.


PRISON INDUSTRIES REVOLVING FUND ACCOUNTS

473. Similar to the previous year, the Prison Industries Fund Accounts for the
year ended 30 June 2009 consist of Revenue and Expenditure balances which
have been drawn from Manual Schedules and not from the Accounting records
and Ledgers. In absence of proper Accounting records, the completeness and
accuracy of the sales, expenses and profit figures for the year could not be
confirmed.

474. The Balance Sheet as at 30 June 2009 reflects a Paymaster General
Account balance of Kshs.222,988,766.25, while the Statement of Assets and
Liabilities for Deposits and Funds as at 30 June 2009 shows a figure of
Kshs.349,037,010.25      against  the    Account.     The     difference    of
Kshs.126,048,244.00 between the two sets of records has not been reconciled or
explained.

475. The Balance Sheet continues to reflect a balance of Kshs.2,926,440.00 in
respect of Scrap Machinery brought forward from the previous year. The
Machinery was not however depreciated during the year under review and as a
result, its value has been overstated by the undepreciated amount.

476. The Balance Sheet further reflects a Suspense Account balance of
Kshs.73,549,592.75 representing a decrease of Kshs.122,700.75 from the
previous year’s figure of Kshs.73,672,293.50. The movement of the balance
during the period has not however been supported or explained and indications
are that the movement was meant for balancing the Account.

477. In the report for 2007/2008, it was stated that the opening balance of
Kshs.238,821,041.10 in respect of Accumulated Reserve differed with the closing
balance of Kshs.240,580,582.30 reflected in the audited Statement for
2006/2007, by a figure of Kshs.1,759,541.20. A review of the position as at 30
June 2009 revealed no change and the difference of Kshs.1,759,541.20 had still
not been explained.



                                       94 
 
In consequence, the Accumulated Reserve balance of Kshs.216,152,335.85 as
at 30 June 2009 could not be confirmed.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.05

478. The Statement of Assets and Liabilities for Vote R.05 as at 30 June 2009
reflects various debit and credit balances totalling Kshs.1,972,223,290.02 and
Kshs.2,251,937,469.70 respectively under Exchequer, GAV, Advances,
Imprests, District Suspense, Excess A.I.A., Agency, General Suspense and
Clearance Accounts, relating to 2007/2008 and earlier years and which ought to
have been cleared on or before 30 June 2009. No reason has been provided for
failure to clear these long outstanding balances from the books of account.

479. The Statement also reflects an Exchequer Account balance of
Kshs.854,601,934.04, which includes an adjustment of Kshs.114,930,588.31
made during the year. This adjustment has not however been supported with the
relevant documents, consequent upon which it has not been possible to confirm
its validity or accuracy.

480. The Statement further reflects an Advances Account balance of
Kshs.1,063,820.45, while the Advances Register shows an amount of
Kshs.1,047,215.55 against the Account. The difference of Kshs.16,604.90
between the two sets of records has not been reconciled or explained.

481. The Statement in addition reflects an Imprest Account balance of
Kshs.5,765,656.05, while the Ledger for the month of June 2009 shows a figure
of Kshs.4,265,635.05, resulting in an unreconciled and unexplained difference of
Kshs.1,500,021.00.

482. The Statement shows a Paymaster General Account (PMG) balance of
Kshs.428,116,928.36    which     differs  with    the   Ledger     figure    of
Kshs.347,236,262.67, by Kshs.80,880,665.69. The PMG balance also differs
with the Cashbook balance of Kshs.2,287,015.10, by Kshs.425,829,913.26. The
differences between the three sets of records, which ideally should reflect the
same balance have not been reconciled or explained.

483. The Statement also shows a Clearance Account credit balance of
Kshs.41,182,265.75 which has not been analysed. As a result, its completeness
and accuracy could not be ascertained. The balance of Kshs.41,182,265.75 also
includes an amounts of Kshs.35,627,606.70 relating to 2007/2008 and earlier
years. No reason has been provided for failure to clear the long outstanding
amount.




                                      95 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.05

484. The Statement of Assets and Liabilities for Vote D.05 as at 30 June 2009
reflects a General Account of Vote (GAV) balance of Kshs.524,315,576.50,
which was during the year adjusted with a debit figure of Kshs.662,729,485.60.
No documentary evidence has however been made available to indicate what the
debit figure represents.

485. The Statement also reflects balances of Kshs.14,979,152.50 and
Kshs.5,480,049.95 under Agency and General Suspense Accounts respectively
which have not been analysed. In absence of the analyses, it has not been
possible to ascertain the completeness and accuracy of the two balances as at
30 June 2009.

486. The Statement further reflects various debit and credit balances totalling
Kshs.659,837,522.00 and Kshs.1,055,790,112.47 respectively, relating to
2007/2008 and earlier years. No reason has been provided for failure to clear
these long outstanding balances from the books of account.

487. The Statement shows a Paymaster General Account debit balance of
Kshs.346,109,277.67, while the Ledger and the Cashbook show amounts of
Kshs.347,236,262.67 and Kshs.2,298,325.15 respectively. The differences
between the three balances have not been reconciled or explained.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS AND FUNDS

488. The Statement of Assets and Liabilities for Deposits and Funds as at 30
June 2009 reflects a balance of Kshs.350,274,200.68 under the Paymaster
General Account (PMG), while the Cashbook as at the same date shows a
figure of Kshs.84,387,256.43. The difference of Kshs.265,886,944.25 between
the two sets of records has not been reconciled or explained.

489. The Statement also reflects a District Suspense Account debit balance of
Kshs.318,646,137.30 made up of amounts of Kshs.311,327,711.00 relating to
2007/2008 and earlier years and Kshs.7,318,426.30 for 2008/2009. No reason
has however been provided for failure to clear the long outstanding amount of
Kshs.311,327,711.00 from the books of account.

490. The Statement further reflects a credit balance of Kshs.199,869,308.92
under Agency/HQ Deposits Account, which includes an amount of
Kshs.178,282,285.47 relating to 2007/2008 and earlier years. As in the previous
instance, the amount of Kshs.178,282,285.47 has not been cleared from the
books of account and no reason has been provided for its non-clearance.




                                      96 
 
491. The Statement shows under the Prison Industries’ Account, a balance of
Kshs.349,037,010.25 which however differs with the corresponding figure of
Kshs.222,841,066.25 reflected in the Prison Industries Fund Accounts for
2008/2009, by Kshs.126,195,944.00. The difference has not been reconciled or
explained.

492. The Statement also shows an amount of Kshs.77,879,170.41 under the
Prisons Farm’s Fund Account, while the corresponding balance appearing in the
Prisons Farm Accounts for 2008/2009 stands at Kshs.10,809,987.60. The
difference of Kshs.67,069,182.81 between the two sets of records has not been
reconciled or explained.

493. The Statement further shows a Suspense Account balance of
Kshs.42,321,033.90 which has not been analysed, with the result that it has not
been possible to establish what it represents.




     MINISTRY OF STATE FOR PLANNING, NATIONAL
           DEVELOPMENT AND VISION 2030

APPROPRIATION ACCOUNT FOR VOTE D.06 FOR THE YEAR ENDED 30
JUNE 2009

Capital Grants to Agencies

494. The Appropriation Account for Vote D.06 for the year ended 30 June 2009
reflects expenditure totalling Kshs.1,305,900,684.00, comprising amounts of
Kshs.505,075,784.00 and Kshs.800,824,900.00 under Sub-Vote 060, General
Planning and Administration, Head 527, Subhead 0077 – Community
Development Programmes and Subhead 0078 – Special Environmental
Management Programmes respectively, relating to Capital Grants to Government
Agencies and Other Levels of Government.

495. However, propriety of the expenditure of Kshs.1,305,900,684.00 could not
be ascertained as payment vouchers and other relevant documents in respect
thereof were not made available for audit verification.


PENDING BILLS

496. Examination of records maintained at the Ministry’s Headquarters
indicated that bills totalling Kshs.15,624,380.35 relating to 2008/2009 were not
settled during the year, but were instead carried forward to 2009/2010. Out of

                                      97 
 
the total, an amount of Kshs.15,434,380.35 was chargeable to the Recurrent
Vote R.06 while the balance of Kshs.190,000.00 related to the Development
Vote.

497. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.06 for the year would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.67,153,941.70 instead of Kshs.82,588,322.05 now shown. Similarly, the
Appropriation Account for Vote D.06 for the same period would have reflected a
reduced Net Surplus of Kshs.656,729,525.50 instead of Kshs.656,919,525.50
now recorded.


DISTRICT DEVELOPMENT FUND ACCOUNTS

Unsupported Expenditure

498. The Income and Expenditure Account for the District Development Fund
for the year ended 30 June 2009 reflects a payment of Kshs.3,038,780.00 made
in January 2009, towards completion of the Rhamu (RPTC) Phase II Water
Project. The expenditure has not however been supported with the relevant
procurement documents including quotations, District Tender Committee
minutes, Local Purchase Order (LPO) and Payment Vouchers.

In absence of the documents, the propriety of the expenditure could not be
confirmed.


BANK RECONCILIATION STATEMENT

499. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects payments of Kshs.1,257,899.60 in the Bank Statement not
recorded in the Cashbook, in respect of two entries of Kshs.1,183,800.00 and
Kshs.74,099.60, representing CQID and CBK Direct Debits respectively. No
reason has however been provided for failure to update the Cashbook with the
payments.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.06

500. The Statement of Assets and Liabilities for Vote R.06 as at 30 June 2009
reflects a General Account of Vote closing balance of Kshs.536,645,584.08,
which includes an amount of Kshs.454,057,262.01 relating to 2007/2008 and
earlier years. No reason has been provided for failure to clear this long
outstanding balance.



                                     98 
 
501. The Statement also reflects an Excess Appropriations-In-Aid balance of
Kshs.601,520.00 relating to 2007/2008 and earlier years. The Ministry has not
however explained why this long outstanding balance had not been remitted to
the Exchequer by 30 June 2009.

502. The Statement further reflects an Exchequer Account balance of
Kshs.362,274,108.00, which includes an amount of Kshs.271,286,406.00 relating
to 2007/2008 and earlier years. No reason has been provided for failure to clear
the latter balance from the books of account.

503. The Statement shows a balance of Kshs.69,342,203.93 under the
Provincial/District Suspense Account, which however differs with the Ledger
figure of Kshs.61,312,117.93, by Kshs.8,030,086.00. No reconciliation or
explanation has been provided for the difference.

504. The Statement also shows a Paymaster General Account debit balance of
Kshs.16,985,582.25 for 2008/2009, while the Cashbook as at 30 June 2009
reflects a figure of Kshs.1,840,742.15, occasioning an unreconciled and
unexplained difference of Kshs.15,144,840.10.

505. The Statement further shows a balance of Kshs.2,505,600.55 in respect of
Items Awaiting Clearance. The balance has not however been analysed with
the result that its completeness and accuracy could not be ascertained.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.06

506. The Statement of Assets and Liabilities for Vote D.06 as at 30 June 2009
reflects various debit balances totalling Kshs.1,776,466,470.90 under Exchequer,
Provincial/District Suspense and Ministry of Finance Transfers Accounts, relating
to 2007/2008 and earlier years.

No reason has been provided for non-clearance of these long outstanding
balances from the books of account.


CONSTITUENCY DEVELOPMENT FUND BOARD

MARAKWET EAST CONSTITUENCY DEVELOPMENT FUND

Purchase of a Semi – Permanent House at Chesoi

507. The Marakwet East Constituency Development Committee at their
meeting held on 26 March 2009, allocated part of the Constituency Development
Fund emergency provision amounting to Kshs.580,000.00 for the purpose of
purchasing of a wooden house, earlier used by a road contractor. The house
was then to serve as a guest house, presumably on a commercial basis.
                                       99 
 
Records available do not however indicate any valuation of the house as having
been carried out by Ministry of Lands, with the result that it has not been possible
to establish how the value of Kshs.580,000.00 was arrived at.

Further, ownership documents of the land on which the structure stands were not
produced for audit review.

Construction of Constituency Office

508. The construction of the Constituency Development Fund Office was
started in the year 2005 and the project was expected to be completed by
2007/2008 at a cost Kshs.9,000,000.00. As of April 2009 however, an amount of
Kshs.7,100,000.00 had been spent on the project which was still far from
completion. Further, no documentary evidence was availed by the Office to
support the expenditure of Kshs.7,100,000.00 already incurred. In addition, there
also seems to have been no project committee in place to oversee and monitor
implementation of the project.

Construction of an Office Block at Mogil Police Station

509. During the year, the Constituency Development Fund Committee also
allocated an amount of Kshs.1,000,000.00 for completion of an office block at the
Mogil Police Station, which project had stalled at foundation level immediately
after commencement of construction. The amount was to be expended on
walling, roofing and purchase of other finishing materials.

510. A physical inspection carried out in April 2009 on the office block, however
revealed that the project had still not been completed as at that date. Further,
expenditure records to support the amount of Kshs.1,000,000.00 already
incurred were not availed for audit verification, consequent upon which its
propriety could not be ascertained.

Construction at Kerio Valley Technical Institute

511. An amount of Kshs.1,600,000.00 was similarly allocated from the Fund to
construct two classrooms, a store and two offices at the Kerio Valley Technical
Institute. The first disbursement of Kshs.800,000.00 was used for construction of
a store, a fence and an office, while the second disbursement of equivalent
amount was to be used for purchase of building materials, including cement,
bars, iron sheets and blocks.

512. A physical inspection of the project carried out in April 2009, however
revealed that the materials bought had not been put to any use, and as a result
two hundred (200) bags of cement worth Kshs.170,000.00 included in the
materials had expired and were therefore valueless.



                                        100 
 
TRANSMARA CONSTITUENCY DEVELOPMENT FUND

Construction of Water Pan at Elenkasoruai

513. An amount of Kshs.2,000,000.00 was spent during the year for
construction of the Elenkasoruai Water Pan in Transmara Constituency.
However, audit of records maintained at the District Treasury in respect of the
Water Pan revealed that, the project was one and same as that which had been
undertaken by the Arid Lands Development Department under Ministry of State
for Development of Northern Kenya and Other Arid Lands in 2007/2008, at a cost
of Kshs.2,275,863.00. Further, information available showed that the project was
referred to as Emarti Water Dam under the Arid Lands Development Department.

514. As may be clearly observed from the foregoing, the amount of
Kshs.2,000,000.00 from the Fund was not used for Elankasoruai Water Pan as
alleged, and the position is that the amount had not been surrendered or
accounted for as at 30 June 2009.

Ntuele Dispensary

515. Ntuele Dispensary in the Constituency was also allocated a sum of
Kshs.300,000.00 in 2004/2005, for construction of a Dispensary Block. However,
a physical verification conducted in July 2009 at the Block revealed that although
the facility was complete as planned, it had not been used for over four (4) years
now, implying that the community for whom it was intended was not interested or
involved before the project was conceived and implemented.

Nkoirienito Primary School

516. Nkoirienito Primary School in the Constituency was similarly allocated an
amount of Kshs.400,000.00 on 5 November 2008 for construction of a classroom
at the School. An audit inspection carried out in July 2009 at the school however
revealed that no classroom had been constructed, while no documentary
evidence was availed to show how the sum of Kshs.400,000.00 was utilized and
accounted for. A further amount of Kshs.300,000.00 allocated to the School
during the same period for construction of another classroom was indicated as
having been spent on the project. However, a physical inspection carried out in
July 2009 showed that although the classroom had been completed, it was
nevertheless poorly constructed and therefore posed considerable risk to pupils.

Saparanigo Primary School

517. Saparanigo Primary School also in the Constituency was allocated a sum
of Kshs.300,000.00 for the construction of one classroom during the year.
According to the project status report dated 30 June 2008, the classroom was
indicated as complete and in use. However, an audit inspection carried out at

                                       101 
 
the School in July 2009 revealed that the project stalled after only two foundation
courses had been constructed. No reason has been provided for the erroneous
and misleading status report. Indications therefore are that, an undeterminable
portion of the amount of Kshs.300,000.00 was misappropriated.


ELDORET EAST CONSTITUENCY DEVELOPMENT FUND

Construction of Moiben Bridge

518. The Moiben Bridge project in the Eldoret East Constituency received from
the Fund an amount of Kshs.700,000.00 in 2007/2008 for the construction of a
bridge across Moiben River. Although indications are that the funds were spent,
a site visit carried out on 1 July 2009 revealed that the project had not been
completed and the contractor had apparently abandoned the site. Consequently,
the propriety of the expenditure of Kshs.700,000.00 could not be ascertained.

Construction of Classrooms at Kamkono Primary School

519. During the years 2007/2008 and 2008/2009, Kamkono Primary School in
the Constituency received from the Fund, an amount of Kshs.450,000.00 for
construction of two (2) classrooms. A physical verification carried out in July
2009 however revealed that only one (1) classroom had been built, although and
as indicated above, the amount of Kshs.450,000.00 had been budgeted for two
(2). No reason has been provided for failure to construct the second classroom.


CONSTITUENCY DEVELOPMENT FUND - NAKURU

520. Examination of records maintained at the Constituency Development Fund
(CDF) Office – Nakuru during the year disclosed the following unsatisfactory
matters:

Loss of Funds

521. The Constituency Development Fund (CDF) Office purchased seventeen
(17) plots of land under LR10704/1 situated at the Free Area Market in Nakuru,
for development of a market.

522. In a letter Ref.NAKT/CDC/PROS dated 2 January 2007, the CDF
Secretary requested the District Land Valuer to undertake valuation of the
seventeen (17) plots, which valuation he gave a figure of Kshs.6,000,000.00 on 7
March 2007. The Valuer again on the 17 May 2007, and for unclear reason gave
another figure of Kshs.8,500,000.00 for the same plots. No justification was
however provided by the Valuer or the CDF Office for the increase of
Kshs.2,500,000.00 in the value of the plots within a period of only two months.


                                       102 
 
523. A physical verification of the plots carried out in April 2009 however
revealed that, only twelve (12) plots existed on the ground and this fact was also
confirmed by a survey report produced by the CDF project manager. Further,
information available indicates that the other five (5) plots worth
Kshs.2,500,000.00 were apparently allocated to a private developer under
unclear and unexplained circumstances, and for no consideration.
Consequently, the CDF Office incurred a loss of Kshs.2,500,000.00 in the
transaction in addition to the manhours.

524. The Nakuru CDF Committee further awarded to a Nakuru based
Construction company a contract for the construction of a market on the twelve
(12) parcels of land aforementioned at a contract sum of Kshs.3,946,676.00.

525. Although, and according to records available, the contractor had by July
2008 been paid an amount of Kshs.1,906,326.00. An audit inspection carried out
at the construction site in April 2009 revealed that the contractor was not on site
and had apparently abandoned the project, while on the ground, only an
incomplete floor slab with a few metal erected poles had been constructed.
Minimal value for money was therefore evident at the site, although an
expenditure equivalent to 48% of the total contract price had been incurred.

Construction of Classrooms – Mwariki East Secondary School

526. In 2006/2007, the Nakuru CDF Office allocated an amount of
Kshs.400,000.00 to Mwariki East Secondary School, (a community based
project) for construction of three (3) classrooms at the institution. An audit
inspection carried out in April 2009 at the school however revealed that the
classrooms had been poorly constructed and were still incomplete. Further, it
was observed that the project had since stalled due to a dispute over ownership
of the land on which the classrooms stand. Additional information obtained
revealed that the dispute is before a court of law.

Construction of Sewerage and Road Drainage – Ponda Mali

527. An amount of Kshs.1,800,000.00 was allocated during the year for
construction of Sewerage and Road Drainage at Ponda Mali, also in the
Constituency. Although records show that an amount of Kshs.1,514,443.00 was
spent on acquisition of hardware materials for the project, there was no
documentary evidence to support the expenditure.

528. A physical verification of the project carried out in March 2009 revealed
that the workmanship of the drainage trench was poor, as stone pitching had
been constructed at low levels, making the excavated soil fall back into the
drainage trench. The elevation of the trench was also not sufficient to allow free
flow of water downstream.



                                       103 
 
In the circumstances therefore, the propriety of the total expenditure of
Kshs.1,800,000.00 on the project could not be confirmed.

Purchase of Land and Construction of Rhonda Market

529. The Nakuru Constituency Development Fund Committee allocated a sum
of Kshs.4,000,000.00 for purchase of land, for construction of Rhonda Market in
the Constituency. However, and according to records available, only an amount
of Kshs.3,350,000.00 was utilized on the project, leaving a balance of
Kshs.650,000.00 as savings. This particular balance had not however been
accounted for as at 30 June 2009.

530. The CDF Committee on 23 May 2007 further awarded to another local
company a contract for construction of a market place at Rhonda at a contract
sum of Kshs.4,931,778.30. The project was expected to be completed within a
contract period of sixteen (16) weeks. Records available however show that the
contractor was paid an advance of Kshs.3,000,000.00, although no work had
been done.

531. An audit inspection conducted at the site in April 2009 revealed that
minimal work had been done on the market and the contractor was not on site.
The contract period of 16 weeks had also elapsed.

As in the previous instance, the propriety of the expenditure                   of
Kshs.3,000,000.00 incurred on the project could not be confirmed.

Construction of unidentified Hyrax Sewerage Project

532. Records available at the CDF Office indicate that an amount of
Kshs.600,000.00 was spent on the construction of Hyrax Sewerage in
2006/2007. However, efforts to identify the site where this particular project was
situated proved fruitless. The Project Manager could not also assist as he was
similarly not aware of where the project was located.


UNACCOUNTED FOR CASH - GALOLE CONSTITUENCY DEVELOPMENT
FUND OFFICE

533. Examination of records held at the Galole Constituency Development
Fund (CDF) Office revealed that on 8 January 2008, a local construction firm
signed a contract agreement with the CDF Office for construction of five (5)
classrooms and a toilet block at Maweni Primary School in the Constituency, at a
contract sum of Kshs.2,655,699.00. The two projects were expected to be
completed within the 2008/2009 financial year.




                                       104 
 
534. According to a letter dated 10 January 2008 from the CDF Office to a local
bank based in Hola, the Manager of the bank was required to make direct credits
to the contractor’s bank account, provided:-

•     Minutes of the project committee were produced; and,
•     A copy of the Inspection Certificate by the District Works Officer was
      attached to the claim.

535. However, and contrary to these requirements, an amount of
Kshs.2,196,400.00 was withdrawn from the CDF bank account in cash at various
dates by ‘self’, that is, the CDF officials. The amount of Kshs.2,196,400.00
included two (2) cash withdrawals of Kshs.550,000.00 and Kshs.300,000.00
made without any certificate from the District Works Officer. As at the date of the
audit, the beneficiaries of the total sum of Kshs.850,000.00 had not been
identified and the cash had also not been accounted for.

536. Further, records show that the contractor abandoned the project in August
2008 and at which point he had been paid a total of Kshs.1,346,400.00, although
insignificant work on the ground had been completed as at that date. A Ministry
of Works estimate done in April 2009 placed the cost of the remaining work at
Kshs.2,493,250.00.

537. No indication has however been given on the action being taken by the
Office to penalize the contractor for abandoning the project before completion or
to recover the amount of Kshs.850,000.00 which appears to have been
embezzled.


UNACCOUNTED FOR DISBURSEMENTS                       -   MANDERA        CENTRAL
CONSTITUENCY DEVELOPMENT FUND

Unaccounted for Disbursements

538. During the year under review, disbursements totalling Kshs.30,398,197.00
were made from the Constituency Development Fund to finance various projects
and programmes under Education, Health and Water Sectors, in the amounts of
Kshs.19,549,580.00, Kshs.5,800,000.00 and Kshs.5,048,617.00 respectively, in
Mandera Central Constituency.

539. However, records showing how the amount of Kshs.30,398,197.00 was
utilized and accounted for have not been made available for audit review, with
the result that the propriety of the expenditure could not be confirmed.




                                       105 
 
WAJIR WEST CONSTITUENCY DEVELOPMENT FUND OFFICE

Value Added Tax

540. During the year, payments totalling Kshs.68,963,046.60 were made to
various contractors assigned to undertake various construction projects within
the Constituency. Although the Wajir West Constituency Development Fund
Office was expected and required to make a deduction of 16% in respect of
Value Added Tax for onward transmission to Kenya Revenue Authority, no such
deductions appear to have been made and as a result, the Government was
denied revenue totalling Kshs.8,270,764.75.


IRREGULAR PROCUREMENT OF CIVIL WORKS                            AT    GARSEN
CONSTITUENCY DEVELOPMENT FUND OFFICE

541. Examination of records maintained at the Garsen Constituency
Development Fund Office revealed that during the month of September 2008,
requests for quotations were invited for civil works involving re-channelling of
River Tana to its normal and original course. Four (4) firms responded and the
quotations were opened on 22 September 2008.

542. The contract was awarded to the second lowest bidder, a local firm, at a
contract sum of Kshs.8,042,460.00. No explanation has however been given as
to why the lowest bidder at Kshs.7,470,840.00 was not considered.

543. It was further observed that the works were later in February 2009 varied
and enhanced by an amount of Kshs.7,208,796.00, effectively raising the
contract price to Kshs.15,251,256.00. Again, no reasons were given for the
variation or for not inviting fresh bids for the additional work.

544. A physical inspection of the project undertaken in November 2009
revealed that the river was not flowing through the new channel as expected,
although the contractor had been paid his dues in full.


EMUHAYA CONSTITUENCY DEVELOPMENT FUND

Construction of a Foot Bridge

545. The Emuhaya Constituency Development Fund Committee in a meeting
held on 7 September 2007, awarded construction of a foot bridge at Okonda in
the Constituency, to a construction firm based in Homa Bay, at a cost of
Kshs.828,837.90. However, examination of payment records in respect of the
project revealed that although the bridge was constructed, albeit poorly, the
contractor was paid an amount of Kshs.1,797,565.00, which exceeded the


                                      106 
 
contract sum of Kshs.828,837.90 by a figure of Kshs.968,727.10.       The excess
payment has not been explained or its propriety confirmed.

Khusikuku Foot Bridge

546. Procurement records including quotations and contract agreement for the
Khusikuku foot bridge in the Constituency, were not made available for audit
review. Consequently, the propriety of the expenditure of Kshs.830,000.00
incurred on the bridge could not be ascertained. Further, the contractor for this
particular foot bridge was apparently demanding an additional payment of
Kshs.952,699.60 for the work.

547. A physical verification of the bridge carried out on 22 May 2009 however
revealed poor workmanship, in that the reinforcement bars had not been properly
installed and were bent and hanging loosely, clearly posing a risk to the users.


CONSTITUENCY DEVELOPMENT FUND – BUMULA

Construction of Water Dam

548. The Bumula Constituency Development Fund Committee entered into a
contract with a local company, for the construction of a water dam and laying of
pipes from the dam to Mukwa, Kibuke and Siboti locations in the Constituency.

549. According to information available, the project was to be implemented in
several phases, with phase I contract sum standing at Kshs.8,164,608.50.
Further, records seen indicate that as at 30 June 2009, expenditure totalling
Kshs.37,492,243.00 had been incurred on the project.

550. A physical verification carried out at the site on 1 September 2009
however revealed that no dam had been constructed, but instead the contractor
laid pipes to an existing water project known as Malakasi Water Station, which
supplies water to Malaba Town. Further verification showed that although the
pipes were connected to the existing water point, no water was flowing to three
(3) locations of Mukwa, Kibuke and Siboti. No reason has been given for the
inadequate handling and poor management of the project. Further, it is also a
matter of concern that an expenditure of Kshs.37,492,243.00 incurred on the
project has added no benefits at all to the residents of Mukwa, Kibuke, and Siboti
locations.




                                       107 
 
CONSTITUENCY DEVELOPMENT FUND– KISUMU TOWN EAST

Construction of Laboratory at St. Albert Angira Secondary School

551. A contract for building of a laboratory at St. Albert Angira Secondary
School at a cost of Kshs.2,642,075.00 was awarded to a construction company
based in Nairobi, for a contract period of 45 days, commencing 23 March 2007.

552. The scope of work involved construction of a laboratory block with twelve
(12) columns above the ground floor slab, walling, ceiling and roofing, plastering
and installation of doors and windows.

553. A site visit conducted in March 2009 revealed that the work had
apparently stalled and the contractor was not on site, although according to
records available he had been paid a sum of Kshs.1,315,000.00. No reason has
been provided for failure to complete the laboratory and no indication has been
given as to when the project will be completed.

Outstanding Imprests

554. Imprests records maintained at the Fund’s Office also revealed that
imprests totalling Kshs.1,256,888.00 issued to various officers, between the
months of March 2005 and March 2009 were still outstanding as at 30 June
2009. The imprests ought to have been surrendered or otherwise accounted for,
on or before the above date.

555. It was further observed that some officers were issued with additional
imprests before having accounted for amounts previously issued.


KIAMBAA CONSTITUENCY DEVELOPMENT FUND

Kawada Primary School

556. The Kawada Primary School Project involved construction of a twenty four
(24) classroom block and an administration block at the school. Tender for the
works was awarded to a construction firm based in Nairobi, at a contract sum of
Kshs.34,307,861.00 The contract works commenced on 1 January 2007 and
were scheduled for completion on 15 December 2007.

557. According to records available, and although payments totalling
Kshs.20,438,536.00 including a donation of Kshs.5,000,000.00 from a
communication’s company had been paid to the contractor as at 2 October 2008,
the project was still incomplete, over ten (10) months after the end of the
contract period. No reason has been provided for failure by the contractor to
complete the project in accordance with the contract agreement.


                                       108 
 
558. Further, an audit inspection exercise conducted in March 2009 revealed
that not only was the project incomplete as at that period, but the contractor had
also apparently disappeared and abandoned the site. As of the date of this
report therefore, it was still unclear as to when the project will be completed.


NDARAGWA CONSTITUENCY DEVELOPMENT FUND

559. Examination of records held at the Ndaragwa Constituency Development
Fund Office revealed that expenditure totalling Kshs.4,287,910.00 was during the
year incurred on rehabilitation and repairs of various roads within the
Constituency. The procurement for the rehabilitation and repair of the roads was
however done through single sourcing, thus denying the Government the
advantages of competitive bidding. No reason has been provided for failure to
comply with the Public Procurement and Disposal Act, 2005.

560. Further, the District Roads Engineer’s Office does not appear to have
been involved in the project, and as a result, it has not been possible to ascertain
whether or not the works had been carried out in accordance with the standards.


MANYATTA CONSTITUENCY DEVELOPMENT FUND WATER PROJECTS

561. Examination of various projects’ records maintained at the Manyatta
Constituency Development Fund Office disclosed that expenditure totalling
Kshs.30,076,819.00 was incurred between 2003/2004 and 2008/2009, on some
seven (7) water projects including Itabua/Muthatari, Kiaga, Ena/Tende,
Gichangai, Gichegeri, Runga and Kibugu/Nguviu,        spread across the
Constituency.

562. An audit verification of the projects conducted in May 2009 however
revealed that none of the projects was operational despite the very substantial
funding received from the Constituency Development Fund. The Fund Office has
not provided satisfactory reasons for the inadequate handling and management
of the projects.


CONSTITUENCY DEVELOPMENT FUND OFFICE - MSAMBWENI

Payment made for Unrendered Services

563. During the year under review, the Constituency Development Fund (CDF)
Office at Msambweni contracted a company based in Ukunda, to provide training
on driving to some one hundred and fifty (150) young men and women drawn
from across the Constituency.         The contract price was agreed at
Kshs.1,215,000.00, that is, at a rate of Kshs.8,100.00 per student, while the
exercise was planned to be concluded in five (5) weeks, beginning 21 July 2008.

                                        109 
 
564. In accordance with the agreement, the company was paid through
Payment Voucher No.290042 dated 22 August 2008, an advance of
Kshs.800,000.00. The balance of the contract sum was to be paid in amounts of
Kshs.300,000.00 and Kshs.115,000.00 during the training and at completion
stage, respectively.

565. However, additional information shows that the company closed business
shortly after receiving the advance payment of Kshs.800,000.00, and after a
group of only thirty (30) students had been trained. Consequently, a refund of
Kshs.557,000.00 for the remaining one hundred and twenty (120) students ought
to have been made to the CDF Office.

566. No evidence has been seen so far to confirm that the amount had been
refunded as at 30 June 2009, and no action appears to have been taken by the
Office to recover the amount.


ABANDONED PROJECT AT BAHARI CONSTITUENCY DEVELOPMENT
FUND OFFICE

567. The Bahari Constituency Development Fund Office disbursed amounts
totalling Kshs.2,337,540.00 to Mtwapa Jua Kali Association, for Construction of
Jua Kali Sheds at Mtwapa.

568. According to information available however, the project appears to have
been abandoned by the CDF Committee in September 2008 citing locality as the
reason. Further information shows that as of this date, an expenditure of
Kshs.1,837,540.00 had been incurred on the Sheds. No satisfactory reason has
been provided for abandonment of the project. Further, the balance of
Kshs.500,000.00 out of the total of Kshs.2,337,540.00 disbursed to the
Association, had not been refunded or accounted for as at 30 June 2009.




             MINISTRY OF STATE FOR DEFENCE

PENDING BILLS

569. Records maintained at the Ministry of State for Defence Headquarters
indicated that bills totalling Kshs.191,004,723.42 chargeable to the Recurrent
Vote were not settled during the year 2008/2009 but instead carried forward to
2009/2010.



                                     110 
 
570. Had the bills been paid and the expenditure charged to the accounts for
the year, the Appropriation Account for Vote R.08 for the year ended 30 June
2009 would have reflected an Excess Vote of Kshs.95,644,098.62 instead of the
Net Surplus to be Surrendered to the Exchequer of Kshs.95,360,624.80 now
shown.

According to information available, failure to pay the bills was caused by a
reduction of the Ministry’s budget during the year.


OUTSTANDING IMPRESTS

571. Examination of Temporary Imprest Records maintained at the Ministry’s
Headquarters revealed that Temporary Imprests totalling Kshs.847,400.00 which
ought to have been surrendered or otherwise accounted for, on or before 30
June 2009 were still outstanding as at that date.

572. Out of the total, imprests amounting to Kshs.839,000.00 were due from
the military personnel, while the balance of Kshs.8,400.00 was owing from three
civilian staff.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

573. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.3,315,285,887.95, which includes stale cheques
amounting to Kshs.931,757.20. No reason has been provided for failure to
investigate and replace the cheques or credit them back in the Cashbook.

574. The Statement also reflects payments of Kshs.632,914,992.15 in the Bank
Statement not recorded in the Cashbook, out of which an amount of
Kshs.525,231,446.55 relates to 2007/2008 and earlier years. No reasons have
been provided for failure to update the Cashbook as appropriate.

575. The Statement further reflects receipts in the Cashbook not yet recorded
in the Bank Statement totalling Kshs.2,301,238,201.60, relating to refer to drawer
cheques. It has not however been clarified how returned cheques would be
reflected in the Reconciliation Statement and not appear in the Bank Statement.

Deposits Cashbook

576. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects receipts in the Cashbook not recorded in the Bank Statement

                                       111 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.08

577. The Statement of Assets and Liabilities for Vote R.08 as at 30 June 2009
reflects a General Account of Vote debit balance of Kshs.404,486,504.10 relating
to 2006/2007 and earlier years. No reason has been provided for non-clearance
of this long outstanding balance.

578. The Statement also reflects an Exchequer Account debit balance of
Kshs.4,348,245,348.00, out of which an amount of Kshs.4,309,394,848.00
relates to 2007/2008 and earlier years. The amount ought to have been cleared
from the books of account as at 30 June 2009.

579. The Statement further reflects a Special and Standing Imprests credit
balance of Kshs.61,155,361.95 which has not been analysed, with the result that
its completeness and accuracy could not be ascertained. In addition, no
explanation has been provided as to what the credit balance represents in an
Imprest Account.

580. The Statement in addition reflects a Temporary Imprests Account credit
balance of Kshs.1,450,786.55, which has not been analysed. Consequently, its
accuracy could not be confirmed. Further, the credit balance in an Imprest
Account has not been explained.

581. The Statement shows an Advances Account debit balance of
Kshs.222,340,210.90,     which includes an amount of Kshs.221,279,719.00
relating to 2007/2008 and earlier years. No reason has been provided as to why
the Advances have not been recovered from the salaries of the respective
officers.

582. The Statement also shows an Agency Account debit balance of
Kshs.458,645,198.25 which has not been analysed, with the result that its
validity, completeness and accuracy could not be ascertained.

583. The Statement further shows a Paymaster General Account debit balance
of Kshs.497,082,287.70, while the Cashbook as at 30 June 2009 reflects a
figure of Kshs.42,039,063.80. The difference of Kshs.455,043,224.00 between
the two sets of records has not been reconciled or explained.

                                      112 
 
584. The Statement in addition shows Suspense and Family Allotment
Accounts debit balances of Kshs.44,312,763.00 and Kshs.47,447,847.55
respectively, which have similarly not been analysed. In the circumstances, the
completeness and correctness of the two balances could not be confirmed.

585. The Statement similarly reflects a Clearance Account credit balance of
Kshs.702,168,233.35, out of which an amount of Kshs.198,432,341.00 relates to
2007/2008. It has not however been clarified why the long outstanding amount
of Kshs.198,432,341.00 had not been cleared from the books of account as at 30
June 2009.

586. The Statement further shows Excess Appropriations-In-Aid (AIA) of
Kshs.366,085,752.65 relating to 2003/2004 and earlier years. The AIA ought to
have been surrendered to the exchequer by 30 June 2009.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

587. The Statement of Assets and Liabilities for Deposits 08 as at 30 June
2009 reflects credit balances totalling Kshs.131,994,898.30, relating to Drilling for
Oil, Boreholes, Domestic and General Tender Deposits amongst other items.
The Ministry has not however provided a detailed analysis for the balances, with
the result that the accuracy of the figure of Kshs.131,994,898.30 could not be
ascertained.

588. Various amounts totalling Kshs.34,480,801.05 in respect of Boreholes,
General Deposits and San Marco Accounts were erroneously posted to other
accounts in the Ledger during the year.

Consequently, the accuracy of the Statement of Assets and Liabilities as at 30
June 2009 as drawn could not be confirmed.




MINISTRY OF REGIONAL DEVELOPMENT AUTHORITIES

APPROPRIATION ACCOUNT FOR VOTE R.09 FOR YEAR ENDED 30 JUNE
2009

Grants to Regional Development Authorities

589. The Appropriation Account for Vote R.09 for the year ended 30 June 2009
reflects grants totalling Kshs.468,846,675.35 disbursed to six (6) Regional
Development Authorities during the year, while the financial statements for the

                                        113 
 
Authorities for 2008/2009 show receipts amounting to Kshs.466,526,231.00 as at
30 June 2009. Although the Ministry has written to the Authorities requiring them
to provide reconciling data, the difference of Kshs.2,320,444.35 has still not been
explained.


APPROPRIATION ACCOUNT FOR VOTE D.09 FOR THE YEAR ENDED 30
JUNE 2009

Under-Expenditure and Under-Collection of Appropriations-In-Aid

590. The Appropriation Account for Vote D.09 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.333,956,451.35 or approximately 28%
of the approved estimates of Kshs.1,206,721,990.00. The Account also reflects
under-collection of Appropriations-In-Aid of Kshs.332,493,608.95, representing
about 66% of the expected receipts of Kshs.503,430,600.00. The explanation
provided in the footnotes to the Account for the under-expenditure and under-
collection of Appropriations-In-Aid include; non-remittance of fund by donors,
reduction in exchequer releases, unfavourable economic factors and the effects
of drought during the year.

Grants to Regional Development Authorities

591. The       Appropriation    Account    also    reflects    grants   totalling
Kshs.556,894,229.00 made to six (6) Regional Development Authorities during
the year, while the financial statements of the Authorities for 2008/2009 show
receipts amounting to Kshs.372,239,002.00 in the same period.                 No
reconciliation or explanation has been provided for the difference of
Kshs.184,655,227.00.

Excluded Expenditure

592. The Appropriation Account further reflects actual expenditure of
Kshs.7,118,000.60 under Domestic Travel and Subsistence, while payments
vouchers and other related records held by the Ministry show a figure of
Kshs.8,473,215.40 against the item. The difference of Kshs.1,355,214.80
represents expenditure excluded in the Account as at 30 June 2009. This
omission has not been clarified.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.09

593. The Statement of Assets and Liabilities for Vote R09 as at 30 June 2009
reflects Exchequer Under-Issues totalling Kshs.38,688,796.65, which include a
balance of Kshs.38,614,006.65 relating to 2007/2008 and earlier years. The
latter balance has been outstanding for a considerably long period of time.

                                       114 
 
Although according to records available the Ministry had during the year sought
Treasury guidance on the matter, the position as reported as at 30 June 2009
had not changed as at the date of this report.

594. The Statement also reflects a General Account of Vote balance of
Kshs.147,058,473.25 relating to 2005/2006 and earlier years, and which has not
been cleared. No reason has been given for failure to clear this long outstanding
amount.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.09

595. The Statement of Assets and Liabilities for Vote D.09 as at 30 June 2009
reflects various debit and credit balances totalling Kshs.227,652,015.20 and
Kshs.251,269,348.90 respectively under Exchequer, General Account of Vote
and Miscellaneous Deposits relating to 2007/2008 and earlier years. According
to a letter dated 12 March 2010, the Ministry had sought guidance from Treasury
on how to clear the balances in question but no progress in this regard had been
recorded as at 30 June 2009.

596. The Statement also reflects Paymaster General Account and General
Account of Vote Accounts opening balances of Kshs.211,969,329.40 and
Kshs.188,352,000.00 respectively, which differ with the corresponding audited
figures of Kshs.45,522,024.00 and Kshs.21,904,695.00 as at 30 June 2008.
Under normal circumstances, the closing balances should be equal to the
opening ones for the ensuing period.

597. The Statement further reflects a credit balance of Kshs.9,996.00 under the
Miscellaneous Deposits Account which has not been analysed. In absence of an
analysis, it has not been possible to establish what the figure represents.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

598. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects a debit balance brought forward of Kshs.19,738.00 under an Adjustment
from 2006/2007 and a credit balance of an equivalent amount brought forward
under A.I.A. Deposits -2006/2007. The movement of these two balances during
the year under review has not been properly explained with the result that their
accuracy as at 30 June 2009 is in doubt.




                                      115 
 
                   MINISTRY OF AGRICULTURE

APPROPRIATION ACCOUNT FOR VOTE D.10 FOR THE YEAR ENDED 30
JUNE 2009

Under-Expenditure and Under-Collection of Appropriations-In-Aid

599. The Appropriation Account for Vote D.10 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.2,915,776,649.86 representing about
32% of the approved estimates of Kshs.8,889,920,559.00. The Account also
reflects under-collection of Appropriations-In-Aid of Kshs.1,515,041,131.80 or
approximately 56% of the estimated receipts of Kshs.2,658,854,059.00. The
reasons given in the footnotes to the Account for the under-expenditure and
under-collection of Appropriations-In-Aid include, inadequate exchequer issues;
delay in disbursement of donor funds; non-receipts of expenditure returns on
direct payments from donors; delay in receiving construction and civil works
approvals from the Ministry of Public Works; adverse weather effects and slow
implementation of projects. However, no evidence has been seen indicating the
action being taken by the Ministry to mitigate these factors.

Unvouched Expenditure

600. Expenditure totalling Kshs.344,724,546.70 charged against various items
under Heads 190, 235, 254, 271 and 502, Sub-head 0000 - Headquarters was
not supported with payment vouchers and other relevant expenditure documents.
In absence of the vouchers and other documents, the propriety of the
expenditure could not be ascertained.

Unreconciled Expenditure

601. Examination of payment vouchers and other relevant documents for
2008/2009 indicates that a payment of Kshs.42,326,488.50 was made in respect
of acquisition of land (Wambugu Farmers Training Centre) in Nyeri and charged
against Sub-Vote 103, Head 260, Item 3130100. However, the Appropriation
Account reflects expenditure totalling Kshs.33,422,742.10 as having been
incurred on the item. The resultant difference of Kshs.8,903,746.40 between the
source documents and the Account has not been reconciled or explained.

Failure to Provide Footnotes

602. Section 11.7 of the Government Financial Regulations and Procedures
requires that footnotes be provided to explain variances of over
Kshs.1,000,000.00 or above between the approved estimates and actual
expenditure or actual Appropriations-In-Aid. The Appropriation Account however
reflects variances in excess of Kshs.1,000,000.00 under six (6) expenditure items

                                      116 
 
under Sub-Votes 100, 101, 102 and 104, for which no footnotes were provided.
No reason has been provided for the omission.


PENDING BILLS

603. Records maintained at the Ministry’s Headquarters indicated that bills
totalling Kshs.793,652,153.25 relating to 2008/2009 were not settled during the
year but were instead carried forward to 2009/2010. Out of the total, an amount
of Kshs.314,175,313.20 was chargeable to the Recurrent Vote, while the balance
of Kshs.479,476,840.05 related to the Development Vote.

604. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Recurrent Appropriation Account for the period would have
reflected an Excess Vote of Kshs.11,453,344.39 instead of the Net Surplus to be
Surrendered to the Exchequer of Kshs.302,721,968.81 now shown, while the
Development Appropriation Account for the same period would have reflected a
reduced Net Surplus of Kshs.1,190,910,290.93 instead of Kshs.1,670,387,130.98
now recorded.


OUTSTANDING IMPRESTS

605. Examination of Imprest Records maintained at the Ministry’s Headquarters
indicated that Temporary Imprests totalling Kshs.4,290,541.50, which ought to
have been surrendered or otherwise accounted for, on or before 30 June 2009
were still outstanding as at that date.      The total includes balances of
Kshs.3,740,816.50 and Kshs.549,725.00 relating to Recurrent and Development
Votes respectively.

606. Out of the outstanding amount of Kshs.4,290,541.50, a sum of
Kshs.1,894,401.50 was owed by officers on Job Group ‘M’ and above, while the
balance of Kshs.2,396,140.00 was owed by officers on Job Group ‘L’ and below.
In addition, various officers were issued with additional imprest amounting to
Kshs.1,420,995.00 before having surrendered or accounted for amounts
previously issued.


ARREARS OF APPROPRIATIONS-IN-AID

607. The Statement of Arrears of Appropriations-In-Aid as at 30 June 2009
reflects arrears totalling Kshs.42,751,778.55. The amount of Kshs.42,751,778.55
does not however include a balance of Kshs.2,230,020.00 relating to Machanga
Agricultural Mechanisation Services.




                                     117 
 
608. Apart from failure to clarify why arrears of Kshs.42,751,778.55 had not
been collected as at 30 June 2009, it has also not been indicated why the
balance of Kshs.2,230,020.00 was excluded from the Statement.


COMPENSATION AND EX-GRATIA PAYMENTS

609. Records maintained at the Ministry’s Headquarters indicate that
expenditure totalling Kshs.799,106.00 was incurred on Compensation and Ex-
Gratia payments during the year. However, the case files and other documents
relating to the payments were not made available for audit review.
Consequently, it has not been possible to establish the circumstances under
which the Ministry was required to make the payments. For the same reason, the
propriety of the expenditure could not be ascertained.


BULK PROCUREMENT OF FERTILIZER

610. Records maintained at the Ministry’s Headquarters indicate that a
company based in Georgia, United States of America was contracted on 23
January 2009 to supply various quantities of DAP, MAP and CAN of fertilizers
worth US$.17,620,693 or Kshs.1,321,551,975 to the Ministry.

However, and according to information available, the firm short-delivered CAN
fertilizer worth US$126,342.03 or Kshs.9,475,652.25, which amount was
therefore due for refund to the Ministry. No evidence was seen during the audit
to confirm that the Ministry received this particular amount.

611. Additional information indicates that on 12 March 2009, the Ministry
signed an agreement with another company domiciled in Altendorf, Switzerland,
for supply of 15,714.286 metric tons of DAP fertilizer at a unit price of US$490
per ton, thus totalling US$7,700,000.14 or Kshs.577,500,010.50. It has not
however been clarified why it was found necessary for the Ministry to procure
DAP fertilizer at US$490 per metric ton from the firm in Switzerland, while the
same fertilizer had been purchased at US$429 per ton two months earlier from a
firm in the United States, as indicated above. Further, and according to other
records seen, the quantity delivered by the supplier was short by 88.131 metric
tons, worth US$43,189.19 or Kshs.3,239,189.25. No evidence has been availed
to confirm that the Ministry was compensated for the shortage.


SMALLHOLDER HORTICULTURE MARKETING PROGRAMME

612. The audit of the Smallholder Horticulture Marketing Programme for the
year ended 30 June 2009 which is financed by the Government and the
International Fund for Agricultural Development (IFAD) through Loan and Grant

                                      118 
 
Agreement No.720-KE dated 10 July 2007 revealed that expenditure totalling
Kshs.4,687,826.00 incurred on building construction during the year was not
supported with the relevant records. Consequently, the propriety of the
expenditure could not be ascertained.


GRANTS TO GOVERNMENT AGENCIES

613. Records for Vote R.10 maintained at the Ministry’s Headquarters show the
grants totalling Kshs.1,941,563,609.60 were issued to Kenya Agricultural
Research Institute (KARI), Pest Control Products Board and Coffee Development
Fund during the year. However, the financial statements of the three Agencies
for 2008/2009 reflect grants amounting to Kshs.1,868,200,332.00 as having been
received.

The difference of Kshs.92,697,277.60 between the two sets of records has not
been reconciled or explained.


CAPITAL GRANTS AND TRANSFERS

Grants to Kenya Plant Health Inspectorate Services

614. The Appropriation Account for Vote D.10 for the year ended 30 June 2009
reflects Grants and Transfers totalling Kshs.69,132,561.00 issued to Kenya Plant
Health Inspectorate Services (KEPHIS) during the year. The financial statements
of KEPHIS for 2008/2009 however show an amount of Kshs.29,159,709.00 as
having been received from the Ministry. No reconciliation or explanation has
been provided for the resultant difference of Kshs.39,972,852.00 between the
two sets of records.

Transfer Under Njaa Marufuku Kenya

615. The Appropriation Account also reflects under Head 502 – Food Security
and Management Programme (Njaa Marufuku Kenya) Item 2640400 – Other
Current     Transfers,   Grants    and     Subsidies,     expenditure     totalling
Kshs.90,999,080.00. According to information available, the expenditure relates
to Grants and Transfers made to various self-help groups across the country to
boost food production. Apart from the fact that it has not been clarified how the
self help groups were identified and considered as suitable for the Programme,
no expenditure returns from the groups were seen, with the result that it has not
been possible to establish the purposes for which the amount of
Kshs.90,999,080.00 was expended.




                                       119 
 
STATEMENT OF PARTICIPATION BY THE GOVERNMENT OF KENYA IN
QUASI-GOVERNMENT AND OTHER STATUTORY ORGANIZATIONS

616. As similarly reported in the previous year, the Statement of Participation
by the Government of Kenya in Quasi-Government and Other Statutory
Organizations as at 30 June 2009 continues to reflect investments totalling
Kshs.310,235,000.00, made in nine (9) entities through the Agricultural
Development Corporation (ADC).

617. However, the Ministry does not yet again appear to have maintained
adequate accounts and other related documentation in respect of participation of
Government of Kenya in Quasi-Government Organizations during the year, with
the result that the balances reflected in the Statement under review were
provided to the Ministry by the respective entities.

618. In absence of the accounts and other related documentation, it has not
been possible to ascertain the accuracy of investment totalling
Kshs.310,235,000.00 shown against the entities in the Statement of Participation
by the Government of Kenya in Quasi – Government and Other Statutory
Organizations as at 30 June 2009.


STATEMENT OF OBLIGATIONS GUARANTEED BY KENYA GOVERNMENT

619. The Statement of Obligations Guaranteed by the Government of Kenya as
at 30 June 2009 reflects an outstanding contingent liability of
Kshs.3,081,490,495.20 in respect of a loan lent by the Government of Japan, to
Tana and Athi River Development Authority for Tana Delta Irrigation Project.
However, the Japanese Investment Corporation Agency (JICA) Progress Report
as at 30 June 2009 on the loan shows an outstanding contingent liability figure of
Kshs.3,232,680,000.00, resulting in a difference of Kshs.151,189,504.80. No
reconciliation or explanation has been provided for the difference.

620. An obligation of Kshs.473,255,930.20 in respect of a loan by the European
Investment Bank to Bura Irrigation Scheme has been excluded from the
Statement of Obligations as at 30 June 2009, despite the fact that it was reflected
in the audited Statement for 2007/2008. Although it has been indicated in the
notes to the Statement that the amount represents a direct Government loan to
the Scheme, no documentary evidence in this regard has been produced for
audit verification.

621. As similarly reported in 2007/2008, the Ministry’s records with respect to
obligations guaranteed by the Government of Kenya continue to be incomplete
and inadequate. For instance, no Loan Register was maintained for the loans
during the year, with the result that it has not been possible to confirm the



                                       120 
 
accuracy and completeness of the Statement of Obligations Guaranteed by the
Kenya Government as at 30 June 2009.


STATEMENT OF INVESTMENTS BY KENYA GOVERNMENT IN LOCAL
COMPANIES

622. As similarly reported in 2007/2008, the Statement of Investments by
Kenya Government in Local Companies through the Ministry as at 30 June 2009
reflects 25,158 shares valued at Kshs.496,030.00 held in eight (8) companies.
Except for Nzoia Sugar Company and Kenya Co-operative Creameries Ltd, the
audited accounts for 2008/2009 for the remaining six (6) companies in which
13,374 shares valued at Kshs.260,350.00 were held as at 30 June 2009 have not
been provided for audit review. Consequently, it has not been possible to
confirm the share valuation and dividends receivable, if any, from the six (6)
companies.

623. Further, share certificates in respect of 495 shares with nominal value of
Kshs.9,610.00 held in four (4) companies have not been availed for audit
verification.

It has therefore not been possible to confirm Government investments in these
particular companies.

624. The Statement also reflects Government’s ownership of 424 shares
valued at Kshs.8,540.00 in the Uplands Bacon Factory, a company which, as
similarly observed in the report for 2007/2008, has since been transferred to
another firm, as part of compensation for the land on which Eldoret Airport now
stands. The validity of this investment is therefore doubtful.

625. The Statement further reflects some 12,000 shares valued at
Kshs.240,000.00 in a local Ranching Company which, as noted in 2007/2008,
was acquired by the Agricultural Development Corporation on 15 October 1998.
As stated in the same year’s report, the Ministry does not appear to have sorted
out the issue of the shares with the transferor and as a result, the ownership of
shares by the Government in the Company has not been resolved.

626. The Statement continues to reflect investments held in three (3)
companies, which fall under Ministry of Livestock Development.

It has not been explained why the companies have been included in the
Statement for Ministry of Agriculture instead of Ministry of Livestock
Development.




                                      121 
 
DEMONSTRATION FARMS FUND

627. In the Report for 2007/2008, reference was made to Capital and
Accumulated Cash balances of Kshs.33,486,748.00 and Kshs.34,107,115.00
respectively, which had been omitted from the financial statements for the period
2004/2005 to 2007/2008. The amounts have still not been included in the
financial statements for 2008/2009 and as in the previous year, no reason has
been provided for the omission.

628. The Farms Fund as at 30 June 2009 reflects a Capital closing balance of
Kshs.39,965,055.30 as at 30 June 2008, while the opening figure in respect of
the item as at 1 July 2008 stands at Kshs.45,410,050.40. The difference of
Kshs.5,444,995.10 has not been reconciled or explained.

629. The Fund Income and Expenditure Account also reflects total expenditure
of Kshs.57,817,549.45, while the reconciliation analysis from various Farmers’
Training Centres (FTCs) show a figure of Kshs.54,134,450.00. The resultant
difference of Kshs.3,683,099.45 has similarly not been reconciled or explained.

630. The Fund’s Balance Sheet as at 30 June 2009 shows a Cash at Bank
balance of Kshs.73,741,676.90, while the Cashbook as at the same date reflects
a figure of Kshs.76,961,915.70. As in the previous instances, no reconciliation or
explanation has been provided for the difference of Kshs.3,220,238.80 between
the two sets of records.

631. The Ministry did not provide Certified Returns from the Farmers Training
Centres in respect of their financial position as at 30 June 2009. For instance, no
Bank Reconciliation Statements, Certificates of Bank balances and other related
records were seen. In absence of these documents, it has not been possible to
ascertain the financial position of the Fund as at 30 June 2009.


AGRICULTURAL INFORMATION RESOURCE CENTRE REVOLVING FUND

632. In the previous year’s report, reference was made to the fact that the
Ministry had not prepared and submitted for audit the Agricultural Information
Resource Centre Revolving Fund Accounts for the 1993/94 financial year. A
review of the position during the financial year 2008/2009 disclosed that the
situation had not changed and the Accounts for 1993/94 had not been submitted
for audit. Consequently, it has not been possible to ascertain the accuracy of
the carried forward balances for the subsequent years, including those for the
year under review.

633. The Agricultural Information Resource Centre invested an amount of
Kshs.2,186,676.25 in a fixed deposit account with Kenya Commercial Bank on 2
January 2009 at an interest rate of 6.75% per annum, for six months. Although

                                       122 
 
the deposit had earned interest amounting Kshs.73,800.00 as at 30 June 2009,
the Centre failed to disclose the income in the Fund’s Income and Expenditure
Account for the year ended 30 June 2009. Consequently, the surplus of
Kshs.5,079,087.70 as at that date has been understated by an amount of
Kshs.73,800.00. No explanation has been provided for this omission.

634. The Centre’s Revolving Fund Balance Sheet as at 30 June 2009 reflects a
total debtors balance of Kshs.10,150,192.10, which includes an amount of
Kshs.1,636,510.10 relating to the period from 1997 to 2008. As similarly
observed in the previous year, no explanation has been provided for failure to
collect the long outstanding debts, most of which are owed by Government
Ministries and Parastatals.

635. Further, and contrary to the requirements under Regulation 4 (2) of the
Exchequer and Audit (Agricultural Information Centre Revolving Fund)
Regulations, 1993, the Fund’s Balance Sheet as at 30 June 2009 does not show
a Reserve Account in which the surplus/deficit realized is expected to be retained
or charged.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

636. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement (unpresented cheques) totalling to Kshs.544,451,277.65, which
include stale cheques amounting to Kshs.34,783,226.30. The cheques have not
however been replaced or reversed in the Cashbook and no reason has been
given for the anomaly.

637. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook totalling to Kshs.10,732,547.90, relating to the period between
2 November 2007 and 29 May 2009. It has not however been clarified why the
receipts, some of which have been outstanding for over twelve (12) months, have
not been recorded in the Cashbook.

638. The Statement further reflects payments in the Bank Statement not
recorded in the Cashbook totalling Kshs.123,495,474.85, relating to 2007/2008.
No reason has however been provided for the delay in recording these payments
in the Cashbook.

639. The Statement shows receipts of Kshs.372,111.50 in the Cashbook but
not recorded in the Bank Statement. As in the previous instance, no explanation
has been given for the anomaly.



                                       123 
 
Development Cashbook

640. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.893,966,825.95, which include stale cheques of
Kshs.4,504,214.80. No explanation has however been given for failure to
replace the cheques.

641. The Statement also reflects payments totalling Kshs.5,935,939.05 in the
Bank Statement not recorded in the Cashbook relating to 2007/2008. It has not
been explained why these long outstanding payments had not been entered in
the Cashbook as at 30 June 2009.

Deposits Cashbook

642. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects receipts in the Bank Statement not entered in the Cashbook
totalling Kshs.141,799.95. No clarification has been provided as to why the
receipts had not been recorded in the Cashbook as at 30 June 2009.

643. The Statement also reflects receipts in the Cashbook not recorded in the
Bank Statement of Kshs.455,470.25, which include an amount of
Kshs.455,469.35 relating to the period between March 2004 and August 2008.
As in the previous instance, it has not been indicated why the receipts of
Kshs.455,469.35 had not been recorded in the Bank Statement as at 30 June
2009.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.10

644. The Statement of Assets and Liabilities for Vote R.10 as at 30 June 2009
reflects various debit and credit balances of Kshs.848,739,937.00 and
Kshs.353,155,486.55 respectively under Advances, Agency, Provincial/District
Suspense, Suspense and Clearance Accounts, which have not been supported
with the relevant analyses.

In absence of the analyses, it has not been possible to confirm the completeness
and accuracy of the balances.

645. The Statement also reflects a Paymaster General Account debit balance
of Kshs.785,476,433.55, while the Ledger and Cashbook as at 30 June 2009
show amounts of Kshs.97,354,349.55 and Kshs.2,644,318.95 respectively. No
reconciliation or explanation has been provided for the differences between the
three sets of records.




                                      124 
 
646. The Statement further reflects an Exchequer Account debit balance of
Kshs.1,277,514,777.10, which relates to the year 2007/2008 and earlier years.
This balance ought to have been cleared from the books of account as at 30
June 2009.

647. The Statement in addition reflects Standing and Temporary Imprests
Account debit balances of Kshs.2,626,265.10 and Kshs.76,489,906.05
respectively,    which    include   amounts     of   Kshs.2,079,096.30  and
Kshs.60,607,421.80 respectively relating to 2007/2008 and earlier years. No
satisfactory explanation has been provided why the imprests balances had not
been surrendered or accounted for, on or before 30 June 2009.

648. The Statement shows a General Account of Vote balance of
Kshs.2,412,213,199.50 relating to 2006/2007 and earlier years. No reason has
been provided for failure to clear this balance as at 30 June 2009.

649. The Statement also shows Excess Appropriations-In-Aid balances of
Kshs.1,859,838.90 and Kshs.6,190,810.80 relating to 2005/2006 and 2006/2007
respectively. Failure to remit these two long outstanding balances to the
Exchequer has not been explained. Further, Excess Appropriations-In-Aid
amounting to Kshs.26,944,062.15 reflected in the Recurrent Appropriation
Account for the year ended 30 June 2009 have not been included in the
Statement and again no reason has been provided for the anomaly.

650. The closing balances reflected in the audited Statement for 2007/2008 in
respect of various Accounts differ with the opening balances for the same
Accounts, brought forward in the Statement for 2008/2009. No explanation has
been provided for the discrepancies.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.10

651. The Statement of Assets and Liabilities for Vote D.10 as at 30 June 2009
reflects    under     Paymaster    General,    Temporary    Imprests,    Agency,
Provincial/District Suspense and GAV Accounts various opening balances, which
differ from the closing balances shown in the audited Statement for 2007/2008.

No explanation has been provided for the anomalies.

652. The Statement also reflects a Paymaster General debit balance of
Kshs.579,253,706.75, while the Cashbook as at 30 June 2009 shows an amount
of Kshs.736,230.20. The difference of Kshs.578,517,476.55 between the two
sets of records has not been reconciled or explained.




                                      125 
 
653. The Statement further reflects an Exchequer Account balance of
Kshs.8,436,957,239.40 for 2007/2008 and earlier years. No reason has been
given for non-clearance of this long outstanding balance.

654. The Statement in addition reflects a debit balance of Kshs.1,337,335.00
against the Standing Imprests Account brought forward from 2007/2008. The
Statement also shows a Temporary Imprest Account balance of
Kshs.162,818,685.30, which includes an amount of Kshs.158,212,230.50,
similarly relating to 2007/2008 and earlier years. No explanation has been
provided for failure to have the long outstanding balances surrendered or
recovered from the officers’ salaries.

655. The Statement shows a debit balance of Kshs.38,639,899.20 under
Agency Account which has not been analysed. Consequently, its completeness
and accuracy could not be ascertained.

656. The Statement also shows a Provincial/District Suspense Account and
Suspense Account net debit balances of Kshs.436,917,433.67 and
Kshs.101,034,520.00 respectively, which have similarly not been analysed. In
absence of the analyses, it has not been possible to ascertain the completeness
and accuracy of the balances.

657. The Statement further shows a General Account of Vote credit balance of
Kshs.8,830,934,839.30 relating to 2006/2007 and earlier years. Non-clearance
of this long outstanding balance has not been clarified.

658. The Statement in addition shows a General Account of Vote credit
balance of Kshs.1,400,735,518.06 for 2008/2009, while the Appropriation
Account for Vote D.10 for the period reflects a Net Surplus of
Kshs.1,397,672,125.78. The resultant difference of Kshs.3,063,392.28 has not
been reconciled or explained.

659. The Statement also reflects a Clearance Account balance of
Kshs.24,468,825.57 which relates to 2007/2008 and prior years. As in the
previous instances, no reason has been provided for failure to clear this long
outstanding balance.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

660. The Statement of Assets and Liabilities for Deposits 10 as at 30 June
2009 reflects a Paymaster General Account debit balance of
Kshs.49,426,454.34, while the Reconciled Deposits Cashbook and Ledger as at
the same date show amounts of Kshs.83,667,457.75 and Kshs.58,700,341.40
respectively, against the Account. No reconciliation or explanation has been
provided for the differences between the three sets of records.

                                     126 
 
661. The Statement also reflects a Sundry Deposits credit balance of
Kshs.49,426,454.34 which has not been analysed. Consequently, its
completeness and accuracy could not be ascertained.




               MINISTRY OF MEDICAL SERVICES

APPROPRIATION ACCOUNT FOR VOTE R.11 FOR THE YEAR ENDED 30
JUNE 2009

Differences between Appropriation Account and Ledger Balances

662. The Appropriation Account for Vote R.11 for the year ended 30 June 2009
reflects expenditure balances totalling Kshs.3,513,788.10 against various items
under Sub-Votes 110, 111, 112 and 114, which differ with corresponding
amounts adding up to Kshs.3,513,788.10 as shown in the Ledger for the month
of June 2009. According to the Ministry, the discrepancies which total
Kshs.7,027,576.20 have been attributed to a fault in the Ledger Management
System.

Expenditure on Personal Emoluments

663. The Appropriation Account also reflects total expenditure of
Kshs.7,319,230,477.35 on Basic Salaries in the year under review against Sub-
Votes 110, 111, 112, 114 and 116. However, examination of the payroll and
other related records during the period revealed that the Ministry paid Basic
Salaries amounting to Kshs.7,746,868,061.30, occasioning an unreconciled and
unexplained difference of Kshs.427,637,583.95. Although the Ministry has
indicated that the difference was caused by the split of the original Ministry into
two, it has not however been clarified as to why a reconciliation of the salaries
had not been carried out as at 30 June 2009.

Grant to Kenya Medical Supplies Agency

664. The Appropriation Account further reflects under Sub-Vote 116, Head 355,
Sub-Head 0000 - Item 2630100, grants totalling Kshs.344,100,000.00 disbursed
to the Kenya Medical Supplies Agency (KEMSA) during the year. The financial
statements of KEMSA for 2008/2009 however show grants amounting to
Kshs.389,256,100.00 as having been received. The difference of
Kshs.45,156,100.00 between the two sets of records has not been reconciled or
explained.



                                       127 
 
Grants to Kenya Medical Training Centre

665. The Appropriation Account shows grants totalling Kshs.1,014,475,475.45
disbursed during the year to the Kenya Medical Training Centre under Sub-Vote
114, Head 340, Sub-Head 0000 - Item 2630100. The financial statements of the
Training Centre for 2008/2009 however reflect grants amounting to
Kshs.938,143,482.00 as having been received as at 30 June 2009, resulting in a
difference of Kshs.76,331,993.45 between the two sets of records. The
difference has not been adequately reconciled or explained.

Irregular Payment of Owner Occupier House Allowance

666. In the Report for 2007/2008, mention was made of irregular payment of
owner occupier house allowances totalling to Kshs.2,643,045.10 to various staff
of the Ministry. A review of the position in 2008/2009 shows that allowances
amounting to Kshs.3,206,732.15 were yet again paid to staff, and charged to
Sub-Vote 111 – Head 316 – Provincial Health Services and Head 317 – District
Health Services.

As similarly observed in the previous year, the basis of paying the allowances to
staff in the Provinces and Districts has not been explained.

Unbudgeted Expenditure

667. The Appropriation Account also shows expenditure totalling
Kshs.214,043,053.59 incurred under various Heads including 310, 311, 312, 296,
316, 325, 326, 328, 330, 331, 334, and 113 amongst others which had not been
provided for in the Approved Estimates for 2008/2009. The expenditure was
incurred without Parliamentary approval and was therefore ineligible.


APPROPRIATION ACCOUNT FOR VOTE D.11 FOR THE YEAR ENDED 30
JUNE 2009

Under-Expenditure

668. The Appropriation Account for Vote D.11 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.787,312,965.55 or approximately 28%
of the gross estimates of Kshs.2,762,551,990.00. The under-expenditure
occurred mainly under Sub-Votes 111 and 117 relating to Curative Health and
Kenyatta National Hospital respectively. The reasons provided in the footnotes
to the Account for the under-expenditure include; non release of funds by donors,
non-receipts of expenditure returns from donors and inadequate exchequer
issues.




                                      128 
 
Unbudgeted Expenditure

669. Expenditure totalling Kshs.25,629,833.60 was incurred against Heads
317, 318 and 510 in the amounts of Kshs.24,921,088.60, Kshs.429,000.00 and
Kshs.279,745.00 respectively, while no provision had been made against the
Heads in the Approved Estimates for 2008/2009.

The expenditure of Kshs.25,629,833.60 was unauthorized by Parliament and
therefore ineligible.

Procurement of Consultancy Services

670. The Ministry incurred expenditure amounting to Kshs.1,800,000.00 on
various consultancy services during the year. Although the contract documents
for the consultancy services were made available for audit review, no evidence
was however seen to confirm that the consultants had been competitively
identified.


PENDING BILLS

671. Examination of records maintained at the Ministry’s Headquarters
revealed that bills totalling Kshs.148,956,811.80 relating to 2008/2009 were not
settled during the year, but were instead carried forward to 2009/2010.

672. Out of the total, bills amounting to Kshs.24,152,753.00 related to the
Recurrent Vote while the balance of Kshs.124,804,058.80 was in respect of
those under the Development Vote.

673. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Recurrent Appropriation Account for the year     would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.248,197,892.91 instead of Kshs.272,350,645.91 now shown. Similarly, the
Development Appropriation Account for the same period would have reflected a
reduced Net Surplus of Kshs.662,508,906.75 instead of Kshs.787,312,965.55
now recorded.

According to the Ministry, the bills in question were not settled during the year
due to liquidity problems.


OUTSTANDING IMPRESTS

674. Examination of imprest records maintained at the Ministry’s Headquarters
indicated that Temporary Imprests totalling Kshs.17,748,516.00 which ought to



                                      129 
 
675. Out of the total, imprests amounting to Kshs.4,279,065.05 were due from
officers on Job Group ‘M’ and above, Kshs.8,334,747.00 from officers on Job
Group ‘L’ and below, Kshs.3,852,931.95 by ex-staff of the Ministry, while the
balance of Kshs.1,281,772.00 was owing from politicians.

676. Further, Standing Imprests amounting to Kshs.2,775,724,381.35 had
similarly not been surrendered or accounted for as at 30 June 2009. These
particular imprests were issued on account of the Decentralized HIV/AIDS and
Reproductive Health, National Leprosy, Tuberculosis and Malaria Control
Programmes.

According to additional information received from the Ministry, recovery of the
outstanding imprests is being effected through the payroll.


COURT DUES, COMPENSATION AND EX-GRATIA PAYMENTS

677. The Appropriation Account for Vote R.11 for the year ended 30 June 2009
reflects expenditure totalling Kshs.26,527,286.50 under Sub-Vote 110 Head 310
Item 2211300 – Other Operating Expenses. This expenditure includes a sum of
Kshs.14,413,489.50 incurred on settlement of court dues, compensation and ex-
gratia payments through the Office of the Attorney General. The figure of
Kshs.14,413,489.50 comprise an amount of Kshs.10,635,328.05 relating to the
decretal sum and Kshs.3,778,161.45 in respect of interest on delayed payments.
As observed in a similar circumstance in 2007/2008, the interest of
Kshs.3,778,161.45 could have been avoided had the decretal sum of
Kshs.10,635,328.05 been settled in time.


UNACCOUNTED FOR COST-SHARING REVENUE AT THE MACHAKOS
GENERAL HOSPITAL

678. Examination of records maintained at the Machakos General Hospital
revealed that cost -sharing revenue totalling Kshs.6,091,800.00 was collected at
the Hospital between January 2008 and January 2009. Out of the total however,
only an amount of Kshs.4,807,650.00 was shown in the records as having been
banked, while a balance of Kshs.1,284,150.00 remained unaccounted for.

679. According to additional information available, the unaccounted for balance
of Kshs.1,284,150.00 may have been misappropriated by a former Accountant in
the Ministry.




                                      130 
 
Although available information indicates that the matter was reported to the
Police for further investigations, no progress appears to have been made on
recovery of the Revenue.


UNACCOUNTED FOR COST-SHARING                       REVENUE       AT    THE     NYERI
PROVINCIAL GENERAL HOSPITAL

680. Examination of financial records maintained at the Nyeri Provincial
General Hospital and a cash survey exercise conducted on 21 July 2009 in
respect of cost-sharing revenue, revealed unaccounted for cash totalling
Kshs.730,056.25. The shortage appears to have arisen as a result of the
hospital’s failure to bank or account for all the revenue collected at the Institution.

A review of the position as at 1 March 2009 disclosed that a sum of
Kshs.137,035.00 had been recovered as at that date, leaving a balance of
Kshs.593,021.25 outstanding.


IRREGULAR PAYMENT OF ALLOWANCES AT THE EMBU PROVINCIAL
GENERAL HOSPITAL

681. Examination of revenue records maintained at the Embu Provincial
General Hospital during the year disclosed that allowances totalling
Kshs.1,938,700.00 were irregularly paid to various staff at the Hospital, out of
the cost-sharing revenue, otherwise referred to as Healthcare Facility
Improvement Fund.

According to records available, the payments were made in respect of services
provided by the staff at the amenity wards and other Departments in the Hospital.

682. Apart from the fact that spending the Facility Improvement Fund on
payment of allowances to staff is irregular, it has also not been explained why the
payments were made to staff who are already drawing salaries for performing the
same duties they received allowances for.

683. Further, the payment of allowances of Kshs.1,938,700.00 is also contrary
to paragraph 7.6 of the Improvement Fund’s Guidelines, which require that all
moneys collected in respect of the Fund be banked intact.


COST SHARING REVENUE – WEBUYE DISTRICT HOSPITAL

684. Examination of revenue records maintained at the Webuye District
Hospital between October 2008 to April 2009 revealed that the Hospital collected
a sum of Kshs.16,911,765.00 in respect of cost-sharing revenue. Out of the total

                                         131 
 
however, revenue amounting to Kshs.1,101,891.00 was not banked as required
by regulations and had not been accounted for as at 30 June 2009.


MEDICAL SUPPLIES FUND’S STATEMENT OF ASSETS AND LIABILITIES

685. As similarly reported in 2007/2008, the Medical Supplies Fund’s
Statement of Assets and Liabilities as at 30 June 2009 submitted for audit is a
replica of the Statements for the years 2004/2005, 2005/2006, 2006/2007 and
2007/2008. The Ministry has still not provided documentary evidence and other
analyses to support debit and credit balances totalling Kshs.220,021,473.35
reflected in the Statement under various items as at 30 June 2009.
In the circumstances, it has not been possible to ascertain the validity and
accuracy of the Fund’s Statement of Assets and Liabilities as at 30 June 2009.

686. The Fund’s Paymaster General overdraft balance of Kshs.2,557,606.35 as
at 30 June 2009 has not been supported with a Bank Reconciliation Statement or
a Bank Balance Certificate. The accuracy of the balance is therefore doubtful.
Further, there is no evidence that the overdraft of Kshs.2,557,606.75 had been
authorized by the Treasury.

687. As observed in the previous year, the Board of Kenya Medical Supplies
Agency established under Legal Notice No. 17 of 11 February 2000, was
expected to take over as soon as possible, all existing assets and liabilities of
the Medical Supplies Fund. However, it has still not been clarified how such a
take over would be accomplished by the Agency in the absence of accurate and
reliable accounting records.


HEALTHCARE SERVICES FUND ACCOUNTS

Accuracy of the Income and Expenditure Account

688. The Income and Expenditure Account for the year ended 30 June 2009
reflects total income of Kshs.2,391,114,794.40 against total expenditure of
Kshs.1,424,671,549.84 in respect of various health facilities in the Country. The
income and expenditure balances have not however been supported with
verifiable records, with the result that their completeness and accuracy could not
be ascertained.

689. The Account also reflects total income of Kshs.2,391,114,794.40, while
the Ledger for the month of June 2009 shows a figure of Kshs.2,392,238,491.10.
The difference of Kshs.1,123,696.70 between the two sets of records has not
been reconciled or explained.

690. The Account similarly reflects a total expenditure balance                 of
Kshs.1,424,671,549.84, which differs with  the  Ledger   figure                 of
                                       132 
 
Kshs.1,542,964,392.65 by Kshs.118,292,842.81. As in the previous instance,
the difference has not been reconciled or explained.

691. Further, the Account shows excess income over expenditure of
Kshs.966,443,244.56, while the Ledger reflects a figure of Kshs.849,274,099.75
against the item. Again, the difference of Kshs.117,169,144.81 has not been
reconciled or explained.

Excess Expenditure

692. As in the previous year, and included in the Income and Expenditure
Account total expenditure figure of Kshs.1,424,671,549.84 as at 30 June 2009
are payments totalling Kshs.3,843,574.55 recorded against six (6) health
facilities, which realized receipts amounting to Kshs.623,234.00, resulting in
excess expenditure of Kshs.3,220,340.55.

It has not however been explained how the excess expenditure of
Kshs.3,220,340.55 incurred at the facilities was financed.

Station Codes without Facility Names

693. An analysis of receipts and payments extracted from the Ledger for the
month of June 2009 shows one hundred and two (102) station codes which have
no corresponding facilities’ names. According to information in the Ledger, the
unidentified stations recorded receipts and payments amounting to
Kshs.334,083,587.94 and Kshs.226,471,788.22 respectively during the year. No
reason has been provided for failure to identify the stations for purposes of
accountability.

Receipts omitted in the Ledger

694. Examination of monthly collections and banking reports maintained in
respect of the Healthcare Services Fund for health facilities revealed that various
facilities realized receipts totalling Kshs.901,917,199.00, but such receipts were
not recorded in the Ledger for the month of June 2009. In the circumstances, it
has not been possible to establish how the receipts were accounted for.

Understated Receipts

695. Thirty six (36) health facilities recorded receipts totalling
Kshs.66,249,769.00 during the year. However, the monthly collections and
banking reports for the facilities show collections of Kshs.368,255,818.00 as
having been realized during the period. The difference of Kshs.302,006,051.00
between the two sets of records has not been reconciled or explained.




                                       133 
 
Accuracy of the Balance Sheet

696. The Balance Sheet total net assets credit figure of Kshs.1,048,189,757.80
differs with the total net liabilities of negative Kshs.1,047,189,557.80 by an
unreconciled and unexplained difference of Kshs.1,000,200.00.

697. The Fund’s Balance Sheet as at 30 June 2009 reflects a Paymaster
General Account balance of Kshs.1,000,200.00, while the Trial Balance as at the
same date shows a figure of Kshs.1,276,860.00.             The difference of
Kshs.276,660.00 has not been reconciled or explained.

698. The Balance Sheet also reflects a cash overdraft balance of
Kshs.1,048,189,757.86 as at 30 June 2009. The overdraft does not however
appear to have been authorized by the Treasury

Bank Reconciliation Statement

699. The Ministry did not prepare and submit any Bank Reconciliation
Statements during the year under review, contrary to the requirements of section
5.9.2 of the Government Financial Regulations and Procedures.


BANK RECONCILIATION STATEMENT: MEDICAL OFFICER OF HEALTH -
NYANDO DISTRICT
 
700. The Bank Reconciliation Statement as at 30 June 2009 for Medical Officer
of Health, Nyando District reflects receipts of Kshs.1,321,339.10 in the Bank
Statement not recorded in the Cashbook, relating to the period between
2000/2001 and 2005/2006. It has not been explained why these receipts had
not been recorded in the Cashbook as at 30 June 2009.

701. The Statement in addition reflects payments totalling Kshs.1,796,376.65
in the Cashbook not recorded in the Bank Statement, which include stale
cheques of Kshs.1,192,639.65. No reason has been given for failure to replace
or credit the cheques back in the Cashbook.


BANK RECONCILIATION            STATEMENT        FOR    THE     DEVELOPMENT
CASHBOOK

702. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects payments in the Cashbook totalling Kshs.436,820,749.60
not recorded in the Bank Statement, which include stale cheques amounting to
Kshs.13,239,681.75. No reason has been provided for failure to investigate,
replace or re-credit these cheques.



                                      134 
 
703. The Statement also reflects receipts of Kshs.92,319,999.45 in the Bank
Statement not recorded in the Cashbook, which include amounts totalling
Kshs.91,862,792.20, relating to reversed entries in respect of exchequer
notifications and letters of credit for the years 2006 and 2007. It has not however
been clarified why these notifications and letters of credit had not been recorded
in the Cashbook as at 30 June 2009.

704. The Statement further reflects payments totalling Kshs.16,374,101.65 in
the Bank Statement not recorded in the Cashbook. Out of the total, an amount of
Kshs.12,005,470.65 relates to 2007/2008 and earlier years. As in the previous
instance, it has not been explained why these payments had not been recorded
in the Cashbook as at 30 June 2009.

705. The Statement in addition reflects receipts of Kshs.167,951,782.30 in the
Cashbook not recorded in the Bank Statement, some relating to 2007/2008. No
reason has however been provided for failure to have the receipts banked.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.11

706. The Statement of Assets and Liabilities for Vote R.11 as at 30 June 2009
reflects General Account of Vote debit balances of Kshs.74,641,787.45,
Kshs.62,558,384.40 and Kshs.155,811,909.20 for the years 1981/1982,
1982/1983 and 2000/2001 respectively. As previously reported, no action
appears to have been taken to have these long outstanding Excess Votes
balances regularized.

707. The Statement also reflects General Account of Vote credit balances
totalling Kshs.3,104,412,548.03, representing Net Surplus to be Surrendered to
the Exchequer, which have been outstanding for a considerably long period of
time. Failure to clear these long outstanding balances has not been explained.

708. The Statement further reflects Exchequer Account debit balances totalling
Kshs.2,214,005,747.00, representing various Exchequer Under-Issues, relating
to 2005/2006 and earlier years.

As in the previous year, no reason has been provided for failure to clear the
Under- Issues from the books of account.

709. The Statement excludes an Exchequer Account credit balance of
Kshs.25,567,828,346.98 relating to year 2006/2007 which appears in the audited
Statement for 2007/2008. The exclusion of the balance has not been explained.

710. The Statement in addition reflects an Exchequer Account debit balance of
Kshs.20,579,680.00 for the year 2008/2009, while records maintained at the
Exchequer Section in Treasury show a figure of Kshs.22,579,680.00 against the


                                       135 
 
Account. The difference of Kshs.2,000,000.00 between the two sets of records
has not been reconciled or explained.

711. The Statement shows opening balances of Kshs.3,172,179.15,
Kshs.83,485,779.74,      Kshs.16,297,750.65,     Kshs.1,869,349,958.35      and
Kshs.397,000,552.82 under Standing Imprests, Temporary Imprests, Advances,
PMG and District respectively, and credit balances of Kshs.121,548,016.75,
Kshs.74,382,354.85 and Kshs.22,841,496.10 under Suspense, Clearance and
Agency Accounts respectively, which differ with the respective closing balances
in the audited Statement for 2007/2008. The differences have not been
reconciled or explained.

712. The Statement also shows various balances under Standing and
Temporary imprests, Advances, District Suspense, Agency and Clearance
Accounts of Kshs.3,774,809.15,     Kshs.189,641,942.61, Kshs.6,701,345.60,
Kshs.1,611,855,619.40,   Kshs.747,222,339.05,     Kshs.20,894,093.10  and
Kshs.380,957,519.25 respectively, which have not been analysed.

In absence of the analyses, it has not been possible to ascertain the
completeness and correctness of the balances.

713. The Statement further shows various balances of Kshs.189,641,942.61,
Kshs.6,701,345.60 and Kshs.1,611,855,619.40 respectively under Temporary
Imprest, Advances and District Suspense Accounts which do not agree with the
corresponding figures of Kshs.189,603,202.61, Kshs.6,640,527.40 and
Kshs.382,878,232.57 respectively reflected in the Trial Balance as at 30 June
2009.

714. No reconciliation or explanation has been provided for the differences
between the two sets of records.

715. The Statement in addition shows a Paymaster General Account balance
of Kshs.1,941,700,462.96, while the Trial Balance as at 30 June 2009 reflects a
figure of Kshs.43,422,437,028.34. The Cashbook on the other hand shows an
amount of Kshs.686,738,647.25 as at the same date. The differences between
the three sets of records have not been reconciled or explained.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.11

716. The Statement of Assets and Liabilities for Vote D.11 as at 30 June 2009
reflects a total assets balance of Kshs.13,994,820,547.90 which does not agree
with the total liabilities figure of Kshs.13,752,245,979.70.     The resultant
difference of Kshs.242,574,568.20 has not been reconciled or explained.




                                     136 
 
717. The Statement also reflects a brought forward Suspense Account debit
balance of Kshs.84,003,576.60 which has not been analysed, with the result that
its completeness and accuracy could not be ascertained. Further, the balance of
Kshs.84,003,576.60 differs with the previous year’s audited figure of
Kshs.76,077,426.60 by Kshs.7,926,150.00.      The difference has not been
explained.

718. The Statement further reflects a brought forward Temporary Imprests
Account credit balance of Kshs.904,279,855.40 whose source has not been
identified. The credit balance also differs with the previous year’s audited figure
of Kshs.10,463,430,779.40, by Kshs.9,559,150,924.00.

719. The Standing Imprests Account brought forward debit balance of
Kshs.1,855,099,534.65 has not been analysed, with the result that its
completeness and accuracy could not be ascertained. The balance also differs
with the corresponding audited figure of Kshs.14,440,876,277.20 for 2007/2008.
The difference of Kshs.12,585,776,742.55 has not been explained.

720. The Provincial/District Suspense Account brought forward balance of
Kshs.372,281,427.10 differs with the previous year’s audited figure of
Kshs.762,186,963.68 by Kshs.389,905,536.58. Further, the Provincial/District
Suspense Account balance of Kshs.448,234,456.65 as at 30 June 2009 has not
been analysed and as a result, its completeness and accuracy could not be
ascertained. The balance also differs with the figure of Kshs.370,419,863.00
appearing in the Trial Balance as at 30 June 2009, by Kshs.77,814,593.55. As in
the previous instance, the difference has not been explained.

721. The Statement shows an Agency Account brought forward debit balance
of Kshs.19,228,058.50 which differs with the previous year’s audited figure of
Kshs.68,692,485.20 by Kshs.49,464,426.70. The Agency Account balance of
Kshs.18,060,883.25 as at 30 June 2009 has also not been analysed,
consequent upon which it has not been possible to ascertain its completeness
and accuracy.

722. The Advances Account reflects a credit balance brought forward of
Kshs.1,659,633.20, while the audited Statement for 2007/2008 reflects a figure of
Kshs.31,590,544.40. The difference of Kshs.29,930,911.20 has not similarly
been explained. The balance of Kshs.3,468,911.20 as at 30 June 2009 has not
been analysed and as a result, its completeness and accuracy could not be
ascertained.

723. The Exchequer Account balances for 2005/2006, 2006/2007, 2007/2008
and     2008/2009    of     Kshs.2,977,529,420.00,  Kshs.3,021,504,197.00,
Kshs.1,137,903,039.88 and Kshs.21,579,680.00 respectively, differ with the
respective balances reflected in Treasury records as at 30 June 2009 of
Kshs.3,008,616,920.00, Kshs.3,014,574,197.00, Kshs.48,747,881.00 and

                                       137 
 
Kshs.235,608,990.90 respectively. The differences between the two sets of
records have not been reconciled or explained.

724. The Statement also excludes an Exchequer Account balance of
Kshs.1,137,903,039.88 for the year 2007/2008.

725. The Statement further shows Exchequer Account debit balances totalling
Kshs.10,833,363,113.25          representing Under-Issues which have been
outstanding for a considerably long period of time. No reason has been provided
for failure to clear the balances from the books of account.

726. The Statement reflects General Account of Vote (GAV) balances totalling
Kshs.5,470,898,075.05 in respect of Net Surpluses to be Surrendered to the
Exchequer, relating to 2004/2005 and earlier years. Again, no reason has been
provided for failure to clear the long outstanding balances from the Statement.

727. The Statement also reflects a Paymaster General Account brought
forward credit balance of Kshs.491,611,957.40, while the audited Statement for
2007/2008 shows a figure of Kshs.2,831,313,065.40 against the Account. The
difference of Kshs.2,339,701,108.00 between the two sets of records has not
been explained. The Paymaster General Account debit balance of
Kshs.407,868,737.80 as at 30 June 2009 does not agree with the June Trial
Balance figure of Kshs.5,660,506,244.45. As in the previous instance, the
difference of Kshs.5,252,637,506.65 has not been reconciled or explained.


STATEMENT OF ASSETS AND LIABILITIES FOR FUNDS, SCHEMES AND
DEPOSITS

728. The Statement of Assets and Liabilities for Funds, Schemes and Deposits
for Vote 11 as at 30 June 2009 reflects various long outstanding debit balances
of      Kshs.4,941,397.70,      Kshs.1,217,994.35,      Kshs.10,000.00      and
Kshs.95,266,563.45 against Health Services Fund, Headquarter Imprest, Agency
General Deposits and District Suspense Accounts respectively, and credit
balances of Kshs.62,810.10, Kshs.239,936,515.16, Kshs.849,351,169.75 and
Kshs.2,304,442.85 under Clearance General Deposits, District Suspense and
Healthcare District Suspense Accounts respectively, which ought to have been
cleared on or before 30 June 2009. No reason has been provided for failure to
clear these long outstanding balances.

Further, the balances have not been analysed with the result that their
completeness and accuracy could not be ascertained.

729. The Statement also reflects a Healthcare District Suspense Account credit
balance of Kshs.849,351,169.75, while the Trial Balance as at 30 June 2009
shows a figure of Kshs.849,274,099.75 against the Account. The difference of

                                     138 
 
Kshs.77,070.00 between the two sets of records has not been reconciled or
explained.

730. The Statement further reflects credit balances against Agency District
Suspense, General Deposits and Capital Fund and debit balances under other
items including General Administration and Planning, Curative Health and Rural
Health, totalling Kshs.1,614,729,355.34 and Kshs.1,724,576,872.50 respectively,
which were cleared during the year under review. However no documentary
evidence has been provided to indicate how the balances were cleared from the
books of account.

731. As reported in the previous year, the Statement excludes credit balances
totalling Kshs.217,243,304.05 in respect of Medical Supplies Fund, representing
Fund      Capital   of  Kshs.180,743,304.05      and   Fund     Surpluses      of
Kshs.36,500,000.00. Although these two particular balances were reflected in
the audited Medical Supplies Fund’s Statement of Assets and Liabilities as at 30
June 2008, no reason has been given for excluding them from the Statement
under review.

732. The Statement shows a brought forward Paymaster General Account
(PMG) balance of Kshs.28,715,852.50 for 2007/2008, which differs by a figure of
Kshs.7,914,990.13 with the audited PMG Account figure of Kshs.20,800,856.37
for that year. The difference has not been reconciled or explained.

733. The Statement also shows a PMG debit balance of Kshs.990,218,982.26,
while the Trial Balance and Cashbook as at 30 June 2009 reflect amounts of
Kshs.990,141,912.26 and Kshs.6,248,759.40 respectively. The differences
between the three sets of records have not been reconciled or explained.



      OFFICE OF THE DEPUTY PRIME MINISTER AND
           MINISTRY OF LOCAL GOVERNMENT

DEVELOPMENT APPROPRIATION ACCOUNT FOR VOTE D.12 FOR THE
YEAR ENDED 30 JUNE 2009

Under-expenditure and Under-collection of Appropriations-In-Aid

734. The Appropriation Account for Vote D.12 for the year ended 30 June 2009
reflects under-expenditure of Kshs.1,116,719,784.70 or approximately 32% of
the estimated provision and under-collection of Appropriations-In-Aid of
Kshs.798,485,581.35 representing about 73% of the estimated receipts.



                                      139 
 
735. According to the footnote provided in the Account, the under-expenditure
and under-collection of Appropriations-In-Aid were caused by; non-receipt of
funds from donors for various planned activities, non-receipt of expenditure
returns from some of the implementing agencies and late procurement of fire-
fighting equipments during the year.


PENDING BILLS

736. During the year under review, bills totalling Kshs.1,638,663,431.67 were
not settled but were instead carried forward to 2009/2010. Out of the total, bills
amounting to Kshs.1,511,030,016.04 related to the Recurrent Vote, while the
balance of Kshs.127,633,415.63 was in respect of those relating to the
Development Vote.

737. Had the bills been paid and the expenditure charged to the Accounts for
the year, the Appropriation Account for Vote R.12 for 2008/2009 would have
reflected an Excess Vote of Kshs.1,293,495,012.00 instead of the Net Surplus to
be Surrendered to the Exchequer of Kshs.217,535,003.78 now shown, while the
Development Appropriation Account for the same period would have reflected a
Net Surplus of Kshs.190,600,786.92 instead of Kshs.318,234,202.55 now
recorded.


OUTSTANDING IMPRESTS

738. Imprest records maintained at the Ministry’s Headquarters show that
Temporary Imprests totalling Kshs.16,164,776.00 which were due for surrender
on or before 30 June 2009 were still outstanding as at that date.

739. Out of the total, Imprests amounting to Kshs.9,848,712.00,
Kshs.3,652,073.00 and Kshs.2,663,991.00 related to Recurrent, Development
and Deposits Accounts respectively.

No reason has been provided for failure to have the imprests surrendered or
accounted for by 30 June 2009.

740. Further, it was observed that some officers were granted additional
imprests before having surrendered amounts previously issued.


CONTRIBUTIONS IN LIEU OF RATES

741. Examination of records maintained at the Ministry’s Headquarters
revealed that the Government owed a sum of Kshs.1,503,805,342.91 in respect
of Contributions In Lieu of Rates (CILOR) to various Local Authorities as at 30
June 2009. However, no reasons have been provided for failure to remit the

                                       140 
 
balances to the Authorities. Further, and in accordance with the schedules made
available for audit verification, an amount of Kshs.79,803,481.34 was due to the
City Council of Nairobi during the year, whereas a sum of Kshs.140,000,000.00
was paid. The resultant overpayment of Kshs.60,196,518.66 has not been
reconciled or explained.

742. The Appropriation for Vote R.12 for the year ended 30 June 2009 reflects
actual expenditure of Kshs.708,230,380.00 under Head 367 (CILOR), while the
related schedules show a figure of Kshs.706,332,252.95.        The resultant
difference of Kshs.1,898,127.05 between the two sets of records has not been
reconciled or explained.

743. Included in the expenditure of Kshs.706,332,252.95 referred to above are
payments amounting to Kshs.550,000.00 made to the Attorney General from
CILOR during the year. However, the purposes for which the payments were
made have not been disclosed. Consequently, the propriety of the expenditure
could not be ascertained.


CONSULTANCY SERVICES

744. According to Sections 4(2) and 5(1)(b) of the Physical Planning Act, Cap
286 of 1996, the Director of Physical Planning, Ministry of Lands is responsible
for all matters relating to physical planning including:-

    •   Formulation of national, regional and local physical development policies,
        guidelines and strategies;

    •   Preparation of all regional and local physical development plans;

    •   Advising of the Commissioner of Lands on matters concerning alienation
        of land; and,

    •   Advising of the Commissioner of Lands and local authorities on the most
        appropriate use of land, amongst other aspects.

745. During 2007/2008 and 2008/2009 financial years however, the Office of
the Deputy Prime Minister and Ministry of Local Government placed in the local
press an invitation to eligible firms/consortium to express their interest in
undertaking Digital Topographical Mapping and Preparation of Strategic Urban
Development Plan in twelve (12) urban centres, namely: Eldoret, Bungoma,
Othaya, Garissa, Mtwapa, Mariakani, Kakamega, Kitui, Kisii, Maralal, Bomet and
Naivasha.




                                        141 
 
746. Subsequently, and according to records available, the tender was
awarded to five (5) local firms at a contract price of Kshs.255,769,636.40, shared
between the firms.

747. As indicated above, and as expounded in various correspondences
exchanged between the two Ministries on the matter, the responsibility for
preparation of all regional and local physical development plans rests with the
Director of Physical Planning in the Ministry of Lands. Bearing this in mind
therefore, the outsourcing of physical planning services for the selected urban
centres by the Office of the Deputy Prime Minister and Ministry of Local
Government during the period, would appear to have been undertaken outside
the provisions of the Physical Planning Act, and is in the circumstances deemed
to have been irregular. No clarification has been provided for the anomaly.

748. In addition, and apart from the fact that the expenditure of
Kshs.198,091,248.50 so far incurred on mapping and preparation of urban
development plan may end up being nugatory, should approval for the services
be disallowed by Ministry of Lands, it has also not been clarified how the Centres
were identified for the purposes of the services outsourced.

749. Further, and while it is clear that both the Office of the Deputy Prime
Minister and Ministry of Local Government and Ministry of Lands have important
roles to play in the planning and development of urban centres across the
country, there appears to be inadequate consultations on the matter between the
two Ministries and as a result, there is a potential risk of wasteful utilization of
public resources through duplicated efforts.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.12

750. The Statement of Assets and Liabilities as at 30 June 2009 reflects a
Paymaster General (PMG) Account balance of Kshs.172,051,945.30 made up of
Kshs.5,041,722.40 (Cr) for 2008/2009 and Kshs.177,093,667.70 (Dr) relating to
2007/2008 and earlier years. However, the Trial Balance for the month of June
2009 shows a figure of Kshs.183,477,484.28 against the Account. The
difference of Kshs.11,425,538.98 between the two sets of records has not been
reconciled or explained. Further, the balances were not supported with the
mandatory Annual Board of Survey Report.

In the circumstances, it has not been possible to confirm the accuracy of the
PMG balance of Kshs.172,051,945.30 as at 30 June 2009.

751. The Statement also reflects a Standing Imprests balance of
Kshs.1,400,952.00 as at 30 June 2009. However, the balance which has not
been analyzed ought to have been surrendered or otherwise accounted for on or
before 30 June 2009.

                                        142 
 
752. The Statement further reflects a Temporary Imprests balance of
Kshs.30,729,956.60 as at 30 June 2009. Out of the amount, Kshs.12,045,280.10
relates to 2007/2008 and earlier years. No reasons have been provided for
failure to have the long overdue imprests of Kshs.12,045,280.10 recovered from
the officers’ salaries. The balance of Kshs.30,729,956.60 also differs with the
amounts of Kshs.1,360,812.00 and Kshs.9,793,712.00 shown in the supporting
schedule and Imprest Register respectively. The resultant differences of
Kshs.29,369,144.60 and Kshs.20,936,244.60 respectively have not been
reconciled or explained.

753. The Advances Account balance of Kshs.1,534,746.20 differs with the
supporting schedule figure of Kshs.374,480.10, by Kshs.1,160,266.10. No
reconciliation or explanation has been provided for the difference. Further, no
Salary Advance Register was maintained by the Ministry during the year.

754. The Statement shows a District Suspense Account credit balance of
Kshs.3,082,546.75 as at 30 June 2009. However, the balance includes an
amount of Kshs.940,550.50 relating to 2007/2008 and earlier years which has
not been cleared.     Non-clearance of the long outstanding amount of
Kshs.940,550.50 has not been clarified.

755. The Statement also shows a General Suspense Account balance of
Kshs.25,197,395.92 which has not been analysed. Consequently, it has not
been possible to confirm its completeness and accuracy.

756. The Statement further shows a Clearance Account balance of
Kshs.3,356,419.15, which has similarly not been analysed, with the result that its
completeness and accuracy could not be confirmed. Further, the balance
includes an amount of Kshs.5,110,216.15 relating to 2007/2008 and earlier
years. No reason has been provided for failure to clear this long outstanding
amount from the books of account.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.12

757. The Statement of Assets and Liabilities as at 30 June 2009 reflects an
Exchequer Account balance of Kshs.223,545,506.50 for 2008/2009, while
records maintained at the Exchequer Section in Treasury show a figure of
Kshs.110,259,826.00    against   the   Account.        The     difference   of
Kshs.113,245,680.50 between the two sets of records has not been reconciled or
explained.

758. The Statement also reflects a Temporary Imprests balance of
Kshs.6,088,859.10, which includes an amount of Kshs.534,405.10 relating to
2007/2008 and earlier years. No reason has been provided for failure to have

                                       143 
 
the impests surrendered or otherwise accounted for as at 30 June 2009. Further,
the balance of Kshs.6,088,859.10 differs with the figure of Kshs.3,652,073.00
shown in the Imprest Register, by Kshs.2,436,786.10. The difference has not
been reconciled or explained.

759. The Suspense Account balance of Kshs.24,088,817.00 has remained
unchanged for the last four (4) years. No reason has been provided for the long
delay in clearing the balance from the books of account.

760. The Statement further reflects a Paymaster General debit balance of
Kshs.323,709,641.85,   while   the    Cashbook      shows     a    figure   of
Kshs.160,637,075.25 as at 30 June 2009.                  The difference of
Kshs.163,072,566.60 between the two sets of records has not been reconciled or
explained.

761. The Statement similarly reflects an Exchequer Account balance of
Kshs.2,498,073,403.55, which includes an amount of Kshs.2,274,527,897.05
relating to 2007/2008 and earlier years. No reason has been provided for failure
to clear the long outstanding figure of Kshs.2,274,527,897.05.

762. As in the previous year, the Statement is out of balance by an
unreconciled and unexplained difference of Kshs.147,451,921.75 between total
assets of Kshs.2,528,251,079.65 and total liabilities of Kshs.2,675,703,001.40.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

763. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects a closing debit balance of Kshs.9,865,634.65, while the Cashbook,
Ledger and the Trial Balance show a debit balance of Kshs.169,101,540.95,
resulting in an unexplained or unreconciled difference of Kshs.159,235,906.30.
Consequently, the accuracy of the Paymaster General Account balance of
Kshs.9,865,634.65 as at 30 June 2009 could not be confirmed.

764. The Statement also reflects a Temporary Imprests closing debit balance of
Kshs.277,500.00, while the Trial Balance and Cashbook show debit balances of
Kshs.1,265,631.00 and Kshs.1,053,531.00 respectively. The differences have
not been reconciled or explained. In consequence, the accuracy of the Imprests
balance of Kshs.277,500.00 as at 30 June 2009 could not be ascertained.

765. The Statement further reflects a debit balance of Kshs.13,112,473.70 in
respect of the Local Authorities Transfer Fund (LATF) Deposits, which has
remained unchanged for three (3) consecutive years. No analysis in support of
the balance have been availed for audit verification, with the result that the
completeness and accuracy of the balance could not be confirmed. Further, no
Register for LATF deposits was maintained during the year, consequent upon

                                      144 
 
which it has not been possible to ascertain the level of such deposits as at 30
June 2009.

766. The Statement shows an opening credit balance of Kshs.13,132,327.15
under KRB Fuel Levy Deposits, which differs from the audited credit balance of
Kshs.13,214,107.15 appearing in the Statement for 2007/2008, by
Kshs.81,780.00.    Further, the Statement reflects a closing balance of
Kshs.13,764,547.90 as at 30 June 2009, which has not been analysed or
supported by schedules. In the circumstances, it has not been possible to
confirm the accuracy of the Fuel Levy Deposits balance of Kshs.3,764,547.90 as
at 30 June 2009.

767. The Statement also shows a Retention Money credit balance of
Kshs.119,707,216.10 as at 30 June 2008, which differs from the audited credit
balance of Kshs.150,472,653.85 reflected in the Statement for 2007/2008, by
Kshs.30,765,437.75. The difference has not been reconciled or explained.
Further, the Statement reflects a closing credit balance of Kshs.138,447,535.80,
while both the Ledger and Trial Balance reflect a credit balance of
Kshs.173,807,135.15 as at 30 June 2009. As in the previous instance, the
resultant difference of Kshs.35,359,599.35 has not been reconciled or explained.
In addition, the Retention Money Register was not properly maintained and
updated during the year.

In the circumstances, it has not been possible to confirm the accuracy of the
Retention Money Deposits balance of Kshs.138,447,535.80 as at 30 June 2009.

768. The Statement further shows Other Deposits debit figure of
Kshs.149,048,444.65 as the opening balance, while the audited closing balance
for the Account as at 30 June 2008 stood at Kshs.32,028,163.75. The difference
of Kshs.181,115,608.40 has not been reconciled or explained. Further, the
Statement reflects a closing debit balance of Kshs.148,687,744.65 against the
Account, while both the Ledger and Trial Balance show a credit balance of
Kshs.9,680,510.52 as at 30 June 2009. As in the previous instance, the resultant
difference of Kshs.158,368,255.17 has not been reconciled or explained.

769. The Statement finally reflects a difference of Kshs.19,731,269.30 between
the total assets of Kshs.171,943,353.00 and total liabilities of
Kshs.152,212,083.00. The difference has not been reconciled or explained.




                                      145 
 
                        MINISTRY OF ROADS

APPROPRIATION ACCOUNT FOR VOTE R.13 FOR THE YEAR ENDED 30
JUNE 2009

Accuracy of the Appropriation Account

770. The Appropriation Account for Vote R.13 for the year ended 30 June 2009
reflects a net total expenditure of Kshs.1,228,010,190.00, whereas the Ledger for
the month of June 2009 shows a credit balance of Kshs.224,696,529.00 against
the item. The resultant difference of Kshs.1,452,706,719.00 between the two
sets of records has not been reconciled or explained.

771. The Appropriation Account also reflects various Personal Emoluments and
Other Allowances totalling Kshs.751,127,680.00, which differ with the amount of
Kshs.893,041,422.75 shown in the payroll and other related records.

The difference of Kshs.141,913,742.75 between the two sets of records has not
been reconciled.

Disbursements by Kenya Roads Board

772. The Appropriation Account further reflects Appropriations-In-Aid totalling
Kshs.19,647,279,804.70 under Head 384 – Major Roads, in respect of Transit
Toll, Fuel Levy and Coffee Cess. However, the Accounts of the Kenya Roads
Board for the year ended 30 June 2009 show an amount of
Kshs.17,842,850,000.00 as having been disbursed to the Ministry during the
period. The resultant difference of Kshs.1,804,429,804.70 between the two sets
of records has not been reconciled or explained.

Non – disclosure of Grants to Roads Authorities

773. During the year, the Ministry incurred expenditure amounting to
Kshs.53,915,100.00 on grants to Kenya Rural Roads Authority, Kenya Urban
Roads Authority and Kenya National Highways Authority, to finance various
administrative and operational costs.

774. The Accounts of the three Authorities for the year ended 30 June 2009
have not however been submitted for audit, with the result that it has not been
possible to confirm that grants totalling Kshs.53,915,100.00 were received and
utilized for the intended purposes.




                                      146 
 
Omission of Footnotes

775. The Appropriation Account in addition reflects material variations between
approved estimates and actual amounts under Heads 380, 507, 384 and 392 in
respect of five (5) items which have not been explained, contrary to Section 11.7
of the Government Financial Regulations and Procedures. No reason has been
given for failure to provide the footnotes.


APPROPRIATION ACCOUNT FOR VOTE D.13 FOR THE YEAR ENDED 30
JUNE 2009

Under-Expenditure and Under-Collection of Appropriations-In-Aid

776. The Appropriation Account for Vote D.13 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.10,335,605,722.60, representing
approximately 22% of the estimated provision of Kshs.46,436,600,000.00. The
Account     also   reflects   under-collection of   Appropriations-In-Aid of
Kshs.7,944,360,959.70 or about 34% of the estimated receipts of
Kshs.22,813,100,000.00.      The under-expenditure and under-collection of
Appropriations-In-Aid occurred mainly under Heads 384 - Major Roads, 385 -
Other Roads and 489– Miscellaneous (Rural Access Road Programme and
Gravelling and Bridges Construction).

777. The reasons provided in the footnotes to the Account for the under-
expenditure and under-collection of Appropriations-In-Aid include; non-
preparation of a procurement plan for 2008/2009, failure by the donors to submit
expenditure returns and late release of funds by donors during the year. No
indication has however been given on how the Ministry is addressing these
challenges.

Failure to Provide Footnotes

778. The Appropriation Account also reflects various material variances in
respect of various items under Heads 384, 385, 488 and 489, which have not
been explained. Failure to provide the footnotes has not been explained.

Misallocation of Expenditure

779. Expenditure totalling Kshs.106,253,231.00 relating to Bungoma-Bokoli-
Kimilili road (in Bungoma), JKIA – Uhuru Highway – UNEP road (in Nairobi) and
Ena-Ishiara-Chiakariga road (in Embu) projects was charged against Sub-Heads
7430 and 6030 for Narok North and Kisii South respectively. The reallocation of
the expenditure does not however appear to have been authorized by Treasury.




                                      147 
 
PENDING BILLS

780. Examination of records maintained at the Ministry’s Headquarters
indicated that bills totalling Kshs.10,192,774,781.65 relating to 2008/2009 were
not settled during the year but were instead carried forward to 2009/2010. Out of
the total, bills amounting to Kshs.1,681,097,871.95 were in respect of the
Recurrent Vote, while the balance of Kshs.8,511,676,909.70 related to the
Development.

781. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.13 for the year would have
reflected an Excess Vote of Kshs.1,359,064,928.27 instead of a Net Surplus
Kshs.322,032,943.68 now shown, while the Appropriation Account for Vote D.13
for the same period would have shown an Excess Vote of
Kshs.6,088,085,153.20 instead of a Net Surplus Kshs.2,423,591,756.50 now
recorded.


OUTSTANDING IMPRESTS

782. Examination of Imprests Records maintained at the Ministry’s
Headquarters indicated that Imprests totalling Kshs.5,912,703.90 which ought
to have been accounted for, on or before 30 June 2009 were outstanding as at
that date. Out of the total, Imprests amounting Kshs.1,679,019.40 were owed
by officers on Job group “M” and above, while the balance of Kshs.4,233,684.50
was due from officers on Job Group “L” and below.

783. It was also observed that various officers were issued with additional
imprests before having accounted for amounts previously issued.


INELIGIBLE EXPENDITURE

784. Examination of the expenditure records held at the District Roads
Engineer’s Office, Laikipia West District, Rumuruti revealed that a local dam
construction company was paid a sum of Kshs.2,504,480.00 in March 2009, in
respect of shoulder grading of Road C77, stretching between Jevi and Rumuruti.

785. A site inspection carried out in April 2009 on the Road however revealed
that no work had been done, although as mentioned above a sum of
Kshs.2,504,480.00 had been paid to the company. Indications therefore are that
the amount may have been misappropriated at the Engineer’s Office.

786. Further, examination of fuel records maintained at the same Office
showed that 19,300 litres of diesel worth Kshs.1,509,250.00 were purchased
during the year from two local fuel suppliers. However, 6,017 litres of diesel

                                      148 
 
worth Kshs.486,411.00 were purportedly drawn by undisclosed GK vehicles,
whose work tickets and log books were not availed for audit. Consequently, and
in absence of the supporting documents, the propriety of the expenditure of
Kshs.486,411.00 could not be confirmed.


CONTRACT FOR REPAIR OF OUTER RING ROAD JUNCTION – KANGUNDO
ROAD

Award of Contract

787. Contract No.RD.0535 for repair of the Outer Ring Junction to Ruai section
of the road, stretching approximately 25 Kms was awarded on 4 February 2008
to an engineering firm based in Nairobi, at a tender sum of Kshs.19,968,704.00.

788. Contract No.RD 0533 for repair of Ruai-Kangundo section of the road
which is approximately 32 Kms long was simultaneously awarded on the same
date to a construction company also based in Nairobi, at a tender sum of
Kshs.19,898,176.00. Works on both sections commenced on 24 April 2008 and
were scheduled to run for a three (3) months period, thus ending on 24 July
2008. Records available do not however indicate the basis on which the two
contractors were identified before being awarded the contracts.

Scope of Works

789.    The works to be executed under the two contracts included:-

    •   Excavation and spoiling existing pavement materials;

    •   Spraying K1-60 tack coat on carriageway;

    •   Provision, laying, and compaction of Asphalt concrete type 1 with 5-6%
        nominal bitumen content by weight of total mix on shaped cleaned and
        primed potholes as a regulating layer; and,

    •   Surfacing on the carriageway shoulders and junction for bumps and
        rumble strips.

However, detailed test results against which it was concluded that the road base
and sub-base were intact and therefore required pothole patching only, were not
produced for audit review.

Audit Inspection

790. Although the two sections of the project were reported as complete with
substantial completion inspections having been undertaken on the second week

                                       149 
 
Expenditure

791. The engineering firm and the construction company had as at 30 June
2009 been paid amounts of Kshs.20,026,704.79 and Kshs.19,890,278.30
respectively, despite the shortcomings noted above.

Award of a New Contract

792. The defect liability period for the Ruai-Kangundo section was to start from
3 September 2008 to 3 October 2008, while that for the Outering Junction-Ruai
section was to run from 19 November 2008 to 19 December 2009. However, the
Ministry through a letter Ref.No.PRE/NBI/08/09/(29) of 19 May 2009 awarded a
new contract for repair of Outering Junction-Tala Market (Kangundo road C98)
to another construction company at a contract sum of Kshs.12,499,981.00. It
has not however been explained why a new contract for the repair of the same
road was awarded to the construction company when clearly the defect liability
period for the previous contract was still running.


REHABILITATION AND RECONSTRUCTION OF MACHAKOS TURN OFF –
JKIA SECTION OF NAIROBI-MOMBASA ROAD

793. In the report for 2007/2008, reference was made to Contract No.RD 0418
for rehabilitation and reconstruction of the Machakos Turn Off-JKIA section of
Nairobi – Mombasa Road (A109/A104) which was awarded on 22 June 2006 to
an international company based in Switzerland, at a contract price of
Kshs.4,258,041,088.15, following an International Competitive Bidding Process.
It was indicated in the report that the project is 67% financed by the International
Development Association and 33% by the Government of Kenya. It was further
stated that the project was scheduled for completion on 10 April 2009.

794. A review of the project records in 2008/2009 and a physical inspection of
the works carried out on 12 August 2009 revealed the following unsatisfactory
and unexplained matters:

Contract Period

795. Although    as indicated above the works had been scheduled for
completion on 10 April 2009, that is, after thirty months, the Progress Report

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released in June 2009 showed that the level of completion of the permanent
works stood at approximately 84% against 91% of the contract period elapsed,
thus implying the contractor was seven (7) months behind schedule. Further,
and according to records available, the contractor’s performance on key activities
was as follows: Earthworks - 99.8%; GCS Subbase - 85%; DBM Base - 85%;
Excavation and filing for structures - 99%; Prime coat- 85%; AC wearing course -
85% and Bridge works - 98%.

796.    The slow progress of work has been attributed to:

    •   Delay in the payment of mobilization advance of Kshs.389,092,577.07;

    •   Delayed payments against certified works; and,

    •   Stoppage of blasting at a quarry due to cashflow problems.

It has not however been clarified how these challenges were being addressed.

Cost Overrun

797. According to Monthly Progress Report No.32 of June 2009, works valued
at Kshs.4,480,330,083.51 up to certificate No.27 had been certified for payment.
In consequence, the contract sum of Kshs.4,258,041,088.15 had as of that date
been exceeded by Kshs.222,288,995.36, although the project had not been
completed.

798. Further records seen indicate that in an effort to provide for the cost
overrun aforementioned, a draft Addendum No.2 for Kshs.1,715,836,129.12
dated July 2009 was considered and prepared, proposing to increase the
contract sum from Kshs.4,258,041,088.15 to Kshs.5,973,877,217.27. The cost
overrun appears to have been caused by:

    •   Additional contractual costs;

    •   Price adjustment; and

    •   Additional work quantities.

Deflection at Athi River Bridge

799. Information available indicates that the Supervision Consultant noted that
there was excessive deflection or movement on the mid span of the Athi River
Bridge, consequent to the casting of the centre deck slab during construction.
The cause of the deflection or movement could not however be explained.
Following this occurrence and as a procedure, further works on the bridge were
suspended with immediate effect, while investigations commenced through the

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800. Additional records indicate that after an initial inspection of the deflection,
including the steel beams, it was agreed in a site meeting held in July 2009 that
an independent Structural Engineer be hired to carry out a design check on the
structure and make recommendations to the Ministry. However, no mention was
made as to who would bear the cost of the Engineer as well as the idle time
arising from the suspended works.

Link Road between RD 418 and RD 0504

801. A 2 Km stretch of road connecting RD 0418, Machakos Turn-Off to JKIA
Section of the Nairobi-Mombasa Road currently under rehabilitation and
reconstruction and RD 0504, JKIA-Gigiri also under rehabilitation was omitted in
either of the two contracts.

802. Although information available shows that the additional work on the
stretch has been included in the proposed Stony Athi Bridge construction project,
it has not however been explained why the stretch was not incorporated in the
RD.0418 and RD.0504 contracts earlier mentioned, where the rehabilitation
would have been efficient and more cost effective.

Consultancy Services Contract

803. The Contract for the supervision of the project was awarded through
International Competitive Bidding to a firm of engineers based in Ireland in
association with a local consultant, at a tender sum of Euros 1,492,350
representing foreign component, and Kshs.102,788,835.60 in respect of the local
component. The amounts included the fees for supervision of rehabilitation of
Machakos Turnoff – Ulu – Sultan Hamud Road Project under Contract No.RD
0417.

804. The Ministry in June 2009 appointed a technical committee to evaluate the
required additional supervision inputs for the Consultancy Services Contract,
arising from the extension of time needed for implementation of the associated
works in respect of the Machakos Turn-off to JKIA section, beyond the original
completion dates. The committee subsequently recommended Addendum No. 1
to the Consultancy Services Contract, against sums of Euros 946,284.13 and
Kshs.69,935,593.07, in effect increasing the Contract cost to Euros 2,438,634.13
(foreign component) and Kshs.172,724,428.67 (local component). No
documentary evidence regarding approval of the recommendation and the
subsequent variation of the contract sum for Consultancy Services was however
provided for audit review. Indications therefore are that the Consultant may be
supervising the works without a valid contract for the extended time.

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805. In addition, and although the consultants had submitted a fee note of
Euros 783,136.00 during the year, the amount had not been paid as at 30 June
2009 and hence was accruing interest. The interest expense could have been
avoided had the note been paid immediately it was raised.

Reimbursement of Project Expenses

806. According to the Conditions of the Contract, the Supervising Consultant is
allowed to spend out of pocket expenses on daily running of the Resident
Engineer’s Office. Although the consultant had submitted to the contractor out of
pocket expenditure reimbursement claims totalling to Kshs.513,432.35 during the
year, the claim had not been reimbursed by 30 June 2009 and no reason has
been given for failure to process the reimbursement. In the circumstances, the
performance of the Engineer’s office may have been considerably impaired.

Interest on Delayed Payments

807. The total amount certified upto certificate No.27 of May 2009 included
accumulated interest on delayed payments of Kshs.101,299,772.17. Apart from
the fact that the interest cost would have been avoided had certificates been paid
on time, it is also a matter of concern that no mechanism appears to be in place
to ensure that further accumulation of the interest does not occur.

Variation of Prices

808. Although the Bill of Quantities and the contract had provided for variation
of prices upto a ceiling of Kshs.186,612,486.00, records seen show that the
contractor had been paid an amount of Kshs.1,156,129,249.35 on account of
variation of prices as of 30 June 2009, which exceeded the ceiling by
Kshs.969,516,763.35. No reason has been provided for failure to contain the
variation of prices in accordance with the contract.


CONSTRUCTION OF ENA – ISHIARA – CHIAKARIGA ROAD

Award

809. Examination of records maintained in respect of Contract No.RD 047 for
construction of Ena-Ishiara-Chiakariga Road (C92/E789) in Embu District,
Eastern Province revealed that the contract for the Road was awarded on 14
December 2007 to a local construction company at a tender sum of
Kshs.2,798,526,782.82, following a competitive tendering process. The works
commenced on 2 April 2007 and were planned to run for a contract period of
thirty (30) months. Thus, the expected date of completion was set at 2 October
2009, but was later revised to 19 February 2010.

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Scope of Work

810. According to records available, the scope of work included upgrading of
Ena-Ishiara-Chiakariga Road to bitumen standard which involved site clearance,
setting out, reference and taking cross section, earthworks, diversions of
services, gravelling detours, construction of pavement structures, provision and
laying of 10/14 pre-coated single seal on carriageway and double bituminous
surface treatment using 14/20 mm and 6/10 mm chippings on the shoulder. The
works further included construction of bridges, box culverts, pipe culverts and
erection of road furniture.

Progress of Work

811. An examination of the Monthly Progress Report No. 27 of June 2009
indicated that the progress of permanent works as at that date stood at 55.22%
against an elapsed contract period of 78.15%. During the same period,
payments totalling Kshs.1,807,816,947.62, representing approximately 64.5% of
the contract sum had been certified. The Report therefore clearly illustrated that
works were behind schedule. A further check on the records revealed that the
slow progress may have been caused by; Inadequate budgetary provision;
Shortage of 42.5 No. type cement; Slow re-location of service lines for power,
telephone and water; and Post-election challenges.

Payment Schedules

812. As indicated elsewhere in this report, the total payments upto 30 June
2009 stood at Kshs.1,807,816,947.62 or about 64.5% of the contract sum, while
the works completed as at the same date represented 55.2% of the entire
project. However, and on the basis of information available, it has not been
possible to establish why the payments for the project appeared to be more than
the value of work done.

Other Audit Findings

An audit inspection of the project carried out on 25 February 2009 revealed the
following other anomalies;

813. According to information available, the contract appears to have been
based on the design and drawings submitted by a local consulting engineer way
back, in 2003 at a fee of Kshs.36,322,926.82. The relevance and applicability of
the drawings, over four (4) years after they were finalised was not clear.

814. According to a memo reference No.R.10551/RD0471 of 25 November
2008 from the Chief Engineer (Roads) to the Accounting Officer, it had been
discovered during implementation of the project that some key items were

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missing in the Bills of Quantities. Consequently, and following negotiation with
the contractor, it was resolved that an extra cost amounting to
Kshs.136,569,801.40 be applied under contingencies to cover the missing items.
No reason has however been provided as to why the items had been excluded in
the Bills of Quantities in the first instance.

815. An appraisal of the project carried out by the Ministry in May 2008,
resulting in compilation of Preliminary Cost Estimates Report No. 1 shows that
the project cost was under-estimated by approximately Kshs. 1,595,274,904.18
or approximately 57% of the contract amount. Should this under-estimation be
considered by the Ministry, the tender sum is likely to rise from
Kshs.2,798,526,782.82 to Kshs.4,393,801,687.00. No reason has been provided
for the very significant under-estimation of the cost.


REHABILITATION OF MACHAKOS TURN OFF – ULU – SULTAN HAMUD
ROAD

816. In the report for 2007/2008, reference was made to Contract No. RD.0417
for Rehabilitation of Machakos Turn Off-Ulu-Sultan Hamud Road which was
awarded to an international construction firm based in Switzerland on 22 June
2006, at a tender sum of Kshs.3,040,616,512.54. The report also indicated that
the works commenced on 11 October 2006 and were scheduled for completion
within a period of twenty four (24) months, which was later extended by fifty nine
(59) days to 8 December 2008.

A review of the project during 2008/2009, and an audit inspection exercise
carried out on 13 August 2009 on the works revealed the following unsatisfactory
observations:-

Contract Period

817. Although the works were expected to be completed on 8 December 2008
as indicated above, the contractor was again granted an extension of time by two
hundred and thirty two (232) days, thus revising the expected date of completion
to 28 July 2009. As at the time of audit in August 2009, the contractor had not
completed the project and was still on site, but without an approved extension of
time. Additional information available shows that the contractor had yet again on
25 July 2009 submitted a request for extension of time.

Interest on Delayed Payments and Variation of Prices

818. According to the Monthly Progress Report No. 32 for June 2009, works
valued at Kshs.2,814,775,514.08 had been certified for payment, that is, up to
Certificate No.26, and included claims for interest on delayed payments of
Kshs.75,812,633.56 and variation of prices of Kshs.729,999,909.18. Although

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this particular Certificate was not made available for audit review, an examination
of Certificate No. 25 paid on 30 June 2009 revealed that the contractor had been
paid a sum of Kshs.704,237,187.14 in respect of variation of prices. This amount
exceeded the provision for variation of prices in the Bill of Quantities of Kshs.
130,742,778.30 by Kshs. 573,494,408.84 or approximately 438%.

819. Apart from the apparent failure to address and contain the issue of interest
on delayed payments, it is a matter of concern that variation of prices has
continued to significantly raise the cost of the still yet to be completed project.

Addendum No.2 for Amendment of the Contract Price

820. In an effort to provide for the anticipated increase in cost of the project as
a result of adjustment in prices and additional work, a draft Addendum No.2
dated July 2009 for Kshs.1,062,748,279.39 was prepared, signed and submitted
by the contractor. If the addendum is approved by the Ministry as submitted, the
contract sum of Kshs.3,040,616,512.54 for the project will increase by
approximately 34% to stand at Kshs.4,103,364,791.93.

Slow Progress of Work

821. The progress of works was clearly below expectations. According to the
Progress Report No.32 dated June 2009, for example, the percentage of works
completed was 72.8% against 97.4% of the contract period elapsed, which did
not compare favourably with value of work certified of Kshs.2,814,775,514.08 or
92.6% of the contract sum of Kshs.3,040,616,512.54 as of that date.

Programme of Works

822. Although the contractor’s approved programme of works was submitted on
10 August 2007, evidence obtained during the audit inspection indicated that
despite the fact that the works were behind schedule, the revised programme of
works had not as at 30 June 2009 been submitted and approved by the Ministry.
Apart from failure to provide the programme, it has also not been clarified how
the Ministry has been monitoring and evaluating progress of implementation of
the project.


REPAIR AND RE-SURFACING OF NYAYO STADIUM – KENYA WILDLIFE
SERVICE GATE ROAD

823. Examination of records relating to Contract No. RD.0488 for Repair and
Re-surfacing of the Nyayo Stadium – KWS Gate Road revealed the following
unsatisfactory matters:-




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Award of the Contract

824. According to information available, interested contractors were invited to
bid for the repair and re-surfacing of the Nyayo Stadium – Kenya Wildlife Service
Gate Road through advertisements in the local media, which attracted ten (10)
contractors. Seven (7) out of the ten (10) returned the tender documents. The
Ministerial Tender Committee at its meeting No.15/2006-2007 held on 16
November 2006 recommended award of the contract to a local construction
company based in Nairobi, at a sum of Kshs.209,629,368.56.

Scope of Work

825. The scope of works of the contract covered a dual carriageway stretch of
approximately 7.0 Km from Nyayo Stadium Roundabout through Lang’ata Road
and up to the Kenya Wildlife Service (KWS) Gate. The project also covered the
Machakos Road in Industrial Area, an access road to the Ministry’s Provincial
Works Office, Nairobi and the link road from Madaraka Estate Roundabout to
Bunyala Roundabout, a distance of approximately 14 Km.

826.    The works included:-

    •   Removal and reinstatement of the failed road pavement to instructed
        depth, laying and compaction of minimum 35 mm Asphalt Concrete (AC)
        Type I, overlay on the carriageway and turnings and application of K1-60
        bitumen emulsion as tack coat;

    •   Construction of shoulders to 1.5 m width, laying and processing of gravel
        materials on shoulders where applicable, application of double seal
        surface dressing of 14/20 and 6/10 chippings and installation of rumble
        strips; and

    •   Opening and repair of all drainage system to free flow condition and
        reinstatement of road furniture as well as road – markings.

Work Performance

827. In a letter ref. No. M.519/35/L/2 dated 6 November 2007 to the Chief
Engineer, Roads, the Chief Materials Engineer indicated that the repair and
rehabilitation works being undertaken on Machakos Road were not complying
with contract specifications in that:-

    •   The base of the Road had failed and therefore required strengthening;

    •   Leaking underground pipes had not been repaired prior to carrying out of
        works on the surface;


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    •   The finished road levels and camber were not in line and level, resulting in
        pools of water collecting at numerous points on the road surface during
        the rainy season;

    •   Patches stabilized with cement were left to be trafficked on before curing,
        thus allowing ingress of rainwater which eventually causes damage to the
        base.

828. However, and even before the above reservations and deficiencies were
addressed and resolved, the contractor alongside various officials inspected the
road works, subsequent to which the project was officially handed over to the
Ministry on 18 December 2007. Shortly thereafter, a substantial completion
certificate and taking over certificate were issued, marking the commencement of
the six months defect liability period.

829. The Ministry has not provided any justification for handing over the project
and the subsequent issuing of completion certificates, while clearly the works had
not been done and completed to specifications.

830. Further inspection carried out on the Road in August 2009 revealed that
potholes had developed on the Road and the Ministry was undertaking the
repairs. The failure observed on the repaired road seemed to confirm the
concern expressed earlier by the Materials Engineer on the quality of
workmanship by the contractor.

Payment for Excess Asphalt Concrete

831. The detailed Bills of Quantities (BQ) attached to Certificate No.7 for
valuation as at 31 October 2007 indicated that 9,095m3 of Asphalt Concrete (AC)
Type 1, costing Kshs.122,782,500.00 had been provided and laid on the road
under Item 16.03 of the BQ. However, the actual BQ reflected 8,000m3 of AC.
No explanation has been provided for the variance of 1095m3 of AC worth
Kshs.14,782,500.00.

Liquidated Damages

832. Although the project’s commencement and completion dates of 12
February 2007 and 12 August 2007 respectively that is a period of six (6) months
were in accordance with the contract, no documentary evidence has however
been provided to confirm extension of the completion date to 18 December 2007.

833. In absence of an approval for extension of time, the contractor ought to
have paid the Ministry liquidated damages totalling Kshs.1,280,000.00 for the
extra one hundred and twenty eight (128) days up to 18 December 2007, in
accordance with Clause 47.1 of the Conditions of Contract. No evidence of such
payment has been seen.

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Irregular Payment of Retention Money

834. The contractor in a letter Ref. No. SIN/CE/TM/0488/043 dated 9 January
2008 to the Ministry undertook to expeditiously complete all the outstanding
works on road marking, placement of bill boards, installation of road signs,
placing of guardrails on Lang’ata road and carting away desilted materials.

835. However, and again even before the contractor gave the undertaking on 9
January 2008 to complete the outstanding works, a handing over certificate had
already been signed on 8 January 2008 by the contractor and the Resident
Engineer. The contractor was subsequently paid retention money totalling
Kshs.6,982,603.70 through payment voucher No.009396 of 28 April 2008,
although the works had not been completed in accordance with the undertaking
aforementioned.

Bitumen 80/100 Penetrating Grade on Loan

836. The Ministry through a letter Ref.No.12679/Rd.0488 of 13 September
2007, Counter Requisition and Issue Voucher (Form S11) No. 1436979, Stores
Ledger and Stock Control Card No. D189262, loaned the contractor some 200
drums (48,000 litres) of Bitumen 80/100 valued at Kshs.3,120,000.00 to be used
for various works. However, the contractor had not as at 30 June 2009 delivered
the bitumen back to the Ministry and no explanation has been given for the
omission. Further, the debt of Kshs.3,120,000.00 has not been disclosed in the
certificate of substantial completion.

Addendum No. 1

837. In February, 2009 the ministry granted an addendum No. 1 for an amount
of Kshs. 2,920,680.00 to the contractor to cover new rates in the contract, arising
from additional works. The additional works involved providing and placing road
channels, providing and laying shallow side slabs, removing existing culverts,
providing and placing concrete class 15/20 to surrounds and beds, and providing
and placing class 25/20 to head walls and wing walls along Nyayo Stadium –
KWS Gate Road. However, during the audit inspection, no physical evidence
was seen of the exact location where shallow side slabs and other supplies were
provided and/or placed. Consequently, the propriety of the expenditure of
Kshs.2,920,680.00 could not be ascertained.

Road Marking Paint

838. Although road marking paint costing Kshs. 2,372,000.00 was provided in
the Bills of Quantities under reference numbers 20.07, 20.08, 20.09, 20.10,
20.11, 20.12, 20.16 and 20.19, the Ministry appears to have awarded under letter
Ref.No.A84.02/A Vol. 27 of 15 February 2008 a separate contract for Road

                                       159 
 
Marking Paint to a local paint dealer, at a contract sum of Kshs.114,618,063.00
for the 14 Km stretch along Lang’ata Road and others elsewhere, all covering
294.30 Km. No explanation has been provided for this anomaly.

839. Further, and during an audit inspection carried out on 21 April 2009 on the
road marking work along Lang’ata Road, officers attached to the Ministry’s Road
Marking Unit I were found on site marking the road while using vehicle
registration No. GK 738 G. No explanation has again been given for the use of
the Ministry’s vehicle and other resources on a road which apparently was still
under an on-going contract with a construction company.


CONSTRUCTION OF BUMALA – RUAMBWA ROAD AND NABENGELE –
PORT VICTORIA ROAD

840. In the report for 2006/2007, reference was made to the contract for
construction of Bumala-Ruambwa Road C30 and Nabengele – Port Victoria
Road D251 which was awarded on 14 December 2004 to a local construction
firm at a contract sum of Kshs.904,993,488.00. It was also indicated that the
works commenced on 3 May 2005 and were scheduled for completion on 3 May
2007.

841. A review of the project during 2008/2009 and a physical inspection
exercise carried out on 26 August 2009 revealed various anomalies and
unexplained matters as summarized below:-

Addendum No. 1

842. An addendum no. 1 for an amount of Kshs.132,074,630.40 or
approximately 14% of the contract sum of Kshs.904,993,488.00 was signed
between the Accounting Officer and the Contractor on 3 October 2007, resulting
in a variation of the contract sum to Kshs.1,037,068,118.40. The addendum was
meant to enable the contractor undertake additional works on Funyula town
roads (1.6Km), Port Victoria town roads (0.5Km), Main Junctions (1.1Km), Minor
Junctions (1.8Km), Access Culverts (0.8Km) and Nabengele town (2.4Km). It
was further indicated that during the design stage of the original project, the
towns and market spur roads were not considered and that communities living
along the project line had requested for the roads to be done. Documentary
evidence to this effect was not however seen.

Slow Progress of Works

843. Although according to records available the expected completion date   had
been revised twice from the original date of 3 May 2007 to 3 January 2008   and
again to 3 May 2008, the progress of work has been considerably slow        and
according to Report No. 50 of July 2009, about 88% of permanent works       had

                                      160 
 
been completed as of that date against 141% of time elapsed. No indication has
been given on how the Ministry is addressing this clearly unsatisfactory
performance.

844. Additional information shows that the slow progress of works has been
attributed to various reasons including; engagement of unskilled labour on
essential plant and equipment, apparently due to high labour mobility in the
market; uncoordinated activities due to lack of team work; poor design of the
road; inadequate equipment at the site; numerous community based water
projects along the project line; and partial suspension of works by the Contractor
during the months of April, June and July 2007 due to failure by the employer to
honour Certificates Nos 13, 14, 15 and 16. No documentary evidence has been
provided indicating the action being taken by the Ministry to address these
factors.

Escalations in Billed Quantities

845. Escalations in billed quantities totalling Kshs.109,313,232.60 were
observed against several items, out of which earthworks alone took up an
amount of Kshs.84,605,588.00 (approximately 77%). No reasons have however
been provided for the significant escalations in billed quantities.

Variation of Prices

846. Payment Certificate No. 26 shows that an amount of Kshs.191,138,159.21
had been certified against Variation of Prices as at 31 March, 2009. This amount
exceeded the original provision of Kshs.74,502,100.00 by Kshs.116,636,059.21
(approximately 156%). The unplanned expenditure on Variations may have
contributed to the shortage of funds for civil works in the contract, thereby
disrupting and slowing down completion of the project.

Interest on Delayed Payments

847. An expenditure of Kshs.189,399.01 in respect of interest on delayed
payments had been incurred as at 31 March 2009. No explanation has however
been given for failure to pay the Contractor’s dues on time in order to avoid
interest penalty.

Outstanding Works

848. According to Progress Report No.50 of July 2009, works valued at
Kshs.1,034,204,378.08 compared to the revised contract sum of
Kshs.1,037,068,118.40 had been certified as at that date. However, no works
had been undertaken on Namalo – Ruambwa (3.1Kms), Namalo – Nabengele
(1.8 Kms), Mundere – Port Victoria (11.0 Kms), Funyula town roads (1.6 Km),
and Port Victoria town roads (0.5 Km). It is therefore doubtful that the balance of

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Kshs.2,863,740.32 remaining out of the contract sum of Kshs.1,037,068,118.40
will be adequate to cover the cost of the outstanding works.


CONSTRUCTION OF THOGOTO- GIKAMBURA–MUTARAKWA ROAD

849. In the report for 2006/2007 financial year, reference was made to the
contract for construction of Thogoto – Gikambura – Mutarakwa road which was
awarded on 28 April 2006 to a local construction firm, at a tender sum of
Kshs.1,042,884,660.00. It was indicated also that the actual works commenced
on 10 July 2006 and were scheduled for completion on 10 January 2008. A
review of the project in 2008/2009 disclosed the following unsatisfactory matters:-

Extension of Contract Period

850. Although as indicated above the works were scheduled for completion
after eighteen months that is, on 10 January 2008, the contractor has twice been
awarded extensions of time for 93 and 126 days, thus revising the completion
date to 16 August 2008. The extensions appeared to have been necessitated by
the slow progress of work as a result of the need to re-route electricity lines and
re-locate water services, besides the slow process in acquiring land for outfalls.

Change of Design

851. On 27 June 2006 and before commencement of the contract, the
contractor submitted a proposal to the Ministry to change the pavement design
from 150 mm lime stabilized sub-base and 150 mm cement stabilized base to
150 mm hand packed stone for the sub-base and 150 mm hand packed stone for
the base layer. In support of the proposal, the contractor claimed that the gravel
materials to be incorporated in both the sub-base and base pavement layers in
the original design were inadequate and of marginal quality.

852. The contractor further proposed another change through a letter Ref. No.
THO/013/OSU/KSC/06 dated 28 November 2006 for a layer of 200mm of hand
packed stone base, MC 30 prime and 50mm and 30mm AC Type I on the
carriageway and shoulder respectively. A Committee of Engineers appointed to
review the contractor’s request for change of pavement design rejected the
proposals on 27 February 2007. The change was however approved by the
Accounting Officer on 22 May 2007, and in effect overruled the decision of the
Committee.

853. Soon after the approval however, the contractor realized that hand
packing of stones was slow and cumbersome. He then yet again proposed to
replace 200mm hand packed stones with 200mm Graded Crushed Stone (GCS)
through a letter Ref. No. THO/028/OSU/KSC/07 dated 18 December 2007. The
proposal was again approved by the Accounting Officer on 17 April 2008. It has

                                       162 
 
not been clarified as to why the contractor was allowed to continue proposing
changes to the contract, while at the same time seeking extensions of the
contract period without any compensation to the Government.

Variation of Contract

854. The Chief Engineer through a letter Ref.No.R12886/RD.0493 of 13 March
2009 requested the Ministerial Tender Committee to adjudicate on two variations
of the contract sum, to accommodate cost overruns totalling
Kshs.705,405,263.80.

855. According to the Engineer, the Variation orders were necessitated by
escalation of earthworks to a total of 482,023.78m3 from the original provision of
50,000m3 and an extension of the Consultancy Supervisory Services. Further
information indicated that the Variation Orders were adjudicated upon and
approved by the Ministerial Tender Committee in its meeting No. 26/2008-2009
held on 26 March 2009. The contract sum of Kshs.1,042,884,660.00 was thus
raised to stand at Kshs.1,748,289,923.80 as of March 2009.

Slow Progress of Work and Suspension of Works

856. According to the Monthly Progress Report No. 27 for October 2008 which
apparently is the latest progress report, the overall physical progress as at 31
October 2008 stood at 70.02% compared to 153.72% of the contract period
elapsed. Additional information shows the foregoing notwithstanding, that the
contractor suspended works on 27 November 2008 in accordance with Clause
69.1 and 69.4, as a result of the Ministry’s failure to settle interim payment
certificate Nos. 15, 16 and 17 all totalling Kshs.450,606,349.81 as at that date,
further slowing down the work. The contractor also gave notice under Clause
53.1 of the Conditions of Contract for claiming full reimbursement for the time lost
and the related costs.

Interest on Delayed Payments

857. Sixteen (16) interim payment certificates for amounts totalling
Kshs.1,035,071,325.70, submitted by the contractor include interest on delayed
payments of Kshs.6,148,601.75. These particular payments would have been
avoided had the Ministry settled the claims expeditiously.

Supervision Consultancy Services

858. The Supervision Consultancy Services were awarded on 13 October 2006
to a local consultancy at a contract sum of Kshs.39,123,000.00. A review of
expenditure records as at 30 June 2009 revealed that the consultant, who was
introduced in the contract mid-stream, had claimed monthly professional fees
totalling Kshs.54,583,800.00 as at that date. This amount however exceeded the

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original contract sum of Kshs.39,123,000.00 by Kshs.15,460,800.00.              No
explanation has been given for the excess claim.

Breach of Fiduciary Duty by the Supervising Consultant

859. The Chief Engineer Roads, through a letter Ref. No. R.9217/RD.0458
dated 29 December 2008 indicated that the consultant had breached his fiduciary
duty by failing to carry out his obligations with due diligence, efficiency and
economy in accordance with the generally accepted professional techniques and
practices.

860. According to the letter, the contractor had been instructed to cut and spoil
18,000m3 of soft material on the road but the consultant apparently and
inexplicably certified 600,000m3.      This resulted in a cost overrun of
Kshs.720,000,000.00. No action appears to have been taken against the
consultant for the poor performance.


CONSTRUCTION OF KAMUKUYWA - KAPTAMA – KAPSOKWONY – SIRISIA
ROAD

861. Examination of records relating to the construction of Kamukuywa –
Kaptama – Kapsokwony - Sirisia Road – Contract No.RD0495 and an audit
inspection of the construction site carried out on 1 September, 2009 revealed the
following unsatisfactory and unexplained matters:-

Award of Contract

862. Contract No. RD 0495 for construction of Kamukuywa - Kaptama –
Kapsokwony – Sirisia Road was competitively awarded on 13 April 2007 to a
Nairobi based construction company, at a tender sum of Kshs.2,699,623,837.

863. According to information available, the works commenced on 22 June
2007 and were scheduled for completion initially after thirty (30) months that is,
on 22 December 2009. The expected completion date was later revised by one
hundred and forty (140) days, to 13 May 2010.

Scope of Work

864. The scope of work involved upgrading to bitumen standard of a sixty
seven (67) kilometers road, including provision and maintenance of Engineer’s
representative office, laboratory, transport and equipment; site clearance;
earthworks; construction of drainage facilities; pavement layers; 125mm cement
improved base; 175mm lime improved sub-base; 3.25m carriage way and 1.5m
shoulder on either side; surface dressing with 14/20mm and 6/10mm chippings.
The work also involved construction of three (3) bridges, eight (8) box culverts as

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865. The contractor was also expected to undertake maintenance works during
the construction period and for twenty four (24) months under the defects liability
period.

Revision of Design

866. The original design of the project was carried out in August 2006 by a firm
of consulting engineers at a cost of Kshs. 33,303,600.00. The design was
however not adequately drawn and it revealed the following major anomalies:-

    •   The original data was taken at intervals of 100 meters instead of 10 to 25
        meters, thus reflecting unrealistic quantities;

    •   The road was restricted to the existing road centre line thus yielding
        vertical and horizontal curves that do not meet the standards;

    •   A bridge with a twelve (12) meter span in cut section of eleven (11) meters
        had an elevation of 13.85% gradient;

    •   The alignment design showed the whole road to be in cut and therefore
        should have had more quantities in improved subgrade and cut to spoil
        than what was reflected;

    •   On a stretch of thirty (30) km, the design gradients were between 6-15%,
        with average climb lengths of over 500 meters;

    •   The vertical alignment in cut had sections with radius of less than one
        hundred (100) meters and length of tangents less than 60 meters, thus
        creating “black spots”.

867. A management meeting held on 30 July 2007 resolved among other
issues that the Resident Engineer be mandated to redesign the whole road, and
provide revised bills of quantities, with options for change of pavement design
and a recommendation for the most economical pavement.                   These
recommendations were put in a Memorandum of Understanding (MOU) dated 30
July 2007 between the Ministry and the contractor, while the new design for the
road was prepared and completed in April 2009.

Financial Appraisal

868. Following a change of design of the road involving vertical and horizontal
alignment, drainage features and subsequent revision of quantities, an appraisal
of the project was carried out in March 2009 by the Resident Engineer. The

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appraisal report proposed to increase the contract sum by Kshs.
1,999,064,337.00 or 74% of the contract sum of Kshs.2,699,623,837.35 to Kshs.
4,698,688,174.35. No decision has apparently been made on the proposal but it
is nevertheless clear that the revision of the quantities is more than the 15%
variation allowed by the procurement regulations.

Slow Progress of Works

869. The Monthly Progress Report No. 24 for July 2009 reflects the percentage
of works completed as 24.93% compared to 71.4% of time expired. The reasons
cited for the slow progress of the works include change of the design, curtailment
of working hours due to a curfew imposed in the area, security threat to the
workforce and post-election violence. The Ministry has not however indicated on
how these issues are being addressed.

Additional Costs on Land Acquisition

870. Although item 1.21 of the Bills of Quantities provided an amount of Kshs.
16,000,000.00 for land acquisition, evidence obtained from the road shows that
the corridor between Km 6 to Km 30 on Kapsiro – Namwela Road section is only
eight (8) metres wide, against the recommended thirty (30) for this class of road,
thus necessitating acquisition of extra land estimated at Kshs. 12,000,000.00. No
explanation has been provided for allowing the inadequate corridor in the design.

Interest on Delayed Payments

871. The contractor through a letter Ref. No. KAPS/140809/OSU/KSC/1 of 14
August 2009 submitted claims totalling Kshs.3,963,197.00 in respect of interest
on delayed payments. However, the claims appeared to mostly have related to
over-deduction of retention money rather than delay in settling the contractor’s
certificates. As in the previous instances, no explanation has been provided for
this anomaly.

Work Certified

872. Although the issues raised above have not been responded to or
addressed as appropriate, Payment Certificate No. 14 shows that works valued
at Kshs.1,310,492,641.38 had been certified as at 30 June 2009.


REPAIR AND REHABILITATION OF MASII – KITUI ROAD

873. In the report for 2007/2008, reference was made to contract No.RD.0426
for repair and rehabilitation of Masii-Kitui Road, which was awarded competitively
to a local construction company at a tender sum of Kshs.722,141,899.20. It was
also indicated that the works commenced on 13 September 2005 and were

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874. An audit review of the project during the 2008/2009 and an audit
inspection conducted on 15 September 2009 revealed the following
unsatisfactory and unexplained matters:

Slow Progress of Work

875. The Monthly Progress of Work Report No. 46 for July 2009 reflects
physical progress of work of 45.6% against 147.9% of contract period elapsed as
at 24 April 2008. The slow progress of work has been attributed to frequent
breakdown of plant and equipment including water tankers, rollers, graders and
crushing plant at the materials production quarries. It has not however been
indicated as to how this persistent problem is being addressed by the contractor.

Termination of Contract

876. The contractor was notified of the slow rate of progress under Clause 46.1
of the Conditions of Contract, through the Ministry’s letters Ref. No. R 2447/RD
0426 dated 25 May 2006 and Ref. No. R 5389/Rd. 0426 dated 30 July 2008,
subsequent to which the contract was terminated through a letter Ref. No.
MOR/A 35.04 VOL 35/101 dated 21 October 2008. However, the contractor
obtained leave on 13 November 2008 through Miscellaneous Civil Application
No.684 of 2008 in the High Court of Kenya sitting at Nairobi, to apply for orders
against the Ministry regarding termination of the contract.

No further communication on this matter has been seen, although information
available indicates that the contractor is still on site and active.

Sub-Standard Works

877. The contractor, through a letter Ref. No.MSI/MOA/09/03 dated 23 July
2009 indicated his intentions to undertake seal works of the shoulders, which
was to involve carrying out carriageway repairs, crack sealing, surface dressing
and shoulder widening.

878. The Engineer, through a letter Ref. No. WK/0426/09/133 dated 24 July
2009 and a letter Ref. No.WK/0426/09/140 dated 5 August 2009, rejected the
proposed work method, as it was a deviation from the conventional method used
for the road project. The contractor nevertheless appears to have ignored the
Engineer’s instructions and proceeded to carry out the works using the rejected
method, thus resulting in sub-standard work on the road. This was clearly in
contravention of Clause 14.1 of the Conditions of Particular Application with
regard to an order of carrying out various operations of the works.



                                      167 
 
879. The contractor similarly ignored the Special Specifications Clause 105
which stipulates that the contractor shall carry out works such that a continuous
and consecutive output of fully completed work is achieved.

Approved Site Agent

880. According to information available, the contractor occasionally has been
implementing the works without an approved Site Agent, an omission which
contravenes Sub-clauses 15 and 16 of the Conditions of Particular Application.
As a result, the site activities have at times been uncoordinated, resulting in low
quality of works. Further records available indicate that the supervisory services
have also been stifled by failure of the contractor to provide adequate transport to
supervisors.

Payment of Staff Wages and Allowances

881. With regard to staff wages and allowances, the contractor appears to have
abandoned his contractual obligations under the contract, by failing to pay
salaries, wages and allowances to the Resident Engineer’s staff, as exemplified
by the Engineer’s letter Ref. No. WK/0426/09/111 of 22 June 2009 to the Site
Agent, in connection with non-payment of salaries for May 2009. Failure to pay
wages and allowances has impacted negatively on the progress of the project.

882. In view of the inadequate manner in which the contract has been handled,
it has not been possible to ascertain that value for money has been obtained
against the expenditure of Kshs.359,571,560.00 incurred on the project as at 30
June 2009.


MAINTENANCE        OF    EKERO-KANDUYI         ROAD      –   BUNGOMA       SOUTH
DISTRICT

883. A contract for maintenance of Ekero-Kanduyi Road (C33) in Bungoma
South District was awarded in March 2009 by the Ministerial Tender Committee
in Nairobi to a business services company based in Nairobi, at a contract sum of
Kshs.46,326,166.00.

884. According to records available, the project involved repair and
maintenance of a 33 Km stretch of Ekero-Kanduyi Road, while the contract
period was agreed at four (4) weeks from the date of acceptance, that is, 28 May
2009. However, due to budgetary constraints experienced during the year, the
scope of work was reduced and scaled down to 17 Km, at a sum of
Kshs.18,498,984.00. The specific works were also limited mainly to; drainage,
natural sub-base and base works, cement stabilized materials and bituminious
mixes.



                                        168 
 
885. However, and for an unclear reasons, additional information shows that
the letter of offer of the contract to the company indicated that the scaled down
works were to cover a distance of only 1.9 Km from Bungoma Tourist Hotel
junction to Kenya Co-operative Creameries Depot, instead of the 17 Km as
earlier approved. No explanation has been provided for this omission or variation
of the contract clearly to the disadvantage of the Government.

886. A physical inspection of the road carried out on 29 October 2009 revealed
that only a stretch of 1.9 Km as described above had been repaired, leaving a
distance of 15 Km undone, while at the same time the contractor had been paid
a sum of Kshs.19,498,232.40 for the works. Further, and apart from the fact that
the works did not cover the extra distance of 15 Km as required and as
approved, it has also not been clarified why the contract sum of
Kshs.18,498,984.00 was exceeded by an amount of Kshs.992,248.40. In the
circumstances therefore, the Government may have incurred a loss estimated at
Kshs.17,204,322.70 from the contract.


MAINTENANCE OF ROADS – MUMIAS DISTRICT

887. During the year under review, a term contract priced at Kshs.4,798,500.00
for the repair and maintenance of Ngairwe-Muberi-Eshikondi-Nyapwaka-Mirere
Road – Junction C 30 was awarded to a construction company based in Mumias
by the District Roads Engineer Mumias District, against an approved work plan
and budget of Kshs.919,900.00. The contractor was later in April and May 2009
paid a total sum of Kshs.4,798,500.00 for the works, through payment vouchers
numbers 2129 of 17 April 2009 and 2257 of 4 May 2009 for amounts of
Kshs.2,299,000 and Kshs.2,499,500.00 respectively.

888. According to additional information available however, the same road
which appears to be an unclassified rural access, had earlier in the year been
repaired and maintained by another company at a cost of Kshs.380,001.20, with
funds facilitated by the Matungu Constituency Development Fund.

In the circumstances therefore, and in the absence of further clarification on the
matter, the expenditure of Kshs.4,798,500.00 is considered as ineligible and
nugatory.


CONSTRUCTION OF DARAJA MBILI – NYATIEKO – KEGOGI – MIRUKA
AND NYAMAIYA – BONYUNYU – ISECHA – BOBARACHO – NGENYI –
NYABIOTO ROADS: KISII DISTRICT

889. Examination of records relating to contract no.0498 for Construction of
Daraja Mbili-Nyatieko-Kegogi-Miruka (E218/E208) and Nyamaiya-Bonyunyu-



                                       169 
 
Isecha-Bobaracho-Ngenyi-Nyabioto (D221/D220) Roads in Kisii District revealed
the following observations:-

Award of Contract and Duration

890. The contract for construction of the above roads was on 4 June 2007
awarded to a construction firm based in Nairobi, at a sum of
Kshs.1,803,695,791.40, following an open tendering procedure. A contract
period of twenty four (24) months was agreed upon, and thus the project was
expected to be completed and handed over on 20 September 2009.

Scope of Works

891. The project covered a stretch of 42 Kilometres which were to be upgraded
to bitumen standard. According to records available, the detailed works entailed;
site clearance and top soil removal, earthworks, construction of pipe culverts and
drainage works, preparation of the subgrade, construction of 150 mm thick
cement improved gravel sub-base on carriageways and shoulders, construction
of 125mm thick cement improved gravel base on carriageway and shoulders,
application of double seal surface dressing of 80/100 penetration grade bitumen,
14/20mm & 6/10mm pre-coated chippings on carriageway and shoulders, gabion
protection works, stone pitching, installation of road furniture and construction of
4 No. box culverts, 2 No. bridges, as well as extension of the Charachani bridge.

Programme of Work

892. Further information available indicates that the Resident Engineer had
submitted the contractor’s Revised Programme of Work in July 2009 to the
employer for approval. In the Revised Programme, the contractor had proposed
an extension of time by three hundred (300) days to 20 July 2010. The Engineer
had, however, recommended an extension by two hundred and thirty five (235)
days to 20 May 2010. No evidence has been seen indicating whether or not that
approval was granted.

Omitted Items

893. Item 14.02(ii) relating to lime was not included in the original contract
documents but it is a crucial element in the construction of roads. The omission
of the item resulted in the fixing of a non-competitive rate of Kshs.12,500.00 per
tonne of lime by the contractor. Consequently, expenditure on this item as noted
under Certificate No. 24 dated 31 August 2009 had accumulated to stand at
Kshs.17,025,000.00, with the clear risk of escalation in the absence of the
guiding quantities in the contract documents.




                                        170 
 
Escalation of Cost of Billed Items

894. Examination of Certificate No. 24 dated 31 August 2009 showed that there
was an escalation of costs totalling Kshs.53,918,996.50 on various items. It has
not been explained why the bills were not contained within the ceiling shown in
the contract documents.

Progress of Work

895. An audit inspection of the project carried out in October 2009 and a
progress Report No.25 dated November 2009 revealed that approximately
60.99% of the work had been done against twenty six (26) months or 108% of
the contract period. Additional information appears to indicate that some
sections of the road to be upgraded had no designs and other related
documents, thus causing delay in the commencement of works.

Expenditure

896. The contractor had been paid a sum of Kshs.690,105,129.80 as at 30
June 2009 out of which Kshs.268,047,722.65 was paid in 2008/2009. As
indicated above, however, these payments are likely to escalate considering the
slow rate of progress of works and lack of critical documents including road
designs for various sections of the roads.


NAIROBI-THIKA HIGHWAY IMPROVEMENT PROJECT

897. The audit of the project for Rehabilitation and Improvement of the Nairobi-
Thika Highway financed by the Government and the African Development Fund
under Loan Agreement Ref. No.2100150015544 dated 26 November 2007, for
an amount of 117,850,000.00 Units of Account (AU) revealed that expenditure
totalling Kshs.458,841,924.00 was incurred during 2008/2009 on Lot 2 – Land
compensation, along the Muthaiga round about – Kenyatta University stretch of
the Highway. The amount of Kshs.458,841,924.00 however includes a sum of
Kshs.3,300,000.00 paid to four (4) land owners, but which figure is considered as
an overpayment. Apart from failure to provide a clarification on the overpayment,
the amount of Kshs.3,300,000.00 has also not been refunded to the Ministry.


SUPPLY, INSTALLATION, TESTING AND COMMISSIONING OF CLOSED
CIRCUIT TELEVISION (CCTV) SURVEILLANCE SYSTEM

898. The Ministerial Tender Committee through minute No.11:35/2007/2008 of
13 March 2008 approved the use of Restricted Tendering to invite bids for
supply, installation, testing and commissioning of a Closed Circuit Television
(CCTV) Surveillance System at both the Ministry’s Headquarters and the

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Materials Department in Industrial Area, Nairobi. Eleven (11) firms were
subsequently identified and requested to submit their bids.

899. Examination of contract records relating to the Surveillance System at the
Materials Department revealed the following unsatisfactory and unexplained
matters:-

Award of Contract

900. Although the bids for the System were evaluated in June 2008 and the
contract awarded to the lowest technically evaluated bidder, a local agency, at a
tender sum of Kshs.11,944,010.00 against the engineer’s estimated figure of
Kshs.12,030,000.00, no written contract agreement appear to have been drawn
between the two parties. It is therefore not clear as to how the supply and
installation of the System was to be carried out in absence of an Agreement. For
the same reason, it has not been possible to establish the basis upon which
payments were to be made.

Unvouched Expenditure

901. An expenditure of Kshs.1,085,710.00 incurred in respect of supervision by
the engineer and site meetings, profit, provisional sum for project managers
transport and supervision expenses and contingency sums to be used at the
discretion of the project manager, could not be ascertained due to lack of the
relevant supporting documents.

902. It has also not been possible to confirm the supply and delivery of
stationery and related items valued at Kshs.165,500.00 provided for training of
technical staff.

903. Although the contract in addition set aside an amount of Kshs 200,000.00
for training of technical staff on the usage and maintenance of the System, such
training does not appear to have been conducted by the contractor and no
reason for the omission has been given.

Supply of Equipment

904. Records available including those with technical specifications show that
the contractor was to supply and instal sony cameras and lenses in the System.
However a physical verification of the System revealed that the contractor
instead supplied and installed vivotek cameras and proline lenses, contrary to
Section 47 of the Public Procurement and Disposal Act, 2005. Apart from
contravention of the law, it has also not been clarified as to the effects the
variation of the contract had on the value and effectiveness of the System.
Further, and although the contract provided for supply and installation of forty two
(42) cameras, only thirty nine (39) were installed, leaving a balance of three (3).

                                        172 
 
No explanation has been provided for failure to instal all the forty two (42)
cameras as per the tender records.

905. Similarly, the contract also required the contractor to supply and instal 4
No. IP PTZ Dome cameras and a weather proof outdoor camera housing at a
cost of Kshs.95,000.00 and Kshs.24,000.00 respectively. According to
information available however, only one camera and one housing were supplied,
leaving three (3) such cameras and houses all worth Kshs.357,000.00
undelivered. Also not supplied were 6 No. weather proof protective housing for
day and night cameras worth Kshs.97,800.00 as provided for under item 1.04 of
the Bill of Quantities. As in the previous instances, no explanation has been
given for this anomaly.


SUPPLY OF CONSOLID LIQUID AND SOLIDRY POWDER

906. Records available indicate that the Ministerial Tender Committee at its
meeting No.19/2007-2008 held on 22 November 2007 granted the Roads
Department authority to use direct procurement method to purchase consolid and
related products from a Roads Development Company based in Nairobi

907. The Ministry subsequently issued a Local Purchase Order No.0367056 to
the supplier on 21 December 2007 for supply of the above products at a total
cost of Kshs.47,750,000.00, in the amounts of Kshs.16,500,000.00 for consolid
444 liquid and Kshs.31,250,000.00 for solidry power. The Consolid 444 (liquid)
and solidry (powder) were delivered to the Ministry through the firm’s Delivery
Note Nos.0012 and 0013 of 25 August 2008 and 8 September 2008 respectively,
subsequent to which full payment was made vide Departmental Voucher
No.002159 of 9 October 2008. However, no Contract agreement appear to have
been drawn and signed between the Ministry and the firm as required under
Section 75(c) of the Public Procurement and Disposal Act, 2005.

908. Although according to information available these materials were sourced
for research on alternative soil stabilization in road base and sub-base
construction, no documentary evidence has been seen regarding the roads on
which the research was to be carried out. Further and for reasons which are not
yet clear, the Chief Materials Engineer’s Department, an office in Charge of
Materials Testing and Research does not appear to have been involved in the
whole process of procurement of the products, raising concern as to which
Department was then to ensure that the products delivered were not only of
reasonable quality but also useful for research purposes. A physical audit check
revealed that the goods had not been used as at 30 June 2009.

909. Although direct procurement method was used on the basis that the
Development Company was the only supplier of these particular products, and
that there was no reasonable alternative, no evidence to confirm this position has

                                       173 
 
been made available for audit verification. This apart, there clearly was no
urgent need to render other methods of procurement impractical because the two
products were delivered nine months after the Local Purchase Order was issued.
The set of conditions stipulated under Section 74 of the Public Procurement and
Disposal Act, 2005 to be fulfilled before the direct procurement method is used
were, therefore, not met in this case.


WAJIR EAST DISTRICT ROADS ENGINEER’S OFFICE

910. Examination of records maintained at the Wajir East District Roads
Engineer’s Office during the month of August 2009 disclosed the following
unsatisfactory matters:-

Payments to Casual Workers

911. An expenditure of Kshs.1,333,715.50 was incurred on payment of wages
to casual labour in respect of the Kazi Kwa Vijana Programme. The work for the
labour hired involved; bush clearing, construction of road bumps and fixing of
road signs on roads within Wajir East District. However, and although the
recipients of the payments signed the schedule attached to the payment records,
information on the number of days worked and rates of payments were not
provided for audit verification, with the result that the propriety of the expenditure
of Kshs.1,333,715.50 could not be ascertained.

Unaccounted for Bulk Fuel, Oils and Lubricants

912. 9,210 litres of Fuel (diesel) and 421 litres of oil and lubricants all worth
Kshs.1,174,700.00 were purchased by the Office during the year. However, the
fuel and lubricants do not appear to have been recorded in the Fuel Register,
consequent upon which it has not been possible to determine how the supplies
were accounted. In the circumstances, the propriety of the expenditure of
Kshs.1,174,700.00 could not be confirmed.


SUPPLY AND APPLICATION OF THERMOPLASTIC ROAD MARKING PAINT

913. Examination of Contract No.RDS/9/2007-2008 for the supply and
application of Thermoplastic Road Marking Paint revealed the following
unsatisfactory matters:-

Award and Scope of Contract

914. The contract for Supply of Thermoplastic Road Marking Paint was
awarded to a local paint dealer at a sum of Kshs.114,618,063.00 through a letter
Ref. No. A 84.02/A VOL.27 dated 15 February 2008. According to information

                                         174 
 
available, the scope of works involved; provision and application of white and
yellow thermoplastic paints and ballotini glass beads on approximately 300Km of
road. Specifically the works entailed road marking of the centerline, road edges,
junctions, crossings and bumps on Kiganjo-Nanyuki Road (63.3Km), Kagumo-
Kagarie Road (13.3Km), Lang’ata Road (14Km), Narok-Sotik-Amala River Road
(110Km), Kiganjo-Nyeri-Marua-Kiganjo Road (17Km) and Nyeri-Kiriaini –
Kangema – Murang’a Road (55.7Km). Other roads included; Mombasa township
roads of Makande-Moi Avenue (4.0Km), Saba-Saba-Nyali Bridge (2.4Km),
Buxton-Likoni (8.0Km), Moi Avenue (4.0Km), Changamwe roundabout-Saba
Saba (8.0Km) and Kenyatta Avenue – 4.0Km. The contractor was ordered to
commence works on 7 March 2008 for a period of five months ending on 5
September 2008.

Quality of Road Marking Paint

915. On 29 September 2008, the Resident Engineer, through a letter Ref. No.
TRMP/VOL.I(17) expressed concern to the Site Agent, that the road markings
which were being carried out had failed on several stretches of roads and
required urgent remedial measures. These failures were observed at;

    • 2 Kms on Marua-Kiganjo road, where the yellow centerline was very
      irregular and was peeling off at certain points.

    • Narumoru Town where the zebra crossings and yellow line had faded.

    • Narok-Sotik road where the yellow line was peeling off from chainage 000
      to Km 0+650, in addition to Mulot Area;

    • Nyeri-Kiganjo road where the yellow line was peeling off near Kiganjo
      town;

    • Other road stretches near or at Mt. Kenya Bottlers, Nyeri Baptist School,
      Honi River Bridge and Nanyuki Township.

916. According to further records seen, the Chief Materials Engineer, through a
letter Ref. No.M.019/35/F/7C dated 3 September 2008 to the Chief Engineer
(Roads) indicated that the Materials Department was, and without clear reasons,
not involved in the implementation of the project. The Department had
nevertheless discovered that the materials used had not been sampled on site at
commencement of the project. Further tests undertaken later on peeling paint
samples confirmed that the paint had been applied on a dirty road surface, while
in other instances new paint was applied on top of the old.

917. Above all, the work was implemented without a continuous sampling and
testing of the different batches of paint and glass beads, and without the


                                      175 
 
contractor being required to apply a particular thickness of thermoplastic
material. No explanations have been given for these omissions.

Payments to the Contractor

918. Although        records   seen    indicate    that     payments     totalling
Kshs.101,572,271.71 had been made to the contractor as at 30 June 2009, it has
not been possible, in view of the matters discussed above, to confirm that
reasonable value for money was obtained from the expenditure. Further, no
evidence has been seen to show that the Government was compensated by the
contractor for the inadequate performance and for failing to complete the project
by 5 September 2008 in accordance with the schedule for completion.


FINANCIAL IRREGULARITIES AT MANDERA EAST DISTRICT ROADS
ENGINEER’S OFFICE

Double Payment

919. An engineering firm based in Mandera was contracted to grade
Malkamari, Kitulo, Kiloweheri roads and Rhamu Airstrip through Local Service
Order (LSO) No.A580020 of 10 December 2007 for three hundred (300) hours. A
wet rate of Kshs.5,000 per hour was used resulting in a sum of
Kshs.1,500,000.00 for the work. This amount was paid on 7 April 2008.

920. On 28 June 2008 however, and for unexplained reason, the contractor
raised another invoice for Kshs.1,500,000.00 against the same LSO. The Roads
Engineer again prepared a payment voucher for an amount of Kshs.1,500,000.00
which was paid on 22 June 2009. This latter transaction resulted in double
payment and a loss of Kshs.1,500,000.00. Apart from failure to provide a reason
for the double payment, no recovery has been made of the overpayment.

Expenditure on Wages

921. The      Engineer’s      Office    also    incurred   expenditure    totalling
Kshs.1,471,000.00 on casual labour wages under the Kazi Kwa Vijana activities
notably, bush clearing. Records in support of this expenditure including signed
schedules of the casual labourers were not however made available for audit,
review with the result that the propriety of the expenditure of Kshs.1,471,000.00
could not be ascertained.


REHABILITATION OF CHEPTIRET - KESSES - MOI UNIVERSITY ROAD

922. A contract for patching of potholes along the Cheptiret – Kesses – Moi
University Road (D305) was in December 2008 awarded by the District Roads

                                       176 
 
923. According to information available, the scope of works for the enterprises
company was to provide, place and compact asphalt concrete type one with 5-6
nominal bitumen content along sections with potholes, while the construction
firm was to provide place and spread natural gravel of CBR greater than 30% on
repaired and reconstructed stretches of the road.

924. Further records seen indicate that in January 2009 the company and the
firm were paid amounts of Kshs.12,216,024.00 and Kshs.2,534,000.00
respectively, for the work done.

925. Two months later, the Provincial Roads Engineer approved a work
programme on the same road. According to information available, the works in
the programme included patching of potholes and maintenance. In this
connection a budget of Kshs.15,000,000.00 was set aside and utilized for the
works. It has not, however, been explained why the Provincial Engineer found it
necessary to carry out repairs and maintenance of a road which had been
worked on by the District Roads Engineer hardly two months earlier.

926. A Physical verification of the road carried out in the month of August 2009
revealed that it was virtually impossible to distinguish between the works carried
out by the two contractors each contracted by the District Roads Engineer and
the Provincial Roads Engineer.

In the circumstances therefore, it has not possible to ascertain the propriety of
the expenditure of Kshs.15,000,000.00 incurred by the Provincial Roads
Engineer.


UNSUPPORTED EXPENDITURE – BUNGOMA SOUTH DISTRICT

927. Examination records maintained at the Bungoma South District Roads
Office revealed that the District Roads Engineer made payments totalling
Kshs.2,211,089.20 during 2008/2009. Payment vouchers and other related
documents for the expenditure were not however availed for audit review, with
the result that its propriety could not be ascertained.


UNCOLLECTED REVENUE AT THE MATERIALS TESTING AND RESEARCH
DEPARTMENT

928. Revenue totalling Kshs.5,688,325.00 expected during the year from
fourteen (14) Organizations/Institutions on account of laboratory test charges,

                                       177 
 
geotechnical site investigations and other services offered by the Materials
Testing and Research Department of the Ministry had not been received as at 30
June 2009. No reason has been provided for failure to collect the revenue.
Further, no guideline was seen indicating how fee charges for these services
were determined.


EAST AFRICAN TRADE AND TRANSPORT FACILITATION PROJECT

929. The audit of the East African Trade and Transport Facilitation Project
financed by the Government and the International Development Association
(IDA) under Credit Agreement No.4148 KE dated 5 April 2006, for an amount of
88,300,000.00 Special Drawing Rights (SDR), revealed that in accordance with
Section 2.04 of Article II of the Agreement between the Government and IDA,
the Government is required to pay a commitment fee to the Association at the
rate of one-half of one percent on the principal amount of the credit not
withdrawn from time to time.

930. Pursuant to the Section aforementioned therefore, the Government paid
during the year a commitment fee of Kshs.6,384,205.10 (US$.870,579.25) on
account of unwithdrawn credit balance as at 30 June 2009. This amount, in
addition to a sum of Kshs.17,402,099.23 (US$.205,555.87) paid in the previous
years, brought the cumulative fees paid as of 30 June 2009 to
Kshs.23,786,304.33 (US$1,076,135.12). No evidence has been seen on the
action being taken by the Ministry to avoid additional commitment charges
against the loan.


NORTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT

931. The audit of Northern Corridor Transport Improvement Project, funded by
the Government and the International Development Association (IDA) under
Credit No.3930KE dated 25 June 2004 for a sum of SDR.138,440,000 revealed
the following unsatisfactory matters:-

Omission of Expenditure

932. Expenditure amounting to Kshs.3,843,378.00 and Kshs.14,850,632.00
incurred on consultancy and civil works respectively, was omitted from the
Ledger for the month of June 2009. The total expenditure recorded against Vote
D.13 for 2008/2009 was therefore understated by an amount of
Kshs.18,694,010.00.




                                     178 
 
Unsupported Credit Entries

933. Eight (8) credit entries for amounts totalling Kshs.16,274,350.00 posted to
the Project’s account No. 1-384-000-3110400 (construction of roads –
Headquarters) in the Ledger were not supported with any documentary evidence.
It has therefore not been possible to establish what the entries represent.

Avoidable Expenditure

934. Article II 2.03 of the financing agreement between the Government and
IDA provides for a commitment charge payable at the rate of one half of one
percent per annum on any unwithdrawn financing balance. A review of the
relevant records during the year indicated that in 2008/2009 a commitment fee of
Kshs.5,640,727.36 (US$71,820.44) was paid by the Government against the
undisbursed portion of the loan. This payment increased the cumulative
commitment fees paid against the loan to Kshs.142,890,736.30
(US$1,964,046.49) as at 30 June 2009. As in the previous instance, no evidence
has been seen on the action being taken by the Ministry to avoid further payment
of commitment charges against the loan.

Interest on Delayed Payments

935. A number of contractors were during the year paid various claims in
respect of interest on delayed payments amounting to Kshs.26,201,820.95 and
Kshs.73,380,017.54, against Government of Kenya counterpart portion of the
Nordic Development Fund (NDF) and IDA Credit respectively. The interest
charges could have been avoided had the contractors claims been settled on
time.

Unsupported Expenditure

936. Documentary evidence in support of an expenditure of Kshs.5,004,519.80
incurred under operating costs was not produced for audit review.         In
consequence, the propriety of the expenditure could not be ascertained.


UNSUPPORTED BANK TRANSACTIONS

937. Examination of the Bank Statements for Deposits 13 as at 30 June 2009
revealed that withdrawals amounting to Kshs. 63,323,464.95 were made from the
Deposits Bank Account between August 2008 and May 2009. The Ministry has
not however provided details of the withdrawals, including the relevant payment
vouchers, counterfoils of the cheque books and other related records. In
absence of the documents, it has not been possible to ascertain the regularity of
the amount of Kshs.63,323,464.95.



                                      179 
 
938. In addition, and during the same period, deposits totalling
Kshs.416,677,766.35 were received into the Deposits Account, but as in the
previous instance, no documentary evidence regarding the sources of these
receipts was seen.


MECHANICAL AND TRANSPORT FUND ACCOUNT

Income and Expenditure Account

939. The Income and Expenditure Account for the year ended 30 June 2009,
prepared and presented for audit reflects cumulative receipts and expenditure for
the year ended 30 June 2009 without showing the balances for 2008/2009. As a
result, it has not been possible to determine from the Account the actual receipts
and expenditure in respect of various items for 2008/2009. No reason has been
provided for failure to prepare the Account in conformity with Section 11.10.3 of
the Government Financial Regulations and Procedures or the International Public
Sector Accounting Standards.

Balance Sheet

940. The Balance Sheet also reflects a Paymaster General Account overdraft
balance of Kshs.49,509,045.18, while the Board of Survey Report and the
Cashbook show amounts of Kshs.103,545,971.47 and Kshs.35,797,759.75
respectively as at 30 June 2009. The differences between the three sets of
records have not been reconciled or explained.

Fund’s Bank Reconciliation Statement

941. The Bank Reconciliation Statement for the Mechanical and Transport
Fund Cashbook as at 30 June 2009 reflects payments in the Cashbook not
recorded in the Bank Statement (unpresented cheques) amounting to
Kshs.343,076,527.01, relating to the periods 2005/2006, 2006/2007, 2007/2008
and other unspecified years. No clarification has been provided as to why the
cheques, which may have been stale as at 30 June 2009, had not been
presented to the Banks or replaced after becoming stale.

942. The Statement also reflects receipts in the Cashbook not yet recorded in
the Bank Statement of Kshs.673,308,449.71 relating to 2005/2006, 2006/2007,
and 2007/2008. It has not however, been explained why the long outstanding
receipts have not been recorded in the Bank Statement.




                                       180 
 
BANK RECONCILIATION STATEMENTS

943. Examination of the Bank Reconciliation Statements for Recurrent,
Development and Deposit Cashbooks as at 30 June 2009 revealed the following
unsatisfactory and unexplained matters:-
W21

Recurrent Cashbook

944. The Bank Reconciliation Statement for the Recurrent Cashbook reflects
an amount of Kshs.809,143,946.25 in respect of payments in the Cashbook not
recorded in the Bank Statement (unpresented cheques), which differ by
Kshs.2,097,256.20 with the Cashbook balance of Kshs.807,046,690.05 as at 30
June 2009. The difference has not been reconciled or explained.

945. The unpresented cheques of Kshs.809,143,946.25 include stale cheques
totalling Kshs.145,668,120.70 and Kshs.105,679,053.35 relating to 2008/2009
and 2007/2008 and earlier years respectively. No explanation has been given for
failure to have the cheques replaced or credited back to the Cashbook.

946. The Statement also reflects receipts totalling Kshs.28,815,684.80 in the
Bank Statement not recorded in the Cashbook, which include an amount of
Kshs.4,534,086.15 relating to 2007/2008 and earlier years. Failure to record the
latter receipts has not been explained.

947. The Statement further reflects Payments of Kshs.376,921,015.35 in the
Bank Statement not recorded in the Cashbook, which includes amounts of
Kshs.134,210,357.05 relating to 2007/2008 and earlier years. It has not however
been clarified how the Ministry would issue the cheques listed in the Statement
and at the same time fail to record them in the Cashbook.

948. Further, examination of the Cashbook disclosed that entries totalling
Kshs.5,777,764.70 indicated as representing payments in the Bank Statement
and not recorded in the Cashbook had actually been captured in the Cashbook.

949. The Statement in addition reflects receipts in the Cashbook not recorded
in the Bank Statement totalling Kshs.572,303,806.95, which include an entry of
Kshs.280,911,009.00 described as “Banking”. However, no explanation has
been provided as to what the “Banking” was in respect of and why the entry was
not appearing in the Statement.

950. The balance of Kshs.572,303,806.95 also includes unexplained and
unsupported entries totalling Kshs.19,318,347.85 and an unidentified Cheque
Reversal amount of Kshs.43,158.85.




                                      181 
 
Development Cashbook

951. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement (unpresented cheques) of Kshs.3,607,553,834.85, which differ with
the Cashbook balance of Kshs.3,668,491,560.90.            The difference of
Kshs.60,937,726.05 has not been explained. The unpresented cheques totalling
Kshs.3,607,553,834.85 include stale cheques amounting to Kshs.320,202,530.80
relating to 2007/2008 and earlier years. No explanation has been provided for
failure to replace or credit the cheques in the Cashbook.

952. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook of Kshs.458,429,903.95, which include a sum of
Kshs.341,502,502.00 relating to 2007/2008 and earlier years. Failure to record
the receipts of Kshs.341,502,502.00 in the Cashbook has not been explained.

953. The Statement further reflects payments in the Bank Statement not
recorded in the Cashbook of Kshs.1,050,887,432.05, out of which an amount of
Kshs.803,217,860.90 relates to 2007/2008 and earlier years. It has not however
been explained as to why the payments of Kshs.803,217,860.90 have not been
entered in the Cashbook.

954. The Statement in addition reflects receipts in the Cashbook not recorded
in the Bank Statement of Kshs.2,491,823,421.85, out of which an amount of
Kshs.173,657,352.00 relates to 2007/2008 and earlier years. The receipts of
Kshs.2,491,823,421.85 also includes an amount of Kshs.1,000,000,000.00
whose details have not been provided. No reasons have been given for this
clearly unsatisfactory state of affairs.

Deposits Cashbook

955. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement (unpresented cheques) totalling Kshs.940,734,597.75, which include
stale cheques amounting to Kshs.3,196,888.95. Some of the cheques have
been outstanding since 2006. No explanation has been given for failure to
replace or credit the cheques in the Cashbook.

956. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook amounting to Kshs.324,173,711.85 relating to 2007/2008 and
prior years. It has not been clarified why the receipts had not been entered in the
Cashbook as at 30 June 2009

957. The Statement further reflects payments in the Bank Statement not
recorded in the Cashbook of Kshs.218,007,444.15, in respect of which no
supporting records including schedules were availed for audit review. The

                                       182 
 
accuracy of the figure of Kshs.218,007,444.15 as at 30 June 2009 could not
therefore be ascertained.

958. The Statement in addition reflects receipts of Kshs.1,076,676,843.25 in
the Cashbook not recorded in the Bank Statement. No reason has been given
for failure to bank the significant balance of Kshs.1,076,678,843.25.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.13

959. The Statement of Assets and Liabilities for the Vote R.13 as at 30 June
2009 reflects Exchequer Account Under-Issues totalling Kshs.1,497,606,825.88
relating to 2007/2008 and earlier years. No reason has been provided for failure
to clear these long outstanding debit balances.

960. The Statement also reflects debit and credit balances of
Kshs.272,299,856.05 and Kshs.11,680,107,184.65 respectively, against the
General Account of Vote, representing Excess Votes and Net Surpluses for
various years between 1982/83 and 2007/2008. No reasons have been provided
for the delay in clearing the long outstanding Excess Votes and Net Surpluses.

961. In addition, the General Account of Vote debit balance of
Kshs.7,177,606,700.44 reflected in the Statement as at 30 June 2009 differs with
the figure of Kshs.322,032,943.68 in respect of Net Surplus to be Surrendered to
the Exchequer shown in the Appropriation Account for Vote R.13 for the period.
The resultant difference of Kshs.7,499,639,644.12 between the two sets of
records has not been reconciled or explained.

962. The Statement further reflects a Salary Advance Account debit balance of
Kshs.90,715,248.65 which includes an amount of Kshs.25,955,193.15 relating to
2007/2008 and earlier years. Apart from the fact that this particular balance
ought to have been cleared by 30 June 2009, it is a matter of concern, as
similarly observed in 2007/2008, that no recoveries of Advances already granted
appear to have been made during the year. In addition, no analysis has been
provided for the balance of Kshs.90,715,248.65 showing who the beneficiaries of
the Advances were.

963. The Statement shows a District and Temporary Imprests Account debit
balance of Kshs.70,274,419.80, out of which an amount of Kshs.65,020,689.90
relates to 2007/2008 and prior years. No analysis has however, been provided
for the balance of Kshs.70,274,419.80 to confirm its correctness. In addition, no
reason has been given for failure to have the imprests of Kshs.70,274,419.80
surrendered or accounted for on or before 30 June 2009.




                                      183 
 
964. The Statement also shows a debit balance of Kshs.197,302,878.07 under
Inter-ministerial Cashbook transfer, relating to 2007/2008 and earlier years. No
documentary evidence has however been provided to support these Cashbook
transfers and as a result, it has not been possible to ascertain their validity.

965. The Statement further shows a Provincial/District Suspense Account debit
balance of Kshs.10,061,071,056.80, which includes an amount of
Kshs.9,225,779,827.07 relating to 2007/2008 and earlier years. No analysis has
been provided in support of the balance of Kshs.10,061,071,056.80 and further
no reason has been given for non-clearance of the long outstanding amount of
Kshs.9,225,779,827.07 from the books of account.

966. The Statement reflects a Paymaster General Account credit balance of
Kshs.8,525,553,273.37, while both the Board of Survey Report and the
Cashbook as at 30 June 2009 reflects a debit balance of Kshs.383,994,473.20.
The resultant difference of Kshs.8,909,547,746.57 has not been reconciled or
explained.

967. As in 2007/2008, the Statement continues to show Excess Appropriations-
In-Aid (A.I.A) of Kshs.12,207,411.00 and Kshs.1,634,736.80 for 2000/2001 and
1996/1997 respectively. It has not however been clarified why the long
outstanding Excess AIA had not been surrendered to the Exchequer by 30 June
2009.

968. The Statement further shows a Standing and Special Imprests Account
balance of Kshs.1,804,539.20, which has also not been supported with an
analysis. Consequently, it has not been possible to ascertain its accuracy or
validity. The balance of Kshs.1,804,539.20 includes an amount of
Kshs.892,039.20 relating to 2007/2008 and earlier years, and which has not
been cleared. No reason has been given for the long delay in clearing this
particular amount.


STATEMENT OF ASSETS AND LIABILTIES FOR VOTE D.13

969. The Statement of Assets and Liabilities for Vote D.13 as at 30 June 2009
reflects Exchequer Account debit balances totalling Kshs.12,041,561,492.25
representing Under-Issues relating to 2007/2008 and earlier years. The Ministry
has not explained why the long outstanding Under-Issues have not been cleared
from the books of account.

970. The Statement similarly continues to reflect credit balances of
Kshs.197,361,637.35 and Kshs.35,000,000.00 under the Exchequer Account and
the Civil Contingencies Fund respectively, which have been outstanding for a
considerably long period of time. No reason has been provided for the continued
retention of the balances in the Statement.

                                      184 
 
971. The Statement also reflects General Account of Vote debit balances
totalling Kshs.161,793,291.30 against Excess Votes incurred between 1992/1993
to 1997/1998. As similarly reported in the previous year, no explanation has
been given for the long delay in regularizing these Excess Votes.

972. The Statement further reflects a debit balance of Kshs.12,295,260.90
against the General Account of Vote balance for 2008/2009, which differs with
the debit balance of Kshs.2,423,591,756.50 reflected in the Appropriation
Account for Vote D.13 for the year ended 30 June 2009. The resultant difference
of Kshs.2,411,296,495.60 between the two sets of records has not been
reconciled or explained.

973. The Statement in addition reflects General Account of Vote credit
balances totalling Kshs.12,558,827,483.70, in respect of Net Surpluses realized
between 1987/1988 and 2006/2007. No action however appears to have been
taken by the Ministry to clear the long outstanding balances.

974. The Statement shows a debit balance of Kshs.70,407,861.40 against the
Temporary Imprests Account relating to 2007/2008 and earlier years. No reason
has been provided for failure to surrender or otherwise account for the long
outstanding amount. Further, the imprest figure of Kshs.70,407,861.40 includes
a balance of Kshs.67,583,757.75 which has not been analysed. Consequently,
the accuracy of the figure of Kshs.70,407,861.40 could not be ascertained.

975. The Statement also shows a credit balance of Kshs.1,303,171,633.35
against the Paymaster-General Account, while the Cashbook as at 30 June 2009
reflects a figure of Kshs.273,976,609.50. The resultant difference of
Kshs.1,577,148,242.85 between the two sets of records has not been reconciled
or explained.

976. The Statement further shows a Suspense General Account net credit
balance of Kshs.142,294,423.35 relating to 2007/2008 and prior years. No
explanation has been provided for failure to clear the balance of
Kshs.142,294,423.35 from the books of account.

977. The amount of Kshs.142,294,423.35 referred to in the preceding
paragraph includes stale and refer to drawer cheques totalling
Kshs.117,577,553.35, which have not been replaced and no reasons have been
given for the anomaly. In addition, no analyses have been provided for the stale
and refer to drawer cheques consequent upon which the correctness of the
amount of Kshs.142,294,423.35 could not be confirmed.

978. The Statement also reflects a debit balance of Kshs.1,524,112,924.20
against the Provincial/Districts Suspense Account, which includes an amount of



                                      185 
 
STATEMENT OF ASSETS AND LIABILITIES FOR FUNDS SCHEMES AND
DEPOSITS

979. The Statement of Assets and Liabilities for Funds, Schemes and Deposits
13 as at 30 June 2009 reflects a debit balance of Kshs.2,215,994.15 in respect of
the Imprests Account, relating to 2007/2008 and earlier years. No reason has
been provided for failure to surrender or otherwise account for the long
outstanding imprests. The balance has also not been analysed and as a result, it
has not been possible to ascertain its validity and accuracy.

980. The Statement also reflects a debit balance of Kshs.25,745,140.60 under
the Agency Accounts which has not been analysed. In consequence, it has not
been possible to ascertain the validity and accuracy in the balance. The figure of
Kshs.25,745,140.60 also includes an amount of Kshs.19,217,486.60 relating to
2007/2008 and earlier years. No reason has however been provided for failure
to clear this long outstanding balance from the books of account.

981. The Statement similarly reflects Ex-MOTC Agency and Ex-MOTC Private
Works Accounts debit balances of Kshs.5,967,358.75 and Kshs.4,997,304.55
respectively, which were transferred from the former Ministry of Transport and
Communications in 1987/1988. As similarly observed in the previous year, no
action appears to have been taken so far to clear these two long outstanding
balances from the books of account.

982. The Deposits Account further reflects a credit balance of
Kshs.1,119,982,116.70 which has not been supported with the relevant analyses.
As a result, it has not been possible to confirm its completeness and accuracy.

983. The Statement shows a debit balance of Kshs.34,627,705.75 under the
Suspense Account, relating to 2007/2008 and earlier years. As in the previous
instance, the balance has not been analysed with the result that its completeness
and accuracy could not be confirmed. Further, no reason has been given for
failure to clear the balance.

984. The Statement further shows a debit balance of Kshs.22,250,045.75
under the Provincial Suspense Accounts relating to 2004/2005 and earlier years.
No explanation has been provided for non-clearance of this long outstanding
balance.

985. The Statement in addition shows a Revenue Account debit balance of
Kshs.52,409,214.20 which has not been properly analysed. Consequently, its
completeness and accuracy could not be ascertained.

                                       186 
 
986. The Statement also reflects a credit balance of Kshs.780,363,955.60 in
respect of the Mechanical Branch (Head 251) Account. It has not however been
possible to establish where this particular balance originated from, due to lack of
adequate supporting documentation.          It’s correctness could not also be
confirmed.

987. The Statement further reflects a debit balance of Kshs.1,752,133,308.55
under the Paymaster General Account, while the Cashbook as at 30 June 2009
shows a figure of Kshs.1,393,361,022.65 against the item. The difference of
Kshs.358,772,289.90 between the two sets of records has not been reconciled or
explained. In addition, no Bank Certificate to confirm the amount held at the
Central Bank of Kenya as at 30 June 2009 was made available for audit review.




                     MINISTRY OF TRANSPORT

APPROPRIATION ACCOUNT FOR VOTE R.14 FOR THE YEAR ENDED 30
JUNE 2009

Accuracy of the Appropriation Account

988. The Appropriation Account for Vote R.14 for the year ended 30 June 2009
reflects gross total expenditure of Kshs.3,190,767,305.00, while both the Ledger
and Trial Balance for the month of June 2009 show a balance of
Kshs.3,061,295,783.05 against the item. The difference of Kshs.129,471,521.95
has not been reconciled or explained.

Excluded Expenditure

989. The Appropriation Account also reflects expenditure totalling
Kshs.54,152,935.00 under Sub-Vote 140, Head 440, Sub-Head 0000, Item
2210300 – Domestic Travel and Subsistence. However, payment vouchers and
other related records for the item show total expenditure of Kshs.70,499,886.00
as having been incurred during the year. The expenditure of Kshs.54,152,935.00
has therefore been understated by a figure of Kshs.16,346,951.00.




                                       187 
 
APPROPRIATION ACCOUNT FOR VOTE D.14 FOR THE YEAR ENDED 30
JUNE 2009

Accuracy of the Appropriation Account

990. The Appropriation Account for Vote D.14 for the year ended 30 June 2009
reflects gross total expenditure of Kshs.1,220,177,660.00, while the Ledger for
the month of June 2009 shows a figure of Kshs.1,113,286,456.85 against the
item. The difference of Kshs.106,891,203.15 between the two sets of records
has not been reconciled or explained.

Under-Expenditure and Under-Collection of Appropriations-In-Aid

991. The Appropriation Account also reflects gross under-expenditure         of
Kshs.444,888,339.70 or approximately 18% of the approved estimates           of
Kshs.2,481,470,000.00 and a deficiency in Appropriations-In-Aid              of
Kshs.131,324,304.70, representing about 48% of the estimated receipts        of
Kshs.271,000,000.00.

992. The reasons provided in the footnotes to the Account for the under-
expenditure and under-collection of Appropriations-In-Aid include delay in
implementation of some of the activities envisaged under the Northern Corridor
Improvement and the East African Trade and Transport Facilitation Projects, as
well as inadequate exchequer releases by Treasury during the year. The
Ministry has not however indicated the action it intends to take to address the
underlying causes of under-expenditure and under-collection of Appropriations-
In-Aid.


PENDING BILLS

993. Records maintained at the Ministry’s Headquarters indicated that bills
totalling Kshs.34,473,913.20 relating to 2008/2009 were not settled during the
year but were instead carried forward to 2009/2010. Out of the total, bills
amounting to Kshs.26,805,558.20 related to the Recurrent Vote, while the
balance of Kshs.7,668,355.00 was in respect of those relating to the
Development Vote.

994. Had the bills been settled and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.14 for the year would have
reflected an Excess Vote of Kshs.3,250,563.20 instead of the Net Surplus to be
Surrendered to the Exchequer of Kshs.23,554,995.00 now shown, while the
Appropriation Account for Vote D.14 for the same period would have reflected a
reduced Net Surplus of Kshs.305,895,680.00 instead of Kshs.313,564,035.00
now recorded.



                                     188 
 
995. According to the Ministry, the pending bills arose as a result of
malfunctioning of the IFMIS during the year.


PROCUREMENT OF FERRIES

996. Records held at the Ministry’s Headquarters indicate that Kenya Ferry
Services commenced procurement of two ferries in 2004 for use in Mombasa.
According to information available, the ferries were to be delivered and
commissioned within a period of thirteen (13) months.

997. Following an international competitive bidding process, a foreign company
based in Germany was awarded the contract to construct and deliver the two
ferries, at contract price of Kshs.983,691,488.00 (Euros 9,458,572).

However, additional records availed for audit indicate that the contract price was
later varied and revised upwards by 25% to stand at Kshs.1,228,240,000.00
(Euros 11,810,000), apparently to accommodate a rise in the price of steel in the
international market. This was however contrary to the terms of the contract
agreement which stipulates that the contract price would not be varied to
accommodate inflationary costs. Further, no evidence has been seen to confirm
that the variation was referred to and approved by the Kenya Ferry Tender
Committee. In addition, the variation does not appear to have been based on the
prevailing consumer price index obtained from the Central Bureau of Statistics or
the monthly inflation rate issued by the Central Bank of Kenya, as required by
Section 31(a) of the Public Procurement and Disposal Regulations.

998. Although the agreement between Kenya Ferry Services and the contractor
provided that neither Kenya Ferry Services nor the contractor could assign their
responsibilities under the contract to a third party without the consent of the
other, the contractor ceded the contract to another firm also based in Germany
one month after signing the agreement, in a clear breach of the agreement. By
this action, the control and supervision of the construction of the ferries and other
related functions and activities by Kenya Ferry Services were severely curtailed.

999. No evidence has been made available to show whether or not Kenya
Ferry Services attempted to counter this clearly unfavourable decision. This a
part, the legal implication of ceding the contract by the contractor to a third party
is not clear.

1000. According to other records seen, the Government had as of January 2010
remitted to Kenya Ferry Services through Ministry of Transport grants totalling
Kshs.1,506,120,000.00 for the ferries. However, and according to expenditure
records made available during the audit, the company had spent an amount of
Kshs.948,104,453.00 on the ferries leaving a balance of Kshs.558,015,457.00
yet to be accounted for. Although the management indicated that this particular

                                        189 
 
balance was spent on financing of the company’s operations, the audited
accounts do not reflect this position. Besides, the grants provided for purchase
of ferries were not meant for financing administrative and other operations by the
company.

1001. In accordance with the agreement and other related information, the two
ferries were expected to be delivered in March 2008. However, and as far as I
have been able to establish, the ferries had not been delivered as of March 2010,
two years after the contract period elapsed.

1002. Additional information appears to suggest that although two new ramps
and an expansion and repair of the existing jetty were necessary and required in
order to accommodate the new vessels, no budgetary provision had been made
in this regard and indications are that the Government may have to provide
additional funding in the budget for 2009/2010 and perhaps beyond, for
construction of the ramps and expansion and repair of the existing jetty.

In the circumstances, it is not clear when the vessels would be put to use should
they be delivered in April 2010 as anticipated.


STATEMENT OF PARTICIPATION BY THE KENYA GOVERNMENT IN QUASI
GOVERNMENT AND OTHER STATUTORY ORGANIZATIONS

1003. The Statement of Participation by Government in Quasi-Government and
other Statutory Organizations as at 30 June 2009 shows that the Government
through the Ministry held shares with a book value of Kshs.1,648,231,765.00 as
at 30 June 2009 in five (5) Organizations. In two (2) of these Organizations, that
is, East African Airways Corporation and East African National Shipping Line, the
Government participation stood at Kshs.23,195,940.00 and Kshs.35,274,020.00
respectively.

1004. However, and as similarly reported in 2007/2008, the two (2)
Organizations were liquidated some years back without the Ministry realizing any
returns or proceeds from the investments.
 

STATEMENT OF OUTSTANDING OBLIGATIONS GUARANTEED BY THE
GOVERNMENT OF KENYA

1005. The Statement of Outstanding Obligations Guaranteed by the Government
of Kenya as at 30 June 2009 reflects one contingent liability of
Kshs.322,341,058.53 in respect of a loan granted to Kenya Ports Authority (KPA)
by the Government of Japan. However, the relevant loan’s records and other
related documentation were not availed for audit verification, with the result that



                                       190 
 
BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

1006. The Bank Reconciliation Statement for the Recurrent Cashbook reflects
payments in the Cashbook not recorded in the Bank Statement of
Kshs.517,558.50 entered on 14 April 2007, and representing stale cheques in
respect of salary deductions. No reason has however been provided for failure
to reverse the cheques in the Cashbook.

1007. The Statement also reflects under payments in the Bank Statement not
recorded in the Cashbook of Kshs.20,875,003.35, a figure of Kshs.1,500,000.00
entered on 11 September 2006 with a remark “UC OC 00069621”. No details of
this particular payment have been seen and as a result, it has not been possible
to establish what it represents.

Deposits Cashbook

1008. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects payments in the Cashbook of Kshs.1,017,478.60 not recorded
in the Bank Statement, out of which an amount Kshs.141,440.50 is represented
by stale cheques. No reason has been provided for failure to reverse the
cheques in the Cashbook.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.14

1009. The Statement of Assets and Liabilities for Vote R.14 as at 30 June 2009
reflects a Paymaster General Account debit balance of Kshs.20,894,035.95,
while the Cashbook as at 30 June 2009 shows a figure of Kshs.1,322,412.10.
The difference of Kshs.19,571,623.85 between the two sets of records has not
been reconciled or explained.

1010. The Statement further reflects balances of Kshs.672,006.05,
Kshs.1,507,764.00 and Kshs.20,984,035.95 under Advances, Temporary
Imprests and Paymaster General Account respectively. However, these balances
do not appear in the Ministry’s ledger for the month of June 2009. Consequently,
the origin, validity and accuracy of the figures could not be confirmed.




                                      191 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.14

1011. The Statement of Assets and Liabilities for Vote D.14 as at 30 June 2009
reflects a Paymaster General Account debit balance of Kshs.3,655,797.00, while
both the Cashbook and the Board of Survey Report as at 30 June 2009 show a
figure of Kshs.5,189,524.35 against the Account.           The difference of
Kshs.1,533,727.35 has not been reconciled or explained.

1012. The Statement further reflects various balances under Suspense,
Temporary Imprest, District Suspense and Paymaster General Accounts, which
differ with the corresponding figures appearing in the Ledger for the month of
June 2009. The differences have not been explained.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1013. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects a Paymaster General Account debit balance of Kshs.205,134,656.55,
while the Cashbook as at 30 June 2009 shows a figure of Kshs.205,644,289.95.
The difference of Kshs.509,633.40 between the two sets of records has not been
reconciled or explained.

1014. Further,    the Statement shows various balances under Paymaster
General, Retention Money and Miscellaneous Deposits of Kshs.205,134,656.55
(Dr), Kshs.25,326,455.10 (Cr) and Kshs.179,508,201.45 (Cr) respectively, whose
corresponding figures in the June Ledger and Trial Balance are at variance by
figures of Kshs.36,396,799.00, Kshs.24,607,537.25 and Kshs.260,422,511.90
respectively.

The variances have not been reconciled or explained.




             MINISTRY OF LABOUR AND HUMAN
                RESOURCE DEVELOPMENT

APPROPRIATION ACCOUNT FOR VOTE D.15 FOR THE YEAR ENDED 30
JUNE 2009

Under- Expenditure

1015. The Appropriation Account for Vote D.15 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.90,320,955.39 or approximately 22% of
the approved estimates of Kshs.399,712,200.00.         The under-expenditure

                                     192 
 
occurred mainly under Sub-Vote 152 – Directorate of Occupational Health and
Safety Services and Sub-Vote 151 – Industrial Relations.

1016. According to the footnotes to the Account, the under-expenditure has
been attributed to liquidity problems, non-delivery of goods and services on time,
delay in constituting the Labour Board, slow implementation of projects and late
submission of invoices by merchants and contractors.

No indication has however been seen on the measures being taken or put in
place to prevent occurrence of similar situation in future.

Accuracy of the Appropriation Account

1017. The Appropriation Account also reflects under Sub-Vote 154 –
Department of Micro and Small Scale Enterprises Development, Head 632 - Jua
Kali Development Division, Item 3110200 – Construction of buildings, an
expenditure of Kshs.52,200,767.66, while the Trial Balance as at 30 June 2009
shows a figure of Kshs.51,348,967.66 against the Item. The resultant difference
of Kshs.851,800.00 between the two sets of records has not been reconciled or
explained.    Similarly, and under the same Head, an expenditure of
Kshs.13,346,397.50 is shown as having been expended on Refurbishment of
Buildings against Item 3110300, while the Trial Balance reflects a figure of
Kshs.14,596,397.50 under the Item. As in the previous instance, the difference
of Kshs.1,250,000.00 has not been reconciled or explained.


PENDING BILLS

1018. Examination of records maintained at the Ministry’s Headquarters
revealed that bills totalling Kshs.14,957,815.02 and Kshs.12,985,865.10
chargeable to Recurrent and Development Votes respectively, were not settled
during the year 2008/2009 but were instead carried forward to 2009/2010.

1019. Had the bills been paid and charged to the accounts for 2008/2009, the
Appropriation Account for Vote R.15 for the year would have reflected a reduced
Net Surplus to be Surrendered to the Exchequer of Kshs.22,620,479.98 instead
of Kshs.37,578,295.00 now shown, while the Appropriation Account for Vote
D.15 would have shown a Net Surplus of Kshs.77,335,090.29 instead of
Kshs.90,320,955.39 now recorded.


OUTSTANDING IMPRESTS

1020. Examination of Imprest Records maintained at the Ministry’s Headquarters
revealed that Temporary Imprests totalling Kshs.3,173,895.00 which ought to
have been surrendered or otherwise accounted for, on or before 30 June 2009

                                       193 
 
were still outstanding as at that date. The above total includes an amount of
Kshs.1,502,817.00 owed by officers on Job Group ‘M’ and above and
Kshs.1,671,078.00 owed by officers on Job Group ‘L’ and below.

1021. A review of the position as at 30 September 2009 disclosed that out of the
total of Kshs.3,173,895.00 outstanding as at 30 June 2009, an amount of
Kshs.1,026,591.00 had been surrendered, leaving a balance of
Kshs.2,147,304.00 outstanding.


CONSTRUCTION OF A RESOURCE CENTRE AT THE TOM MBOYA LABOUR
COLLEGE

1022. Information available indicates that on 16 September 2002, the Central
Organizations of Trade Unions (COTU) was allocated by the Government a
parcel of land measuring approximately 1.4189 hectares adjacent to the Tom
Mboya Labour College in Kisumu,           for the purpose of expanding the
organization’s undertakings including training.

1023. The organization thereafter sought financial assistance for construction of
an Ultra-modern Resource Centre on the plot, through All Chinese Workers
Federation in China. However, and according to information available, the
Federation agreed to finance construction of the Resource Centre, but on
condition that the arrangement was to be planned and considered as a
Government to Government initiative.

1024. In this connection therefore, and following consultations between COTU
and Ministry of labour and Human Resource Development , the project was
factored in the Estimates for 2007/2008 and 2008/2009 financial years under
Other Capital Grants and Transfers item.

Construction Tender

1025. Tender No.D15/8219 A/1 for construction of the Resource Centre was
awarded by the Ministerial Tender Committee on 16 October 2007 to a
construction company based in Nairobi, at a contract sum of
Kshs.207,884,539.60.

Scope of Work

1026. According to records available, the scope of work for the project included
erection and completion of a Resource Centre comprising of 4 No. floors,
covering 4500 square meters. The Centre was to have other facilities including;
6 No. VIP rooms including a VIP lounge; 80 No. ordinary rooms including a
lounge; and a restaurant.



                                      194 
 
1027. The works further included; electrical installations, structured cabling and
telecommunication, supply and installation of lifts, building mechanical services
(plumbing, drainage and supply and installation or solar heating systems) and
supply and installation of kitchen facilities.

Contract period and progress of work

1028. The initial contract period was for forty eight (48) weeks running from 19
October 2007 to 19 October 2008. This period was later extended by forty four
(44) weeks to 4 August 2009. However, and as of December 2009, records
show that approximately 84% of the physical work had been completed, while
168% of the contract period had elapsed. No reasons have been provided for
the apparent slow progress of the works.

Payments

1029. A review of payment certificates and the related expenditure records
showed that a sum of Kshs.181,496,936.90 had been paid to the contractor as at
30 June 2009 through certificates numbers 1 – 13, against the contract sum of
Kshs.207,884,539.60.    The payment of Kshs.181,496,936.90 represented
approximately 87% of the contract sum, while about 84% of the physical work
had been completed. Indications therefore are that payments made as at that
date were not commensurate with the work done on the ground.

Supply and Installation of Lifts

1030. Tender No.D15/8219A/4 for Supply, Installation and Commissioning of
No.8 passengers 4 landing lifts was awarded by the Ministerial Tender
Committee on 2 April 2008 to a local company at a contract sum of
Kshs.7,027,676.00. It was however observed that the Tender Committee had
initially recommended the lowest bidder, another local company which was
similarly responsive in all respects, to supply and install the lifts at a tender sum
of Kshs.5,029,277.00. For some unclear reason, and after validation of the
tenders by Ministry of Public Works, the former company which had quoted a
higher price of Kshs.7,027,676.00 was recommended for the award. No
documentary evidence has been provided to justify the basis on which the higher
bidder was awarded the contract.

Quality and Capacity of the Lifts

1031. An audit inspection of the lifts carried out on 18 January 2010 revealed
that although one of the lifts had already been installed, its door was too small
and not in accordance with the architectural drawings which required that such
door be of a minimum width of 1.5 meters.




                                        195 
 
1032. Further, and according to additional information available, an inspection of
the lift by the relevant engineers and consultants had not come up with the way
forward. In addition, and while the structural engineer indicates that the lift shaft
details were in accordance with the specifications received from the Consultant
Service Engineer, the contractor maintains that he had specified the shaft size
showing the smaller door opening at the tendering stage. The matter does not
appear to have been resolved as at the date of this report.

1033. Apart from the issues discussed above, the terms and conditions         of the
agreement between COTU and Ministry on the project have not been              seen.
Consequently, the rationale behind involvement and utilization of             public
resources on a project not belonging to the Government has not                 been
established.


TILING AND INTERNAL PAINTING OF FLOORS OF SAFETY HOUSE

1034. A contract for Tiling and Internal Painting of various floors at the Safety
House in Nairobi was awarded to a local firm through letter Ref. No.
DOHS/E&S/4/44 dated 21 January 2009, at a contract sum of
Kshs.4,972,026.80. According to records available, the Tiling and Internal
Painting involved;

    •     First floor – Laying of 6mm thick, ceramic coloured tiles size
          300x300mm and 200x25mm border tiles, as well as applying two (2)
          coats of gloss paint on the corridor walls;

    •     Fourth Floor – Laying of 8mm thick polished granito floor and granito
          border tiles and applying two (2) coats of gloss paint on the doors; and,

    •     Fifth Floor – Laying of 6mm thick ceramic coloured tiles size
          300x300mm and 200x25mm border tiles as well as applying two (2)
          coats gloss paint on the corridor walls.

1035. Further information showed that the works were to be completed within a
period of six (6) weeks from a date to be determined by the Provincial Works
Officer, Nairobi.

1036. According to the Certificate of Practical Completion issued by the Works
Officer, the contract had been certified as complete on 25 June 2009, following
which a Handing Over Certificate was issued on 29 June 2009.

1037. An audit inspection exercise carried out in August 2009 on the project
however revealed that granito border tiles valued at Kshs.692,940.00 had not
been fitted in accordance with the specifications in the tender documents.
Further, a cheaper water based paint had been applied on the walls and doors,

                                        196 
 
instead of the specified petroleum solvent type (i.e gloss). No reason has been
provided for failure to comply with the specifications as outlined in the Bills of
Quantities and other tender documents.

1038. Expenditure records maintained in respect of the contract show that an
amount of Kshs.5,066,528.95 had been paid as of November 2009 and the same
had been charged against Vote D.15. Apart from the fact that the contractor had
been paid for works not done or completed in accordance with the specifications
in the tender documents, it has also not been explained why the firm was paid an
extra amount of Kshs.94,502.15 over and above the contract sum of
Kshs.4,972,026.80.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

1039. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Cashbook not in the Bank Statement
(unpresented cheques) totalling Kshs.23,885,560.45. The amount however
includes a balance of Kshs.1,166,543.00 in respect of which no cheques were
issued. No clarification has been made for the anomaly.

1040. The Statement also reflects payments in the Bank Statement not recorded
in the Cashbook totalling Kshs.8,079,931.90, out of which amounts of
Kshs.713,871.85 and Kshs.109,195.00 represent cheque replacements relating
to 2005/2006 and 2006/2007 respectively. However, the circumstances under
which replacements would appear in the Bank Statement and not in the
Cashbook has not been explained.

1041. The Statement further reflects receipts totalling Kshs.3,010,601.00 in the
Cashbook not recorded in the Bank Statement, relating mainly to cancellations
for the previous years reversed cheques. The cancellations and reversals of the
cheques have not however been clarified.

Development Cashbook

1042. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects payments totalling Kshs.2,150,619.25 in the Bank
Statement not recorded in the Cashbook, out of which a sum of
Kshs.1,440,001.25 relates to 2007/2008 and earlier years. No explanation has
been provided as to why the outstanding payments had not been recorded in the
Cashbook as at 30 June 2009.

1043. The Statement also reflects receipts totalling Kshs.50,310,933.30 in the
Cashbook not recorded in the Bank Statement. The receipts however include a

                                       197 
 
figure of Kshs.225,840.00 relating to June 2007. This particular figure has not
however been explained.

Deposits Cashbook

1044. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects receipts of Kshs.4,148,988.45 in the Bank Statement not
recorded in the Cashbook, out of which an amount of Kshs.2,100,363.00 relates
to year 2004. It has not however been clarified as to why the amount of
Kshs.2,100,363.00 had not been recorded in the Cashbook as at 30 June 2009.
Further, details of five (5) cheques for a sum of Kshs.997,054.35 received on 18
May 2006 and 30 June 2009 have not been provided for audit review.

1045. The Statement also reflects payments of Kshs.8,789,885.90 in the Bank
Statement not recorded in the Cashbook. Details of forty nine (49) cheques for
amounts totalling Kshs.8,557,949.70 included in the above figure and paid
between 11 January 2001 and 11 May 2009 have not similarly been provided for
audit verification.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.15

1046. The Statement of Assets and Liabilities for Vote R.15 as at 30 June 2009
reflects an Exchequer Account debit balance of Kshs.489,276,534.00, out of
which an amount of Kshs.487,304,834.00 relates to 2007/2008 and earlier years.
No reason has been provided for non-clearance of the long outstanding balance
of Kshs.487,304,834.00.

1047. The Statement also reflects a General Account of Vote credit balance of
Kshs.670,857,074.40,     which includes an amount of Kshs.596,957,338.82
relating to 2006/2007 and earlier years. It has not however been clarified why
the latter balance had not been cleared from the books of account by 30 June
2009.

1048. The Statement further reflects a Standing Imprest Account debit balance
of Kshs.4,127,007.85, out of which an amount of Kshs.3,547,222.85 relates to
2007/2008 and earlier years. The Statement also shows a Temporary Imprest
Account debit balance of Kshs.6,578,938.65, which relates to 2007/2008 and
earlier years. No reason has been provided why the imprests had not been
surrendered or otherwise accounted for, on or before 30 June 2009.

1049. The Statement shows an Agency Account debit balance of
Kshs.146,952,868.13 relating to 2007/2008 and earlier years. No analysis has
been provided for the balance and therefore its completeness and accuracy
could not be ascertained. Further, no reason has been given for the long delay
in having the balance cleared.

                                      198 
 
1050. The Statement also shows a Clearance Account debit balance of
Kshs.23,272,524.34 for which no analysis has been provided.               In the
circumstances, it has not been possible to establish what the balance represents
or confirm its accuracy.

1051. The Statement further shows an Advance Account debit balance of
Kshs.9,172,801.75, out of which an amount of Kshs.8,188,565.90 relates to
2007/2008 and earlier years. Apart from lack of an analysis for balance of
Kshs.9,172,801.75, no reason has been provided for delay in clearing the figure
of Kshs.8,188,565.90 from the books of account.

1052. The Statement in addition reflects Paymaster General Account debit and
credit balances totalling Kshs.12,939,221.60 and Kshs.8,104,170.50 respectively
relating to 2005/2006 and earlier. As in the previous year, it has not been
clarified what these balances represent.

1053. The Statement also reflects a Provincial/District Suspense Account credit
balance of Kshs.58,496,567.25 and a Suspense Account figure of
Kshs.4,768,004.25,     both relating to 2007/2008 and earlier years.        No
explanation has however been provided for non-clearance of these long
outstanding balances. Further, the amount of Kshs.4,768,004.25 has not been
analysed, with the result that its accuracy could not be ascertained.

1054. The Statement finally reflects an Excess Appropriations-In-Aid credit
balance of Kshs.1,841,418.65 for the year 2002/2003, which had not been
surrendered to the Exchequer as at 30 June 2009.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.15

1055. The Statement of Assets and Liabilities for Vote D.15 as at 30 June 2009
reflects an Exchequer Account balance of Kshs.377,041,302.70, which includes
an amount of Kshs.336,167,102.70 relating to 2007/08 and earlier years. No
reason has been provided for failure to clear the latter balance. The balance of
Kshs.377,041,302.70 also includes an amount of Kshs.40,874,200.00 for
2008/2009 which differs with the figure of Kshs.40,847,200.00 shown in the
records held at the Treasury, by Kshs.27,000.00. The difference has not been
reconciled or explained.

1056. The Statement also reflects an Exchequer Account credit balance of
Kshs.2,199,000.00, which has not been explained or supported with the relevant
documents. Its accuracy is therefore in doubt.




                                      199 
 
1057. The Statement further reflects Standing and Temporary Imprest Accounts
balances of Kshs.148,990.00 and Kshs.9,895,330.05 respectively, relating to
2007/2008 and earlier years. No reason has been provided why the balances
had not been surrendered or accounted for, on due dates or as at 30 June 2009.

1058. The Statement shows a Suspense Accounts-Headquarters debit balance
of Kshs.159,181,231.44, out of which an amount of Kshs.148,164,655.00 relates
to 2007/2008 and prior years. The balance also includes an Inter-Ministerial
Agency amount of Kshs.15,977,730.99 which is not however reflected in the
Ledger for the month of June 2009. No explanation has been provided for non-
clearance of the Suspense Account balance or non-inclusion of Agency Account
balance in the Ledger.

1059. The Statement also shows Paymaster General Account debit and credit
balances totalling Kshs.32,969,318.95 and Kshs.593,887.10 respectively, in
respect of Bank and Cash balances brought forward from 2007/08 and earlier
years. It has not however been clarified as to what these balances represent or
why they are still appearing in the books of account.

1060. In addition, and while the Statement reflects a Cash at Bank balance of
Kshs.2,945,010.15 as at 30 June 2009, the Board of Survey Report as at the
same date shows a figure of Kshs.3,165,410.15 against the Account. The
resultant difference of Kshs.220,400.00 between the two sets of records has not
been reconciled or explained.

1061. The Statement further shows a General Account of Vote (GAV) credit
balance of Kshs.683,183,756.19, which includes an amount of
Kshs.531,999,532.35 relating to 2006/2007 and earlier years. No reason has
been provided for delay in clearing the latter balance.

1062. The Statement in addition reflects Provincial/District Reimbursement
Account and Development Clearance Account credit balances of
Kshs.19,901,165.35 and Kshs.50,010,341.30 respectively, which have not been
properly analysed. The accuracy of the balances could not therefore be
ascertained. The two balances have also been outstanding for a considerably
long period of time.

1063. The Statement finally shows an Excess Appropriations-In-Aid balance of
Kshs.28,421,636.65 relating to 1995/1996 financial year. It has not been clarified
why this long outstanding amount had not been remitted to the Exchequer as at
30 June 2009.




                                       200 
 
STATEMENT OF ASSETS AND LIABILITIES FOR FUNDS, SCHEMES AND
DEPOSITS

1064. The Statement of Assets and Liabilities for Funds, Schemes and Deposits
as at 30 June 2009 reflects a Provincial/District Reimbursement Account net
debit balance of Kshs.9,140,983.65 relating to 2005/2006 and earlier years. No
explanation has been provided for failure to clear this long outstanding balance.
The amount has also not been analysed and therefore its accuracy is in doubt.

1065. The Statement also reflects an Imprest Account net debit balance of
Kshs.6,635,049.20 which has similarly not been analysed, with the result that its
correctness could not be confirmed. The figure also includes an amount of
Khss.6,524,309.20 relating to 2007/2008 and earlier years, and which ought to
have been surrendered on or before 30 June 2009.

1066. The Statement further reflects a Suspense Account debit balance of
Kshs.11,474,726.15 relating to 2007/2008 and earlier years. Apart from lack of a
proper analysis, the balance also ought to have been cleared from the books of
account on or before 30 June 2009.

1067. The Statement shows Cash on Hand and Cash at Bank balances totalling
Kshs.27,810,940.20, while the Board of Survey Report as at 30 June 2009
reflects a figure of Kshs.26,015,606.90 against the two items. The resultant
difference of Kshs.1,795,333.30 between the two sets of records has not been
reconciled or explained.

1068. The Deposits Account net credit balance of Kshs.55,061,699.20 has
similarly not been analysed and as a result, the accuracy of the amount could not
be confirmed. For the same reason, the correctness of the Statement of Assets
and Liabilities as drawn is in doubt.
 


                         MINISTRY OF TRADE

APPROPRIATION ACCOUNT FOR VOTE R.16 FOR THE YEAR ENDED 30
JUNE 2009

Accuracy of the Appropriation Account

1069. The Appropriation Account for Vote R.16 for the year ended 30 June 2009
reflects total expenditure of Kshs.429,211,230.75 under Sub-Votes 160, 162, 166
and 167, whereas the Ledger for the month of June 2009 shows a balance of
Kshs.377,896,854.60 against the Sub-Votes, resulting in a difference of
Kshs.51,314,376.15. The Appropriation Account also reflects Appropriations-In-

                                      201 
 
Aid of Kshs.20,500,000.00 under Sub-Vote 167, Head 756, Item 3520300, while
the Ledger shows a figure of Kshs.3,233,040.00 against the item, occasioning a
difference of Kshs.17,266,960.00. In both instances, the differences have not
been reconciled or explained.

Unvouched Expenditure

1070. The Appropriation Account also reflects total expenditure of
Kshs.1,451,412,560.30 against the Vote as at 30 June 2009. The total includes
expenditure amounting to Kshs.299,415,160.10 incurred under Sub-Vote 166,
Head 752 in respect of Foreign Trade Services in Kinshasa, Dar es salaam,
Addis Ababa, Cairo, Brussels, London, Moscow, Harare, Islamabad, Lusaka,
Washington, Kampala, Berlin, Pretoria, Beijing and Geneva.

1071. Payment vouchers and other documents in support of the expenditure of
Kshs.299,415,160.10 were not however made available for audit review, with the
result that propriety of the expenditure could not be ascertained.


APPROPRIATION ACCOUNT FOR VOTE D.16 FOR THE YEAR ENDED 30
JUNE 2009

Excess Vote

1072. The Appropriation Account for Vote D.16 for the year ended 30 June 2009
reflects total actual expenditure of Kshs.403,396,723.00 against an approved
provision of Kshs.394,778,356.00, resulting in an Excess Vote of
Kshs.8,618,367.00. The Excess Vote has been mainly attributed to an over-
expenditure of Kshs.13,250,000.00 recorded under Sub-Vote 160, Head 796 –
Export Processing Zone Authority.

Unvouched Expenditure

1073. The Appropriation Account also reflects total expenditure of
Kshs.167,940,326.00 incurred in respect of Kenya European Union Post Lome
Trade (KEPLOTRADE ) under Sub-Vote 166, Head 751. Out of the total, an
amount of Kshs.42,630,610.70 was not supported with payment vouchers and
other related records and as a result, the propriety of this particular expenditure
could not be ascertained.

Unsupported Grants

1074. The Appropriation Account further reflects total expenditure of
Kshs.45,402,030.00 under Sub-Vote 166, Head 745 – Trade Development Field
Services. The amount includes grants amounting to Kshs.10,000,000.00



                                       202 
 
extended during the year to various Joint Loans Boards in Coast, Nyanza,
Western, Rift Valley, Nairobi, Eastern and North Eastern Provinces.

1075. However, no documentary evidence has been provided to confirm that the
grants were received by the intended recipients and that such grants were
utilized for the intended purpose.


OUTSTANDING IMPREST

1076. Examination of Imprest Records maintained at the Ministry’s Headquarters
indicated that Temporary and Standing Imprests amounting to Kshs.582,429.80
and Kshs.18,000.00 respectively, which ought to have been surrendered or
otherwise accounted for on or before 30 June 2009 were still outstanding as at
that date.

1077. Out of the Temporary Imprests shown above, an amount of
Kshs.179,593.80 was owed by officers on Job Group ‘M’ and above,
Kshs.351,792.00 by officers on Job Group ‘L’ and below, while the balance of
Kshs.51,044.00 was due from an officer whose Job Group could not be
identified in the Ministry’s records.

1078. It was also observed that three officers were issued with additional
imprests before they had surrendered or accounted for balances previously
issued.

1079. The Standing Imprest balance of Kshs.18,000.00 was owing from a
secretarial staff and a clerical officer.

1080. A review of the position as at 1 December 2009 disclosed that imprests
totalling Kshs.435,797.80 had been recovered, leaving a balance of
Kshs.164,632.00 outstanding.


OUTSTANDING LOANS – BUNGOMA DISTRICT TRADE DEVELOPMENT
OFFICE - JOINT LOANS BOARD

1081. In my report for 2007/2008, concern was raised over non-performing loans
and accumulated interest totalling Kshs.8,932,413.42 as at 30 June 2008, due
from some five hundred and eighty four (584) applicants who had accessed loan
facilities in 2007/2008 and earlier years at the Bungoma Trade Development
Office.

1082. A review of the position during 2008/2009 disclosed that the figure for the
non-performing loans and the accumulated interest had increased from
Kshs.8,932,413.42 as at 30 June 2008 to Kshs.9,464,315.00 as at 30 June 2009,

                                      203 
 
made up of principal and interest of Kshs.5,052,189.79 and Kshs.4,412,125.21
respectively.

No explanation has however been provided for the upward trend in non-
performing loans. Further, no measures appear to have been put in place to
ensure that the undesirable trend is reversed.


OUTSTANDING LOANS – KAKAMEGA DISTRICT TRADE DEVELOPMENT
OFFICE

1083. Examination of loans records maintained at the Kakamega District Trade
Development Office during 2008/2009 revealed that loans totalling
Kshs.3,025,168.25, granted to some sixty two (62) traders and individuals over
an unspecified period of time up to 30 June 2009, were outstanding as at that
date.

No reason has been provided by the Trade Development Office for failure to
recover the loans.


NON - RECOVERY OF LOAN ADVANCES – NAROK NORTH DISTRICT
TRADE DEVELOPMENT OFFICE

1084. Examination of records maintained at the Narok North – District Trade
Development Office revealed that loans totalling to Kshs.8,572,629.00 advanced
by the Joint Loans Board to various traders and individuals between 1970 and
2007 were outstanding as at 30 June 2009. Although, according to information
available the loans were to be repaid within a period of two years from the date of
issue, no such repayments appear to have been received by the Ministry as at 30
June 2009 and no action has been taken in this regard.


NON-PERFORMING LOANS – GARISSA TRADE DEVELOPMENT OFFICE -
JOINT LOANS BOARD

1085. In the report for 2007/2008, concern was raised over long outstanding
loans and accumulated interest totalling Kshs.8,235,507.43 due from various
traders and individuals to the Garissa Joint Loans Board as at 30 June 2008, with
some such loans dating to as far back as in 1968.

1086. A review of the position in 2008/2009 disclosed that minimal improvement
had been recorded during the year in that the overdue loans and accumulated
interest reduced by a paltry sum of Kshs.151,210.52 (or about 1.8%) , to stand at
Kshs.8,084,296.91 as at 30 June 2009. Out of the amount of Kshs.8,084,296.91,



                                       204 
 
a balance of Kshs.3,821,311.87 represented the principal, while the balance of
Kshs.4,262,985.04 related to accumulated interest.

No satisfactory explanation has been provided for failure to recover the loans
from the traders and individuals.


NON-PERFORMING LOANS – ISIOLO TRADE DEVELOPMENT OFFICE –
JOINT LOANS BOARD

1087. Examination of records maintained at the Isiolo District Development
Office - Joint Loans Board revealed that loans and accrued interest amounting to
Kshs.1,291,905.00 and Kshs.927,978.00 respectively, owing from various traders
and individuals and relating to the period 1999 and 2004, were due and
outstanding as at 30 June 2009. No reasons have been provided by the Loans
Board for failure to recover the loans.


NON-PERFORMING LOANS – MANDERA EAST TRADE DEVELOPMENT
OFFICE - JOINT LOANS BOARD

1088. Examination of loans records maintained at the Mandera East District
Trade Development Office in respect of the Joint Loans Board revealed that
loans and accrued interest amounting to Kshs.3,760,000.00 and
Kshs.2,746,532.08 respectively, due from various traders and individuals had
not been recovered, but were still outstanding as at 30 June 2009.

No reason has been provided for failure to collect the loans. Further, and
according to other records seen, some of the loans have been outstanding since
1973.


OUTSTANDING LOANS – KWALE TRADE DEVELOPMENT OFFICE - JOINT
LOANS BOARD

1089. Examination of records maintained at the Kwale District Trade
Development Office in respect of the Joint Loans Board revealed that loans
totalling Kshs.4,821,482.66 issued to various traders and individuals between
1958 and 2006 had not been recovered, and were outstanding as at 30 June
2009. The amount of Kshs.4,821,482.66 was made up of an amount of
Kshs.2,675,603.93 in respect of the principal loan, while the balance of
Kshs.2,145,878.73 represented accumulated interest.

No reasons have been provided for failure by the Loans Board to recover the
outstanding amounts.



                                      205 
 
NON-PERFORMING LOANS – MAKUENI TRADE DEVELOPMENT OFFICE -
JOINT LOANS BOARD

1090. Examination of records maintained at the Makueni District Trade
Development Office - Joint Loans Board revealed that loans totalling
Kshs.6,004,313.08 issued to various traders and individuals between 1994 and
2008 had not been settled as at 30 June 2009 and were therefore in arrears.
The balance of Kshs.6,004,313.08 included amounts of Kshs.3,606,620.79 and
Kshs.2,397,692.29 relating to the principal loan and accumulated interest
respectively.

No steps appear to have been taken by the Loans Board to have the outstanding
loans recovered.


NON-PERFORMING LOANS – KITUI TRADE DEVELOPMENT OFFICE -
JOINT LOANS BOARD

1091. Examination of records maintained at the Mwingi District Trade
Development Office during the year in respect of the Joint Loans Board disclosed
that loans totalling Kshs.8,953,056.17 issued to various traders and individuals
between 1958 and 2006 were in arrears as at 30 June 2009. The amount of
Kshs.8,953,056.17 consisted of balances of Kshs.4,967,794.81 and
Kshs.3,985,261.36 relating to the principal loan and accumulated interest
respectively.

It has not however been clarified why the Loans Board has not been able to
recover these loans.


NON-PERFORMING LOANS – EMBU TRADE DEVELOPMENT OFFICE -
JOINT LOANS BOARD

1092. Examination of records held at the Embu District Trade Development
Office during the year in respect of the Joint Loans Board revealed that loans
totalling Kshs.13,565,784.67 issued between 1960 and 2007 were in arrears as
at 30 June 2009. Out of the total, an amount of Kshs.8,105,937.40 represented
the principal loan,     while the balance of Kshs.5,459,847.27 related to
accumulated interest. No steps appear to have been taken by the Loans Board
to recover these long outstanding loans from the traders.




                                      206 
 
NON-PERFORMING LOANS – MARSABIT TRADE DEVELOPMENT OFFICE -
JOINT LOANS BOARD

1093. Examination of records maintained at the Marsabit District Trade
Development Office during the year, in respect of the Joint Loans Board revealed
that loans totalling Kshs.8,582,628.00 issued to various traders and individuals
between 1967 and 2008, were due and outstanding as at 30 June 2009. The
amount of Kshs.8,582,628.00 comprised of principal loan of Kshs.4,054,940.00
and accumulated interest of Kshs.4,527,688.00.

No reason has been provided by the Loan’s Board for failure to recover the
loans, some of which have been outstanding for a considerably long period of
time.


NON-PERFORMING LOANS – MOMBASA MUNICIPALITY                             TRADE
DEVELOPMENT OFFICE - JOINT LOANS BOARD

1094. Examination of loans records maintained at the Mombasa Municipality
Trade Development Office in respect of the Joint Loans Board revealed that
loans totalling Kshs.11,270,814.46 issued between 1958 and 2007 were
outstanding and due as at 30 June 2009. The amount of Kshs.11,270,814.46
represented the principal loan amounting to Kshs.6,471,264.39 and accumulated
interest of Kshs.4,799,550.07. No reason has been provided by the Loans Board
for failure to recover the arrears.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

1095. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments of Kshs.40,155,686.80 in the Bank Statement not in
the Cashbook, which include two balances of Kshs.94,664.75 and
Kshs.39,748,857.45 dated 18 June 2009 and 23 June 2009 respectively, that
have not been supported with the relevant documents. Consequently, the
validity and correctness of the balances could not be ascertained.

Deposits Cashbook

1096. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects payments totalling Kshs.779,895.90 in the Cashbook not
recorded in the Bank Statement, which includes four (4) stale cheques
amounting to Kshs.41,500.00. No explanation has been provided for failure to
replace or reverse the cheques in the Cashbook.



                                      207 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.16

1097. The Statement of Assets and Liabilities for Vote R.16 as at 30 June 2009
reflects an Exchequer Account debit balance of Kshs.228,809,096.70, which
includes an amount of Kshs.217,988,465.90 relating to 2007/2008 and earlier
years. As in the previous year, no reason has been provided for failure to clear
this long outstanding balance from the Ministry’s books of account. Further, the
Statement shows an Exchequer Account balance of Kshs.10,820,630.70 for
2008/2009, while records held at the Treasury show a figure of Kshs.1,875.20
against the Account. The difference of Kshs.10,818,755.50 between the two sets
of records has not been reconciled or explained.

1098. The Statement also reflects a Paymaster General Account balance of
Kshs.2,113,244,321.65 while the Cashbook as at 30 June 2009 shows a figure of
Kshs.90,935,812.25    against    the  Account.         The    difference    of
Kshs.2,022,308,509.40 between the two sets of records has not been reconciled
or explained.

1099. The Statement further reflects debit and credit balances totalling
Kshs.62,856.65 and Kshs.3,994,951.10 respectively against Agency Fees,
Provision for Encumbrance, Inter-Ministerial Agency, Government Liability
Attachment and District Recurrent Bank Account, all of which have not been
analysed.

In absence of the analyses, it has not been possible to confirm the completeness
and accuracy of the balances.

1100. The Statement shows nil balances against Inter- Ministerial Agency and
Clearance Accounts, an indication that the debit and credit balances of
Kshs.6,738,873.05 and Kshs.1,208,934.80 respectively brought forward from
2007/2008 were cleared during 2008/2009. No documentary evidence has
however been provided to support clearance of the two balances.

1101. The Statement also shows a balance of Kshs.415,406.80 under Loss of
Cash Account. This balance has not been analysed or explained and as a
result, it has not been possible to confirm its validity and completeness.

1102. The Statement further shows a debit balance of Kshs.333,615,125.00
under the District Suspense Account relating to 2007/2008 and earlier years, and
which had not been cleared as at 30 June 2009 as expected.

1103. The Statement also reflects a General Suspense Account Credit balance
of Kshs.12,756,546.00, which includes an amount of Kshs.8,900,929.45 relating
to 2007/2008. The latter amount ought to have been cleared by 30 June 2009.



                                      208 
 
1104. The Statement further reflects a debit balance of Kshs.5,236,773.30
against the Salary Paid in Advance Account, representing a recovery of
Kshs.38,296,931.90 during the year. However, no documentary evidence has
been made available to support the recovery of Kshs.38,296,931.90. As a result
the validity of the transaction could not be ascertained.

1105. The Statement in addition reflects a General Account of Vote balance of
Kshs.1,421,802,470.00, while the Recurrent Appropriation Account for
2008/2009 shows a Net Surplus to be Surrendered to the Exchequer of
Kshs.67,671,364.60. The difference of Kshs.1,354,131,105.40 between the two
sets of records has not been reconciled or explained.

1106. The Statement also shows debit balances totalling Kshs.256,629.10,
made up of Kshs.61,717.50, Kshs.169,211.60 and Kshs.25,700.00 under Staff
Welfare Associations, HELB deductions and Union Dues Accounts respectively.
No explanation has however been provided for the debit balances against
Accounts which under normal circumstances should reflect credit or nil balance.

1107. In addition, the Statement reflects an unusual credit balance of
Kshs.10,000.00 against the Maintenance Expenses – Motor Vehicles Account
and another one of Kshs.17,449,806.10 under the Salary Advance Account. As
in the previous instance, no reason has been provided for the unusual credit
balances.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.16

1108. The Statement of Assets and Liabilities for Vote D.16 as at 30 June 2009
reflects an Exchequer Account debit balance of Kshs.1,017,924,292.15, which
includes an amount of Kshs.1,016,540,292.15 relating to 2006/2007 and earlier
years. No reason has been provided for failure to clear the long outstanding
amount of Kshs.1,016,540,292.15 from the books of account. Further, the
Statement also reflects an amount of Kshs.1,384,000.00 in respect of the
Exchequer Account for 2008/2009, while records maintained at the Treasury
show nil balance against the Account. The difference of Kshs.1,384,000.00
between the two sets of records has not been reconciled or explained.

1109. The Statement also reflects a General Suspense Account credit balance
of Kshs.9,868.40 relating to 2006/2007 and earlier years. Although the Account
has been identified as relating to stale cheques, no action appears to have been
taken to have the cheques replaced.

1110. The Statement further reflects an Agency Account balance of
Kshs.108,000.00, which has not been properly analysed with the result that its
completeness and accuracy could not be ascertained. Further, the figure ought
to have been cleared from the books of account by 30 June 2009.

                                      209 
 
1111. The Statement similarly reflects long outstanding balances of
Kshs.250,000.00 and Kshs.2,200,591.00 under Standing and Temporary
Imprests Accounts respectively. As in the previous year, no reason has been
provided for failure to have the Imprests balances surrendered or otherwise
accounted for. Further, the Temporary Imprest Account figure of
Kshs.2,200,591.00 has not been supported with an analysis consequent upon
which, it has not been possible to ascertain its completeness and accuracy.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1112. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects a Paymaster General Account balance of Kshs.43,480,832.35
represented by amounts of Kshs.41,709,615.35, Kshs.1,679,078.05 and
Kshs.92,138.95 under Revenue Deposit E-312 Account, Cash and Return to
Drawer Cheques respectively.

1113. However, both the Cashbook and the Board of Survey Report show a
figure of Kshs.14,327,272.35 as at 30 June 2009. The resultant difference of
Kshs.29,153,560.00 has not been reconciled or explained.

1114. Further, no reason has been provided as to why the Ministry has not
replaced R/D Cheque No. 006516 for Kshs.92,138.95 payable to Kenya
Revenue Authority (Commissioner of Value Added Tax).

1115. The Statement also reflects a Cash Clearing Account credit balance of
Kshs.2,988,654.45, which has not been analysed with the result that its
completeness and accuracy could not be ascertained.



    MINISTRY OF JUSTICE, NATIONAL COHESION AND
              CONSTITUTIONAL AFFAIRS

APPROPRIATION ACCOUNT FOR VOTE R.17 FOR THE YEAR ENDED 30
JUNE 2009

Under-collection of Appropriations-In-Aid

1116. The Appropriation Account for Vote R.17 for the year ended 30 June 2009
reflects under-collection of Appropriations-In-Aid of Kshs.100,378,050.00,
representing   approximately   99%      of   the     estimated   receipts  of
Kshs.100,600,000.00. The under-collection was mainly recorded under Sub-
Vote 172, Head 648 – Kenya School of Law, where nil receipts were realized

                                     210 
 
against estimated collections of Kshs.100,000,000.00. No reason has however
been provided for the under-collection.


APPROPRIATION ACCOUNT FOR VOTE D.17 FOR THE YEAR ENDED 30
JUNE 2009

Under-expenditure and Under-collection of Appropriations-In-Aid

1117. The Appropriation Account for Vote D.17 for the year ended 30 June 2009
reflects a gross under-expenditure of Kshs.442,925,556.20 or approximately 74%
of the estimated provision of Kshs.596,310,421.00. The Appropriation Account
also reflects a deficiency in Appropriations-In-Aid of Kshs.323,138,708.00,
representing about 78% of the estimated receipts of Kshs.414,242,371.00.

1118. The under-expenditure and under-collection of Appropriations-In-Aid were
recorded mainly under Sub-Vote 170, General Administration and Planning.
According to the footnotes to the Account, the under-expenditure and under-
collection of Appropriations-In-Aid have been attributed to inconsistent funding,
inadequate Government counter-part funding and delayed procurement resulting
from inadequate internal capacity, amongst other reasons.


OUTSTANDING IMPRESTS

1119. Examination of Imprest Records maintained at the Ministry’s Headquarters
revealed that imprests totalling Kshs.1,092,187.65, which ought to have been
surrendered or otherwise accounted for, on or before 30 June 2009 were still
outstanding as at that date.

1120. Out of the above total,             Temporary Imprests amounting to
Kshs.754,461.25 were due from officers on Job group ‘M’ and above including
politicians, Kshs.297,304.40 from officers on Job group ‘L’ and below, while the
balance of Kshs.40,422.00 was in respect of Standing Imprests.

1121. It was further observed that some officers were issued with additional
imprests before having surrendered or accounted for amounts previously issued.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

1122. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects an amount of Kshs.283,552,993.75 in respect of payments in
the Cashbook not recorded in the Bank Statement (unpresented cheques). The

                                      211 
 
amount includes stale cheques of Kshs.1,489,546.00 dated between 8 October
2008 and 30 December 2008.

No efforts appear to have been made to have the cheques replaced or credited
back in the Cashbook.

1123. The Statement also reflects receipts of Kshs.44,277,602.20 in the Bank
Statement not recorded in the Cashbook, described as Credits Without Debits
and Cashbook Overcasts. It has not however been clarified as to what these
Debits and Overcasts represent, while at the same time, no action appears to
have been taken to have the Cashbook updated.

1124. The Statement further reflects payments in the Bank Statement not
recorded in the Cashbook of Kshs.10,089,328.15, representing settlements
made by the bank. It has not been explained how the payments were processed,
yet the respective cheques were not recorded in the Cashbook.

1125. The Statement in addition reflects receipts of Kshs.47,724,567.70 in the
Cashbook not recorded in the Bank Statement. The receipts include an amount
of Kshs.46,599,199.95 referred to as Debit Without Credit and another of
Kshs.1,125,365.75 described as Cashbook Undercasts. No clarification has
however been given for failure to bank the receipts. It has also not been
indicated as to what Debits Without Credits and Cashbook Undercasts represent.

Development Cashbook

1126. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.22,166,031.55. The amount however includes a figure
of Kshs.98,300.00 representing stale cheques issued between 23 April and 17
June 2008. No reason has been provided as to why the cheques have not been
replaced or written back in the Cashbook.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.17

1127. The Statement of Assets and Liabilities for Vote R.17 as at 30 June 2009
reflects an Exchequer Account balance of Kshs.243,710,739.95, which includes
an amount of Kshs.196,456,190.00 brought forward from 2007/2008. No reason
has been provided for failure to clear the latter balance.

1128. The Statement also reflects a Standing Imprests Account balance of
Kshs.10,481.00, while the Imprest Register shows a figure of Kshs.40,442.00.
The difference of Kshs.29,961.00 between the two sets of records has not been
reconciled or explained.



                                     212 
 
1129. The Statement further reflects a Temporary Imprests balance of
Kshs.1,632,925.95, which ought to have been surrendered or otherwise
accounted for, on or before 30 June 2009.

1130. The Statement shows a General Account of Vote balance of
Kshs.550,499,652.10 for 2007/2008, and earlier years, which differs with the
closing balance of Kshs.506,391,702.00 as at 30 June 2008 by
Kshs.44,107,950.10. The difference appears to relate to excess Appropriations-
In-Aid for 2007/2008 which have been inappropriately combined with the General
Account of Vote balance for that year. No explanation has been provided for
failure to separately disclose the Excess Appropriations-In-Aid as required. In
addition, it has not also been clarified why the Appropriations-In-Aid had not been
remitted to the Exchequer as at 30 June 2009.

1131. The Statement also shows a Suspense Account credit balance of
Kshs.4,301,251.50, which includes an amount of Kshs.322,340.00 relating to
2007/2008 and earlier years. As in the previous instances, no reason has been
provided for failure to clear this long outstanding balance.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.17

1132. The Statement of Assets and Liabilities for Vote D.17 as at 30 June 2009
reflects an Exchequer Account debit balance of Kshs.493,858,448.80, which
includes an amount of Kshs.362,755,985.25 relating to 2007/2008 and earlier
years. No explanation has been provided for failure to clear the latter balance.

1133. The Statement also reflects a Temporary Imprests Account debit balance
of Kshs.3,655.00, which has been outstanding for a considerably long period of
time. Non-clearance of this balance has not been clarified.

1134. The Statement further reflects a General Account of Vote credit balance of
Kshs.541,391,941.82, which includes an amount of Kshs.309,798,430.07 relating
to 2006/2007 and earlier years. As in the previous instance, no reason has been
provided for the non-clearance of the long outstanding balance.

1135. The Statement shows a Paymaster General Account balance of
Kshs.47,529,837.97, while the Cashbook as at 30 June 2009 reflects a figure of
Kshs.18,661,378.05. The difference of Kshs.28,868,459.92 between the two
sets of records has not been reconciled or explained.

1136. A balance of Kshs.435,446.00 under the Suspense Account was cleared
during the year under review. Details in support of the transaction have not
however been seen and as a result, the validity of the clearance could not be
ascertained.



                                       213 
 
           MINISTRY OF GENDER, CHILDREN AND
                 SOCIAL DEVELOPMENT

APPROPRIATION ACCOUNT FOR VOTE R.18 FOR THE YEAR ENDED 30
JUNE 2009

Accuracy of the Appropriation Account

1137. The Appropriation Account for Vote R.18 for the year ended 30 June 2009
reflects expenditure balances totalling Kshs.29,988,475.75 against various items
under Sub-Vote 187, which differ with the corresponding Ledger amounts adding
up to Kshs.42,765,702.60, by Kshs.12,777,226.55. The differences have not
been reconciled or explained.

1138. The      Appropriation   Account     also   reflects  balances   totalling
Kshs.544,811,693.50 against various items under Sub-Vote 187, which are not
reflected in the Ledger and Trial Balance as at 30 June 2009. The source of the
balances has not been identified or explained.

1139. The Recurrent Appropriation Account Summary reflects actual
Appropriations-In-Aid of Kshs.3,948,441.40 under Sub-Votes 186 and 187, while
the main Appropriation Account shows a figure of Kshs.3,525,968.50 against the
Sub-votes.

The difference of Kshs.422,472.90 between the Summary and the Account has
not been reconciled or explained.

Under-collection of Appropriations-In-Aid

1140. The Appropriation Account further reflects under-collection of
Appropriations-In-Aid of Kshs.1,453,358.60 or approximately 22% of the
estimated receipts of Kshs.6,215,000.00 for the year. The under-collection was
mainly recorded under Sub-Vote 180 – General Administrative Services. No
reasons have however been provided for the under-collection.




                                      214 
 
APPROPRIATION ACCOUNT FOR VOTE D.18 FOR THE YEAR ENDED 30
JUNE 2009

Under-Expenditure and Under-Collection of Appropriations-In-Aid

1141. The Appropriation Account for Vote D.18 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.379,209,895.00, representing about
26% of the voted provision of Kshs.1,421,423,746.00. The under-expenditure
mainly occurred under Sub-Votes 186 and 187, relating to Culture and Social
Services and Children Services respectively. The Account also reflects under-
collection of Appropriations-In-Aid of Kshs.335,509,402.00, representing
approximately 41% of the estimated receipts of Kshs.817,620,516.00.

1142. The reasons provided in the footnotes to the Account for the under-
expenditure and under-collection of Appropriations-In-Aid include; lack of funding
by donors, delayed processing of payments by IFMIS and failure to get
expenditure returns from donors.

Unsupported Expenditure

1143. The Appropriation Account further reflects expenditure totalling
Kshs.288,858,169.00 in respect of Other Capital Grants and Transfers under
Sub-Votes 180 and 186, and out of which an amount of Kshs.5,320,568.00 has
not been supported with the relevant documentary evidence.

Consequently, the propriety of the expenditure of Kshs.5,320,568.00 could not be
ascertained.


PENDING BILLS

1144. Examination of records maintained at the Ministry’s Headquarters
revealed that bills totalling Kshs.15,780,430.30 and Kshs.2,704,124.05
chargeable to Recurrent and Development Votes respectively were not settled
during the year, but were instead carried forward to 2009/2010.

1145. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.18 for the year ended 30 June
2009 would have reflected a reduced Net Surplus to be Surrendered to the
Exchequer of Kshs.162,660,264.70 instead of Kshs.178,440,695.00 now shown,
while the Appropriation Account for Vote D.18 also would have reflected a
reduced Net Surplus of Kshs.206,870,639.95 instead of Kshs.209,574,764.00
now recorded.




                                       215 
 
OUTSTANDING IMPRESTS

1146. Examination of Imprest Records maintained at the Ministry’s Headquarters
revealed that Temporary Imprests totalling Kshs.4,596,758.00, which ought to
have been surrendered or otherwise accounted for, on or before 30 June 2009
were still outstanding as at that date. Out of the total, an amount of
Kshs.2,004,449.00 was owed by officers on Job Group ‘M’ and above, while the
balance of Kshs.2,592,309.00 was due from officers on Job Group ‘L’ and below.

1147. It was also observed that additional imprests were issued to various
politicians/officers who had not surrendered previous balances.


DORMITORIES PROJECT – NAIROBI CHILDREN’S REMAND HOME,
KABETE

1148. Contract No. W.P Item No. D05 NB 606-Job No. 0428C for erection and
completion of two new dormitories and other works at the Nairobi Children’s
Remand Home – Kabete was awarded by the Office of the Vice President and
Ministry of Home Affairs on 9 March 2007 to a construction firm based in Nairobi,
at a contract sum of Kshs.29,336,370.00.

Scope of Works

1149. According to the tender documents and other related records, the scope of
works comprised erection and completion of two new dormitories, a dining hall
and an adjoining kitchen, and associated electrical, mechanical and site works,
including rehabilitation of an existing sewerage.

Contract Period

1150. The works commenced on 10 April 2007 and were scheduled to run for a
period of thirty six (36) weeks. The completion date was therefore set for 10
January 2008. This date was however revised to 19 June 2009.

Audit Observations

1151. A physical inspection of the construction site carried out in March 2010
revealed the following unsatisfactory matters:-

    •   The ceiling board and timber trusses were not fitted in the dining hall as
        required in the respective clauses in the Bill of Quantities (BQs);

    •   The dormitories’ ceiling boards were loosely fitted and were therefore
        sagging;


                                        216 
 
    •   Although item No.7 of the BQs indicates that five (5) panel doors of 50mm
        thick wrot hardwood were to be fitted in the dining hall, none had been
        fitted as at the time of the inspection;

    •   Further, and while the BQs indicate that seven (7) metal doors with two
        adjustable levers were to be fitted in the dining hall, only three (3) such
        doors were installed; and,

    •   In addition, no shelves were fitted in the kitchen or to the adjoining kitchen
        stores.

1152. Apart from the evident delay in completion of the project, no clarification
has been provided for the poor workmanship as discussed in the preceding
paragraph.


UNACCOUNTED FOR REVENUE - MOMBASA DISTRICT

1153. Examination of records maintained at the Mombasa District Gender and
Social Development Office revealed that revenue totalling Kshs.2,131,940.50 in
respect of sale of registration forms for self-help youth and welfare groups,
renewal and replacement of certificates, realized between January 2007 and
June 2009 had not been accounted for as at 30 June 2009.

No reason has been provided for failure to surrender or account for the revenue.

1154. It was also observed that the Office did not during the year maintain a
Cashbook to record and account for the monies collected and further that the
receipts used for collection of the revenue appeared to have been locally printed,
contrary to Section 6.7.1 of the Government Financial Regulations and
Procedures which requires that Government money be received on authorized
forms or the standard miscellaneous receipt forms.


UNACCOUNTED FOR EXPENDITURE - MALINDI DISTRICT

1155. Examination of records maintained at the Malindi District Children’s Office
during the year disclosed that cash donations totalling Kshs.2,160,000.00 were
made by the District Children’s Officer to various beneficiaries and groups, which
care for orphans and vulnerable children in the District. However, the Children’s
Office has not availed for audit verification a schedule of the beneficiaries and
groups which received the donations.

1156. Further, expenditure returns from such beneficiaries and groups to show
how the donations were used and accounted for have not been seen.


                                         217 
 
In consequences, and in absence of such returns, the propriety of the
expenditure of Kshs.2,160,000.00 could not be ascertained.


THE WOMEN ENTERPRISE FUND

Failure to comply with the International Public Sector Accounting
Standards (IPSAS)

1157. The Fund Accounts prepared and submitted for audit do not conform with
the requirements of International Public Sector Accounting Standard No.1 on
“presentation of financial statements” in that accounting policies have not been
disclosed. A Statement of Changes in Net Assets/Equity has also not been
prepared.

Balance Sheet

Non-Current Assets

1158. The Balance Sheet as at 30 June 2009 reflects a Furniture & Fittings
balance of Kshs.690,850.00, which includes an amount of Kshs.285,850.00
relating to Computers, Equipment and Accessories.     However, Computer
Equipment and Accessories ought to have been classified under Office
Equipment. Further, Furniture & Fittings and Office Equipment valued at
Kshs.3,111,187.10 have been excluded from the Balance Sheet and no reason
has been provided for the omission.

Loans to Micro-Finance Intermediaries

1159. The Balance Sheet figure of Kshs.503,750,000.00 in respect of loans
granted to Micro-Finance Intermediaries relates to disbursements made to twelve
(12) financial intermediaries, for on – lending to various women groups &
enterprises during the year. As in the previous year, it has not been explained
how the Intermediaries were identified and considered as eligible for loan
purposes.

1160. Further, returns and related records showing the amounts disbursed and
received by the Intermediaries and women groups & enterprises respectively
were not made available for audit review.

Accrued Principal Loan Repayment

1161. The Balance Sheet figure of Kshs.11,250,000.00 in respect of Accrued
Principal Loan Repayment relates to an amount due from the Kenya Women
Finance Trust. However, the same amount has been included in the figure of
Kshs.503,750,000.00 in respect of Loans to Micro Finance Intermediaries.

                                      218 
 
Consequently, the Current Assets of Kshs.1,120,641,469.90 reflected in the
Balance Sheet have been overstated by an amount of Kshs.11,250,000.00.

Loan to Constituencies

1162. The completeness and accuracy of the Loans to Constituencies balance
of Kshs.135,688,181.55 as at 30 June 2009 could not be ascertained due to lack
of an analysis and the relevant supporting records.

Bank Balance

1163. The Balance Sheet reflects a Bank Balance of Kshs.57,689,371.20, while
the Cashbook as at 30 June 2009 shows a figure of Kshs.62,805,381.55 against
the Account. The difference of Kshs.5,116,010.35 between the two sets of
records has not been reconciled or explained.

Income Statement

Unsupported Receipt

1164. The Income Statement for the year ended 30 June 2009 reflects receipts
totalling Kshs.1,271,514.00 in respect of Financial Intermediaries Support in
Kind. However, documents relating to this balance were not made available for
audit review and as a result, it has not been possible to establish what the
amount represents.

Unsupported Expenditure

1165. The      Income    Statement    reflects    expenditure amounting to
Kshs.8,759,790.00, Kshs.3,374,200.00 and Kshs.6,000,000.00 under launch
expenses, contracted professional services and community mobilization
respectively, charged against the Fund during the year.

1166. However, payment vouchers and other related records in support of the
expenditure totalling Kshs.18,133,990.00 were not however provided for audit
verification, consequent upon which it has not been possible to ascertain its
propriety.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

1167. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments of Kshs.114,266,592.25 in the Cashbook not
recorded in the Bank Statement, which include stale cheques totalling

                                     219 
 
Kshs.13,210,723.41. No reason has been provided for failure to investigate the
cheques or having them credited back in the Cashbook.

1168. The Statement also reflects receipts of Kshs.11,081,203.55 in the Bank
Statement not recorded in the Cashbook, which include receipts totalling
Kshs.10,894,021.95 relating to 2007/2008 and earlier years. Failure to enter the
long outstanding receipts in the Cashbook has not been clarified.

1169. The Statement further reflects payments totalling Kshs.26,065,772.85 in
the Bank Statement not recorded in the Cashbook, which include amounts
adding up to Kshs.18,995,813.85 relating to 2007/2008 and earlier years. No
reason has been given for failure to update the Cashbook with the payments.

1170. The Statement in addition reflects an amount of Kshs.44,306,906.30
under receipts in the Cashbook not recorded in the Bank Statement, with some
of the receipts dating to as far back as in June 2006. Failure to bank the receipts
has not been clarified.

Development Cashbook

1171. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects payments totalling Kshs.197,330,968.70 in the Cashbook
not recorded in the Bank Statement, which include stale cheques amounting to
Kshs.3,113,978.30. It has not however been explained why the cheques have
not been replaced or reversed in the Cashbook.

Deposits Cashbook

1172. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects an amount of Kshs.989,704.10 under payments in the
Cashbook not recorded in the Bank Statement (unpresented cheques), which as
in the previous case include stale cheques totalling Kshs.708,603.75. It has not
been clarified as to why the cheques have not been replaced or reversed in the
Cashbook.

1173. The Statement also reflects an amount of Kshs.79,412.25 under receipts
in the Bank Statement not recorded in the Cashbook, which include a figure of
Kshs.60,834.85 brought forward from year 2005/2006. No reason has been
provided for failure to enter the long outstanding receipts in the Cashbook.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.18

1174. The Statement of Assets and Liabilities for Vote R.18 as at 30 June 2009
reflects long outstanding Exchequer Under-Issues debit balance of
Kshs.203,774,664.50 relating to 2007/2008 and prior years, which has not been

                                       220 
 
cleared. No reason has been provided for failure to clear the amount from the
books of account.

1175. The Statement also reflects an outstanding Imprest Account debit balance
of Kshs.3,273,628.80, which includes an amount of Kshs.1,357,166.40 relating to
2007/2008 and earlier years. Failure to surrender the imprests on or before 30
June 2009 has not been explained.

1176. The Statement further reflects a Paymaster General (PMG) Account debit
balance of Kshs.323,265,853.40, while the Cashbook as at 30 June 2009 reflects
a figure of Kshs.3,439,020.95. The resultant difference of Kshs.319,826,832.45
between the two sets of records has not been reconciled or explained.

1177. The Statements shows a General Suspense Account credit balance of
Kshs.221,760.435.65, which includes an amount of Kshs.8,311.65 brought
forward from 2007/2008. The latter figure has not been explained or analysed to
indicate what it represents.

1178. The Statement also shows other balances of Kshs.130,625,809.65 (Dr,
Kshs.12,107,382.05 (Dr), Kshs.12,907,610.00 (Cr) and Kshs.26,487,188.35 (Cr)
under District Suspense, Suspense and Clearance, Inter-Ministerial Agency and
Miscellaneous Deposits Accounts respectively, for which no analyses were
provided.

In absence of the analyses, it has not been possible to ascertain the
completeness and correctness of the balances.


STATEMENT OF ASSET AND LIABILITIES FOR VOTE D.18

1179. The Statement of Assets and Liabilities for Vote D.18 as at 30 June 2009
reflects various Account balances relating to 2007/2008 and earlier years which
have not been cleared from the books of account.

No reasons have been provided for failure to clear the long outstanding
balances.

1180. The Statement also reflects a balance of Kshs.136,515,215.70 under the
Paymaster General Account, while both the Cashbook and the Board of Survey
report both shows a figure of Kshs.12,927,518.25 as at 30 June 2009. The
difference of Kshs.123,587,697.50 between the two sets of records has not been
reconciled or explained.




                                     221 
 
1181. The Statement in addition reflects balances of Kshs.19,489,163.00 (Dr),
Kshs.109,967,118.85 (Cr) and Kshs.1,048,200.00 (Cr) under Inter-Ministerial
Agency, District Suspense and General Deposits Accounts respectively, which
have not been analysed.

Consequently, it has not been possible to ascertain their completeness and
accuracy.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1182. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects balances of Kshs.4,851,445.85 (Cr) and 4,851,445.85 (Dr) under the
Paymaster General (PMG) and Headquarter Deposits Accounts respectively,
relating to 2007/2008 and earlier years.

Although these balances were cleared during the year under review, documents
in support of the clearance have not however been made available for audit
review. In consequence, it has not been possible to ascertain the validity of such
clearance.

1183. The PMG balance of Kshs.2,872,328.10 as at 30 June 2009 differs with
the Ledger figure of Kshs.1,837,235.70, by Kshs.1,035,092.40. No reconciliation
or explanation has been provided for the difference.

1184. The Statement also shows amounts of Kshs.996,000.00 and
Kshs.4,851,445.85 against Miscellaneous and Headquarter Deposits Accounts
respectively, which have not been supported with the relevant records. In the
circumstances, it has not been possible to confirm their completeness and
accuracy.



          MINISTRY OF LIVESTOCK DEVELOPMENT

APPROPRIATION ACCOUNT FOR VOTE D. 19 FOR THE YEAR ENDED 30
JUNE 2009

1185. The Appropriation Account for Vote D.19 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.602,919,004.29 or approximately 26%
of the approved provision of Kshs.2,272,237,803.00. The Appropriation Account
also reflects under-collection of Appropriations-In-Aid of Kshs.365,883,172.20,
representing about 39% of the estimated receipts of Kshs.939,418,333.00. The
reasons provided in the footnotes to the Account for the under-expenditure and
under-collection of Appropriations-In-Aid include; delay in the identification of

                                       222 
 
breeding stock, reduced foreign travel, non-receipt on time of No Objection
letters from donors for various consultancies and civil works, and failure to
capture in the Account, direct payments details from donors.


UNSUPPORTED EXPENDITURE

1186. The audit of the Smallholder Dairy Commercialization Programme funded
by the Government and the International Fund for Agricultural Development
(IFAD) under Loan and Grant Nos.678 – KE and 815 – KE respectively, both
dated 26 January 2006 revealed that expenditure totalling Kshs.116,708,997.65
was incurred on the programme during the year under review. The expenditure
however, includes an amount of Kshs.35,031,274.85 utilized in nine (9) districts
covered by the Programme and which was not supported with the relevant
payment vouchers and other related records. Consequently, it has not been
possible to confirm the propriety of this particular expenditure.


PENDING BILLS

1187. Records maintained at the Ministry of Livestock Development
Headquarters indicated that bills totalling Kshs.34,852,480.50 were not settled
during the year, but were instead carried forward to 2009/2010.

1188. Out of the total, bills amounting to Kshs.16,198,260.50 related to the
Development Vote, while the balance of Kshs.18,654,220.00 was in respect of
those relating to the Recurrent.

1189. Had the bills been paid and the expenditure charged to the accounts for
the year, the Appropriation Account for Vote R.19 would have reflected a
reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.121,101,639.52 instead of Kshs.139,755,859.52 now shown, while the
Development Appropriation Account for the same period would have reflected a
reduced Net Surplus of Kshs.220,837,571.59 instead of Kshs.237,035,832.09
now recorded.


OUTSTANDING IMPRESTS

1190. Examination of Imprest Records maintained at the Ministry’s Headquarters
revealed that Temporary and Standing Imprests balances of Kshs.5,167,490.80
and Kshs.37,000.00 respectively both totalling Kshs.5,204,490.80, and which
ought to have been surrendered or otherwise accounted for on or before 30 June
2009 were still outstanding as at that date.




                                      223 
 
1191. Out of the total of Kshs.5,204,490.80, Imprests amounting to
Kshs.4,439,223.80 representing approximately 85% of the total, were due from
officers on Job Group ‘M’ and above, while the balance of Kshs.765,267.00 was
owed by officers on Job Group ‘L’ and below.

1192. It was also observed that two officers were issued with additional imprests
before having accounted for amounts previously issued.

1193. A review of the position in May 2010 indicated that imprests amounting to
Kshs.4,909,992.80 had been accounted for leaving a balance of
Kshs.294,498.00 outstanding.


FAILURE TO DEDUCT VALUE                 ADDED      TAX    ON    PAYMENT       FOR
REFURBISHMENT WORKS

1194. The Ministry paid a local construction company based in Nairobi an
amount of Kshs.2,218,128.80 through cheque No.005161 of 30 June 2009, for
refurbishment of washrooms and toilets in Harambee Hostel at AHITI, Kabete.
However, and from records available, Value Added Tax amounting to
Kshs.354,900.60 does not appear to have been deducted for onward
transmission to Kenya Revenue Authority.

No reason has been provided for failure to deduct the tax.


ASAL BASED LIVESTOCK AND RURAL LIVELIHOODS SUPPORT PROJECT

1195. The audit of the ASAL Based Livestock and Rural Livelihoods Support
Project funded by the Government and the African Development Fund under
Loan Agreement No. 2100150007205 and Protocol of Agreement Grant No.
2100155002025 both dated 3 June 2004 revealed the following unsatisfactory
matters:-

1196. The Project’s financial statements as at 30 June 2009 reflect expenditure
totalling Kshs.451,805,729.05 incurred on various project activities during the
year, while the Appropriation Account for Vote D.19 for the period shows a
figure of Kshs.443,560,513.40 against the item. The resultant difference of
Kshs.8,245,215.65 between the two sets of records has not been reconciled or
explained.

1197. Expenditure totalling Kshs.133,140,560.45 incurred on various activities in
the districts covered by the project could not be verified and propriety confirmed,
due to lack of the relevant supporting records.




                                       224 
 
1198. One unit of refrigerated bench centrifuge was acquired in August 2008
from a local supplier at a cost of Kshs.2,474,484.00. The same item was
however purchased during the same period from another supplier at a cost of
Kshs.1,053,900.00. The resultant price difference of Kshs.1,420,584.00 for the
item has not been explained.


GRANTS TO KENYA MEAT COMMISSION

1199. The Development Appropriation Account for the year ended 30 June 2009
reflects grants totalling Kshs.408,000,000.00 issued to Kenya Meat Commission
during the year. However, the financial statements of the Commission for
2008/2009 show grants amounting to Kshs.3,074,623.00 as having been
received during the period. The resultant difference of Kshs.404,925,377.00
between the two sets of records has not been reconciled or explained.


HIDES AND SKINS CESS FUND

1200. In the previous year’s report, reference was made to the fact that the
Hides and Skins Cess Fund was abolished in 1986 through a Legal Notice
No.129 of 11 June 1986. It was further observed that the Public Accounts
Committee in its Report on the Appropriation Accounts and Other Public
Accounts for the year 2003/2004 recommended that the Accounting Officer,
Ministry of Livestock Development liaises with the Permanent Secretary, Ministry
of Agriculture and the Treasury to ensure that the Hides and Skins Cess Fund
was wound-up by 30 June 2008. However, a review of the matter in 2008/2009
disclosed that the Fund had still not yet been wound-up and continues to hold
substantial cash balances which would otherwise be utilized in other Livestock
development programmes.       No reason has been provided for failure to
implement the recommendations of the Committee.

1201. The Balance Sheet as at 30 June 2009 continues to reflect amounts of
Kshs.10,000.00 and Kshs.5,881.85 in respect of Accounting Fees and Interest
Due to Other Organizations respectively. The accuracy and validity of these
liabilities could not yet again be confirmed, due to lack of the relevant supporting
records and documentation.


VETERINARY SERVICES DEVELOPMENT FUND

1202. The Veterinary Services Fund’s Balance Sheet as at 30 June 2009 does
not reflects an Accumulated Fund brought forward balance, whereas a closing
balance of Kshs.10,125,118.39 is shown in the Fund’s audited Accounts for
2007/2008. No explanation has been given for this omission. In addition, the
Balance Sheet reflects an Accumulated Fund carried forward balance of

                                        225 
 
Kshs.8,767,660.60, while the total assets comprising of Cash at Bank and
Unsurrendered float/Temporary Imprests add up to Kshs.8,704,968.95. No
reconciliation or explanation has been provided for the difference of
Kshs.62,691.65 between the two sets of records.

1203. The Balance Sheet also reflects outstanding imprests totalling
Kshs.7,468,053.50, which were due for surrender on or before 30 June 2009.
No satisfactory reason has been provided for failure to have the imprests cleared
from the books of account.

1204. As similarly reported in the previous year, the Accounts do not show the
comparative figures for 2007/2008 as required under paragraph 11:10 of
Government Financial Regulations and Procedures. No reason has been given
for failure to comply with the Procedures.

1205. The Fund’s Bank Reconciliation Statement as at 30 June 2009 also
reflects payments in the Cashbook not recorded in the Bank Statement totalling
Kshs.24,181,288.45, out of which an amount of Kshs.351,370.35 represents
stale cheques. These cheques ought to have been replaced on or before 30
June 2009.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.19

1206. The Statement of Assets and Liabilities for Vote R.19 as at 30 June 2009
reflects a balance of Kshs.143,721,183.35 under Paymaster General Account,
while the Cashbook as at the same date shows a figure of Kshs.80,574,004.00.
The difference of Kshs.63,147,179.35 between the two sets of records has not
been reconciled or explained.

1207. The Statement also reflects Standing and Temporary Imprests Accounts
debit balances of Kshs.1,275,597.70 and Kshs.10,494,532.75 respectively, which
have not been supported with the respective analyses, with the result that their
accuracy could not be ascertained. Further, amounts of Kshs.1,275,597.70 and
Kshs.6,280,604.80 under the same Accounts respectively, relating to 2007/2008
and earlier years had not been cleared as at 30 June 2009. No reason has been
provided for the omission.

1208. The Statement further reflects a General Account of Vote credit balance of
Kshs.400,765,474.15 relating to 2006/2007 and earlier years. As in the previous
instance, no reason has been provided for failure to clear this long outstanding
amount.




                                      226 
 
1209. The Statement also shows various debit and credit balances totalling
Kshs.8,149,683.85 and Kshs.58,437,545.80 respectively, which have not been
analysed. Consequently, and in absence of the analyses, the completeness and
accuracy of the balances could not be ascertained.
Further, an unusual credit balance of Kshs.4,156,495.00 under the Salary
Advances Account has not been explained.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.19

1210. The Statement of Assets and Liabilities for Vote D.19 as at 30 June 2009
reflects a Paymaster General Account debit balance of Kshs.48,676,497.20,
while the Cashbook as at 30 June 2009 shows a figure of Kshs.23,722,953.90.
The resultant difference of Kshs.24,953,543.30 between the two sets of records
has not been reconciled or explained.

1211. The Statement also reflects an Exchequer Account debit balance of
Kshs.773,852,352.00 relating to 2006/2007 and earlier years, which has not
been cleared. No reason has been provided for failure to clear the balance.

1212. The Statement further reflects Standing and Temporary Imprests
Accounts balances of Kshs.40,000.00 and Kshs.466,106.25 respectively, which
have not been analysed. In consequence, the completeness and accuracy of the
Accounts could not be confirmed. The two amounts also ought to have been
cleared from the books of account on or before 30 June 2009.

1213. The Statement shows Deferred Cheques, General Suspense Account and
District Suspense Accounts balances of Kshs.523,037.00, Kshs.674,343,477.80
and Kshs.150,893,637.50 respectively, which have not been analysed. As in the
previous instance, the completeness and accuracy of the balances could not be
confirmed.

1214. The Statement also shows a General Account of Vote credit balance of
Kshs.1,314,194,347.95 relating to 2006/2007 and prior years. No reason has
been given for failure to clear this long outstanding amount.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1215. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects various debit and credit balances totalling Kshs.21,192,374.55 and
Kshs.221,745,334.45 respectively whose analyses have not been provided for
audit verification. Consequently, the completeness and correctness of the
balances could not be ascertained.




                                     227 
 
1216. The Statement also reflects a Paymaster General Account balance of
Kshs.200,552,950.00, while the Cashbook as at 30 June 2009 shows an amount
of Kshs.200,212,796.95. The difference of Kshs.340,153.05 between the two
sets of records has not been reconciled or explained.



           MINISTRY OF WATER AND IRRIGATION

APPROPRIATION ACCOUNT FOR VOTE R. 20 FOR THE YEAR ENDED 30
JUNE 2009

Under-expenditure and Under-collection of Appropriations-In-Aid

1217. The Appropriation Account for Vote R.20 for the year ended 30 June
2009 reflects gross under-expenditure of Kshs.1,171,220,569.00, representing
approximately 25% of the approved estimates of Kshs.4,677,570,440.00. The
Appropriation Account also reflects under-collection of Appropriations-In-Aid of
Kshs.1,133,718,735.00 or about 98% of the estimated receipts of
Kshs.1,147,113,280.00.

1218. According to information available, the under-expenditure and under-
collection of Appropriations-In-Aid have been attributed mainly to delay in
disbursements as a result of donors’ conditionalities, over estimation as well as
unforseen changes in the composition of various Boards. The Ministry has not,
however indicated the measures it has put in place to address the underlying
causes of under-expenditure and under-collection of Appropriations-In-Aid.

Grants to Other Government Agencies

1219. The     Appropriation    Account    further  reflects    grants   totalling
Kshs.251,771,372.80 made during the year to Lake Victoria North Services
Board, Lake Victoria South Services Board, National Irrigation Board and Kenya
Water Institute, while the Accounts of the Agencies for 2008/2009 show grants
amounting to Kshs.262,750,000.00 as having been received.

1220. The difference of Kshs.10,978,627.20 between the two sets of records has
not been reconciled or explained.




                                      228 
 
APPROPRIATION ACCOUNT FOR VOTE D.20 FOR THE YEAR ENDED 30
JUNE 2009

Under – Expenditure and Under-Collection of Appropriations-in-Aid

1221. The Appropriation Account for Vote D.20 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.2,903,382,026.29 or approximately 16%
of the approved estimates of Kshs.18,196,953,086.00. The Appropriation
Account     also   reflects   under-collection   of  Appropriations-In-Aid   of
Kshs.1,813,385,824.95, representing about 30% of the estimated receipts of
Kshs.6,145,507,366.00.

1222. According to the footnotes to the Account, the under-expenditure and
under-collection of Appropriations-In-Aid have been attributed to; under
estimation, delays in approving contracts and late release of exchequer issues
during the year.

Unvouched Expenditure

1223. Expenditure totalling Kshs.52,454,336.10 charged against Sub-Vote 200,
Head 886, Item 3111500- Rehabilitation of Civil Works during the year was not
verified due to lack of payment vouchers and other related records.
Consequently, the propriety of the expenditure could not be ascertained.
Similarly, expenditure records in respect of an amount of Kshs.38,164,089.25
incurred during the same period under the Natural Resource Management
Project were not availed for audit review. The Propriety of the expenditure could
not also be confirmed.

Excluded Expenditure

1224. Expenditure totalling Kshs.44,136,353.05 incurred during the year under
Sub-Vote 200 Head 282 – Mount Kenya East Pilot Project, was not captured in
the Ledger for the month of June 2009 and accounted for in the Appropriation
Account. The total expenditure of Kshs.15,293,571,059.71 recorded against the
Vote as at 30 June 2009 has therefore been understated by an equivalent
amount.

Excluded Appropriations-In-Aid

1225. Appropriations-In-Aid amounting to Kshs.53,155,656.38 relating to the
Mount Kenya East Pilot Project were similarly excluded from the Appropriation
Account and no reason has been provided for the omission.




                                      229 
 
Direct Payments - IFAD

1226. The audited financial statements of the Mount Kenya East Pilot Project for
Natural Resources Management (IFAD Loan No.599.KE) for the year ended 30
June 2009 reflects IFAD direct payments of Kshs.131,384,010.35, while the
Appropriation Account for the year shows a figure of Kshs.71,635,538.40 against
the item. The difference of Kshs.59,748,471.95 between the two sets of records
has not been reconciled or explained.

Grants to State Corporations

1227. Development grants totalling Kshs.3,013,580,000.00 were issued to the
National Water Conservation and Pipeline Corporation during 2008/2009. The
Corporation’s financial statements for the period however show grants amounting
to Kshs.3,252,700,000.00 as having been received. The significant difference of
Kshs.239,120,000.00 between the two sets records has not been reconciled or
explained.

1228. Additional records indicate that grants totalling Kshs.1,275,950,983.60
were issued to various Water Service Boards and Water Service Trusts during
the year, while the respective financial statements show receipts amounting to
Kshs.1,008,181,413.00 as having been received.

1229. As in the previous instances, no reconciliation or explanation has been
provided for the resultant difference of Kshs.267,769,570.60.


PENDING BILLS

1230. Records maintained at the Ministry of Water and Irrigation Headquarters
indicated that bills totalling Kshs.19,126,753.00 and Kshs.55,617,996.00
chargeable to Recurrent and Development Votes respectively were not settled
during 2008/2009 but were instead carried forward to 2009/2010.

1231. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.20 for the year ended 30 June
2009 would have reflected a reduced Net Surplus to be Surrendered to the
Exchequer of Kshs.18,375,081.00 instead of Kshs.37,501,834.00 now shown.
Similarly, the Appropriation Account for Vote D.20 for the period would have
reflected a reduced Net Surplus of Kshs.1,034,378,205.34 instead of
Kshs.1,089,996,201.34 now recorded.


OUTSTANDING IMPRESTS

1232. Imprest records maintained at the Ministry’s Headquarters indicated that
imprests totalling Kshs.11,297,217.90, which ought to have been surrendered or
                                      230 
 
otherwise accounted for, on or before 30 June 2009 were still outstanding as at
that date. Out of the total, imprests amounting to Kshs.2,667,091.70 were due
from officers in Job Group ‘M’ and above, Kshs.7,744,366.20 from officers in Job
Group ‘L’ and below, while the balance of Kshs.885,760.00 was owing from
politicians. It was further observed that some officers were issued with additional
imprests before having surrendered or accounted for amounts previously issued.

1233. A review of the position as at 30 October 2009 disclosed that imprests
totalling Kshs.8,236,794.40 had been recovered, leaving a balance of
Kshs.3,060,823.50 outstanding.


UNCOLLECTED VALUE ADDED TAX

1234. Examination of expenditure records at the District Water and Irrigation
Office in Wajir North District revealed that Value Added Tax (VAT) totalling
Kshs.348,040.80 in respect of goods and services purchased during the year,
was not deducted from the amounts paid to various suppliers.
No clarification has however been made for failure to effect VAT deductions.


PAYMENT FOR WORK NOT DONE – BUNGOMA NORTH DISTRICT

Sinking of Boreholes

1235. A construction company based in Kisumu was in December 2008,
awarded a contract for drilling boreholes at Nakalila and Kakamwe Secondary
Schools in Bungoma North District, at a cost of Kshs.4,623,860.00.

1236. According to Local Service Order No. 0106068 of 5 February 2009 against
which the contract became effective, the scope of work involved sinking of two
(2) boreholes at the two (2) institutions and installation of two (2) submersible
pumps.

1237. An audit inspection exercise carried out at the project site on 23
September 2009, however revealed that although the contractor had been paid
the entire contract sum of Kshs.4,623,860.00, works valued at
Kshs.1,473,460.00 including distribution lines to communal water points had not
been carried out. No reason has been provided for processing the full payment
for the contract, while the works had not been completed.

1238. Further, and for reasons not indicated, the ten percent (10%) retention fee
does not appear to have been deducted while making the above payment.




                                       231 
 
Sikakangania Water Project

1239. Another company based in Bungoma was in December 2008, awarded a
contract for construction of the Sikakangania Water Project, at a cost of
Kshs.2,267,602.00.

1240. According to records available, the scope of work as described in the
Local Service Order included excavation, supplying and laying of pipes for a
distance of 1.5 Kilometres.

1241. An audit inspection exercise carried out at the site on 23 September 2009,
however revealed that works estimated at Kshs.1,346,202.00 had not been
executed, although the contractor had been paid the full contract sum. No
reasons have been provided for processing of the full contract amount, while
works valued at Kshs.1,346,202.00 had not been completed.


UNACCOUNTED FOR CASH AT THE BONDO DISTRICT WATER AND
IRRIGATION OFFICE

1242. Examination of financial records at the Bondo District Water Office
revealed that cash withdrawals totalling Kshs.19,547,904.00 made between 26
January 2007 and July 2008, had not been accounted for as at 30 June 2009.
According to information available, the cash was withdrawn from the Bank,
posted in the Development Cashbook as receipts and then cleared from the
Cashbook in lump sum, with a narration of “banking” or “cash for use”. No
records were however availed to support the “banking” or “cash for use” items.


IRREGULAR PROCUREMENT AT THE MANDERA WEST DISTRICT
WATER AND IRRIGATION OFFICE

Purchase of Bulk Fuel

1243. During the year, 8,840 litres of diesel worth Kshs.998,920.00 were
purchased from a service station based in Mandera through Local Purchase
Order No. 0182002 dated 5 August 2008. However, the Fuel Register, Detail
Orders and Work Tickets to account for the fuel were not availed for audit
verification, with the result that it has not been possible to confirm that the fuel
was delivered and used for the intended purpose.

Hire of Transport

1244. An expenditure of Kshs.394,000.00 was incurred during the year on
hire of transport by the Water and Irrigation Office. However, proper
procurement procedures were not followed as the transport suppliers appear

                                        232 
 
to have been identified on a single source basis. Further, the purposes for
hiring the transport services were not indicated and no movement/work plans
were made available as evidence of the distances covered.

Water Distribution

1245. The Water and Irrigation Office raised a Local Service Order
No.505831 of 15 September 2008 for Kshs.4,996,200.00 in favour of a
company in Mandera, for supply of water during the year, to drought stricken
areas of Mandera West.

1246. The schedules produced in support of distribution of the water however
showed an expenditure of Kshs.1,714,000.00 as having been incurred for the
service. Consequently, the supplier appears to have been overpaid by an
amount of Kshs.3,282,200.00. It has also not been clarified how the supplier
was identified.

Water Treatment Chemicals

1247. The Office also incurred an expenditure of Kshs.450,000.00 on
purchase of various water treatment chemicals. However, and as in the
previous instance, proper procurement procedures to facilitate competitive
bidding do not appear to have been followed in the supply of the chemicals. It
is therefore doubtful that the Office obtained fair and competitive value in the
expenditure of Kshs.450,000.00.


UNDELIVERED GOODS AT THE KITUI DISTRICT WATER AND IRRIGATION
OFFICE

1248. Examination of expenditure records held at the Kitui District Water and
Irrigation Office revealed that an L.P.O. No.0127272 dated 12 June 2009, was
issued to a local building contractor for supply of various water pipes at a cost of
Kshs.768,000.00.

1249. Information available further indicates that the contractor was paid the full
amount of Kshs.768,000.00 on 24 June 2009.

1250. However, a physical verification carried out on 16 July 2009 at the Water
and Irrigation Office confirmed that the pipes had not been delivered as at that
date, and no refund had been made to the Office by the contractor.




                                        233 
 
UNCOLLECTED RENT REVENUE AT THE WAJIR EAST DISTRICT WATER
AND IRRIGATION OFFICE

1251. Examination of financial records maintained at the Wajir East District
Water and Irrigation Office revealed that house rent revenue totalling
Kshs.860,000.00, had not been collected during the year from various
Government employees and was outstanding as at 30 June 2009. Some of the
rent revenue has been outstanding since 2003.

1252. Apart from the fact that the Office is incurring additional expenditure on
repair and maintenance of the houses, no reason has been provided as to why
the rent had not been recovered from the employees’ salaries, as is normally the
practice.


CONSTRUCTION OF COMMUNITY WATER PROJECTS IN WEST POKOT
DISTRICT

Sigor Water Project

1253. The construction of Sigor Water Project was in 2007/2008 awarded to a
construction and building company based in Kitale, at a contract sum of
Kshs.39,004,015.00.

1254. According to information available, the scope of work involved
improvement of existing intake works, construction of new transmission and
distribution mains and tank sites, completion of treatment facilities, backwash
tanks and three masonry storage reservors. The work also included
refurbishment of the Caretaker’s house.

1255. The contract commenced on the 2 May 2008 but the contract period and
date of completion were not however indicated.

1256. A physical verification carried out on project works in October 2009
however revealed that:-

      Although the contractor had been paid the full contract sum of
      Kshs.39,004,015.00, work estimated at Kshs.2,746,675.00 had not been
      done;

      Normal completion certificates showing the work done, amount certified,
      tax deductions and retention money were not also maintained, rendering
      verification of the project considerably difficult;

      Although according to the invitation for tender, a contractor registered
      under category ‘C’ by the Ministry of Public Works was required for the
      project, the company was found to be in category ‘D’. It has not been
                                      234 
 
      possible to establish the circumstances under which a contractor in
      category ‘D’ was awarded the contract.

Muruny – Chepareria Water Project

1257. A contract for construction of Muruny – Chepareria Water Project was
during the year under review awarded to a Kapenguria based contractor at a
contract sum of Kshs.46,900,370.00.

1258. The scope of works included laying of 35,500 metres of distribution lines,
construction of four masonry storage tanks, ten water kiosks, masonry valve
champers, anchor, thrust blocks and marker posts along the distribution mains.

1259. The contract commenced on the 1 April 2009 for a contract period of 12
months. The date of completion was therefore 31 March 2010.

1260. A physical verification of project works carried out in October 2009
however revealed that:-

      The contractor had been paid an amount of Kshs.40,356,247.00
      representing 86% of the contract sum, but no retention money had been
      deducted and transferred to a deposit account as required;

      A project vehicle worth Kshs.3,500,000.00 had not been purchased by the
      contractor although it was a requirement under the project;

      Various works estimated at Kshs.1,155,000.00 had not been done
      although they had been paid for.

No reasons have been provided for these anomalies.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

1261. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects receipts in the Cashbook not recorded in the Bank Statement
totalling Kshs.6,454,428.25, which include an amount of Kshs.2,081,701.80
relating to 2007/2008. No reason has been given for failure to clear the long
outstanding balance of Kshs.2,081,701.80 from the Reconciliation Statement.

1262. The Statement also reflects payments in the Bank Statement not recorded
in the Cashbook totalling Kshs.12,224,234.85, which include an amount of
Kshs.8,271,046.80 relating to 2007/2008. As in the previous instance, no reason
has been provided for failure to enter the payments in the Cashbook.


                                      235 
 
Development Cashbook

1263. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects payments in the Bank Statement not recorded in the
Cashbook totalling Kshs.1,132,452.60, which include an amount of
Kshs.310,462.05 relating to 2007/2008. It has not however been clarified why
the Cashbook had not been updated with these payments as at 30 June 2009.

1264. The Statement also reflects receipts in the Cashbook not recorded in the
Bank Statement totalling Kshs.794,272,820.05. The amount includes cheque
replacements of Kshs.4,272,820.65 and an exchequer issue of
Kshs.790,000,000.00. However, it has not been clarified why the latter balances
had not been recorded in the Bank Statement as at 30 June 2009.

Deposits Cashbook

1265. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects a receipt of Kshs.117,530.00 in the Bank Statement not
recorded in the Cashbook. This balance has been outstanding since December
2007 and no reason has been provided for failure to record the figure in the
Cashbook.

1266. The Statement also reflects a receipt in the Cashbook not recorded in the
Bank Statement of Kshs.1,104,732.35 relating to 2006/2007. Again, and as in
the previous instance, it has not been indicated why the receipt had not been
recorded in the Bank Statement as at 30 June 2009.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R. 20

1267. The Statement of Assets and Liabilities for Vote R.20 as at 30 June 2009
reflects various Accounts with debit and credit balances totalling
Kshs.1,336,165,851.35 and Kshs.13,848,992,076.14 respectively, all relating to
2007/2008 and prior years.

No reasons have however been given for non-clearance of the long outstanding
balances from the books of account.

1268. The Statement also reflects various debit and credit balances totalling
Kshs.155,736,735.65 and Kshs.13,112,153,406.41 respectively, against which
the relevant supporting analyses have not been provided.

In absence of the analyses, it has not been possible to ascertain the
completeness and accuracy of the balances.




                                     236 
 
1269. The Statement further reflects a Temporary Imprests Account balance of
Kshs.10,510,750.00, while the Trial Balance as at 30 June 2009 shows a figure
of Kshs.36,114,611.36. The Imprests Register on the other hand reflects a figure
of Kshs.11,169,111.90. No reconciliation or explanation has been provided for
the differences.

1270. The Statement in addition reflects a Paymaster General (PMG) Account
debit balance of Kshs.12,515,939,443.74, while the Cashbook as at 30 June
2009 shows an amount of Kshs.1,976,217.55. The Trial Balance as at the same
date reflects a credit figure of Kshs.8,754,263.66. As in the previous instances,
no reconciliation or explanation has been provided for the differences between
the three sets of records.

1271. The Statement also shows an Advances Account debit balance of
Kshs.4,299,169.50, out of which an amount of Kshs.3,586,306.10 relates to
2007/2008 and earlier years. No reason has been given for non-clearance of the
long outstanding balance. Further, the balance of Kshs.4,299,169.50 differs with
the Ministry’s Advance Register figure of Kshs.3,072,676.80, by an unreconciled
and unexplained difference of Kshs.1,226,492.70.

1272. The Statement further shows a Returned Salary Account credit balance of
Kshs.1,488,194.60, while the Ministry’s Returned Salary Register reflects an
amount of Kshs.402,808.40. The resultant difference of Kshs.1,085,386.20 has
not been reconciled or explained.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.20

1273. The Statement of Assets and Liabilities for Vote D.20 as at 30 June 2009
reflects various debit and credit balances totalling Kshs.3,757,195,122.35 and
Kshs.12,336,314,508.82 respectively, which have not been supported with
analyses.

In absence of the analyses, it has not been possible to confirm the completeness
and accuracy of the balances.

1274. The Statement also reflects Excess Vote balances totalling
Kshs.278,619,045.50, relating to the period between 1979/1980 and 1990/1991.
No reason has been provided for failure to have the balances regularized.

1275. The Statement further reflects various exchequer under-issues totalling
Kshs.2,770,569,137.30, relating to 2007/2008 and earlier years. Non-clearance
of the long outstanding balances has not been explained. The Statement further
shows the current year’s Exchequer balance of Kshs.1,466,897,126.00, while
records maintained at the Exchequer Section, Treasury reflect a figure of
Kshs.673,856,126.00. The difference of Kshs.793,041,000.00 between the two
sets of records has not been reconciled or explained.
                                      237 
 
1276. The Statement shows various General Account of Vote credit balances
totalling Kshs.2,358,402,126.85, relating to 2007/2008 and earlier years.
The failure to surrender the balances to the Exchequer has not been explained.

1277. The Statement also shows a Paymaster General Account debit balance of
Kshs.10,168,316,927.00, while the Cashbook and Ledger reflect amounts of
Kshs.4,656,343.05 and Kshs.464,902,856.60 respectively. No reconciliation or
explanation has been provided for the differences between the three sets of
records.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1278. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects various Miscellaneous Deposits Accounts with debit and credit balances
totalling Kshs.113,777,339.03 and Kshs.351,498,039.60 respectively.

1279. These balances have not however been analysed with the result that it
has not been possible to ascertain their completeness and correctness. Further,
and as similarly reported in 2007/2008, no explanation has been given for the
debit balances of Kshs.113,777,339.03 in an account which under normal
circumstances should reflect a credit or nil balance.

1280. The Statement further reflects a Contract Retention Money Account credit
balance of Kshs.4,034,396.25, while the Retention Money Register maintained
by the Ministry shows a figure of Kshs.5,097,789.95. The difference of
Kshs.1,063,393.70 has not been reconciled or explained. Further, the balance of
Kshs.4,034,396.25 has not been analysed and as a result, its completeness and
accuracy could not be ascertained.

1281. The Statement shows a Paymaster General Account debit balance of
Kshs.241,755,096.55, while the Cashbook as at 30 June 2009 shows a figure of
Kshs.17,562,580.85. The resultant difference of Kshs.224,192,515.70 between
the two sets of records has not been reconciled or explained.




                                     238 
 
               MINISTRY OF ENVIRONMENT AND
                    MINERAL RESOURCES

APPROPRIATION ACCOUNT FOR VOTE R.21 FOR THE YEAR ENDED 30
JUNE 2009

Under-expenditure and Under-Collection of Appropriations-In-Aid

1282. The Appropriation Account for Vote R.21 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.184,682,887.15 or approximately 8% of
the estimated provision of Kshs.2,163,984,910.00. The Account also reflects
under-collection   of    Appropriations-In-Aid   of    Kshs.177,313,475.85  or
approximately 87%       of the estimated receipts of Kshs. 203,100,000.00.
According to the footnotes to the Account, the under-expenditure has been
mainly attributed to some technical problems in the Integrated Financial
Management Information System (IFMIS), while the under-collection was blamed
on over-estimation in the budget for the year under review.

Grants to National Environment Management Authority

1283. The      Appropriation  Account     also    reflects  grants    totalling
Kshs.426,157,298.00 issued to the National Environment Management Authority
during 2008/2009. However, the Accounts of the Authority for the period show
grants amounting to Kshs.425,517,135.00 as having been received, resulting in
an unreconciled and unexplained difference of Kshs.640,163.00 between the two
sets of records.


APPROPRIATION ACCOUNT FOR VOTE D.21 FOR THE YEAR ENDED 30
JUNE 2009

1284. The Appropriation Account for Vote D.21 for the year ended 30 June 2009
reflects an Excess Vote of Kshs.16,821,368.40. According to information
available, the Excess Vote was caused by a deficiency in the collection of
Appropriations-In-Aid, where out of estimated receipts of Kshs.211,487,030.00
for the year, only collections of Kshs.129,196,256.10 were realized.


PENDING BILLS

1285. Records maintained at the Ministry’s Headquarters indicated that bills
totalling Kshs.117,377,053.65 and Kshs.123,490,901.60         chargeable to
Recurrent and Development Votes respectively, were not settled during the
year 2008/2009 but were instead carried forward to 2009/2010.


                                     239 
 
1286. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Recurrent Appropriation Account for the year would have
reflected an Excess Vote of Kshs.110,007,642.35 instead of the Net Surplus to
be Surrendered to the Exchequer of Kshs.7,369,411.30 now shown, while the
Development Appropriation Account for the same period would have reflected an
increased Excess Vote of Kshs.140,312,270.00 instead of the Excess Vote of
Kshs.16,821,368.40 now recorded.

1287. According to information available, the bills resulted from lack of cheques
books, delay in processing of payments through IFMIS and lack of Exchequer
Issues.


OUTSTANDING IMPRESTS

1288. Examination of Imprests records maintained at the Ministry’s
Headquarters indicated that Temporary Imprests totalling Kshs.10,362,241.80
which ought to have been surrendered or otherwise accounted for, on or before
30 June 2009 were outstanding as at that date.

1289. Out of the above total, imprests amounting to Kshs.2,696,643.10 were
outstanding against officers in Job Group ‘M’ and above, Kshs.4,795,629.05
against officers in Job Group ‘L’ and below, Ksh.2,403,697.35 against politicians,
while the balance of Kshs.466,272.30 was owing from officers who have since
been transferred to other ministries.

1290. Further, other records show that an amount of Kshs.3,275,536.80
representing approximately 31% of the total outstanding imprests, related to
2007/2008 and earlier years, with some such imprests dating to as back as in
1990. It was also observed that several officers were issued with additional
imprests before having surrendered or accounted for balances previously issued.

1291. According to information available, the recovery process which has so far
yielded an amount of Kshs.58,709.10 has been slowed down by transfer of
various imprest holders to other ministries and separation and merging of some
ministries over time.


PURCHASE OF LAND

1292. The Commissioner of Lands through a Kenya Gazette Notice No.9528 of
17 August 2007 communicated the Government’s intention to acquire three
parcels of land in Kakamega District for construction of offices for the
Meteorological Department. Consequently and during 2008/2009, the Ministry
incurred an expenditure of Kshs.5,330,750.00 for purchase of two parcels of land
measuring 0.9581 hectares in the District. However, the valuation report against

                                       240 
 
which payment of Kshs.5,330,750.00 was based was not made available for
audit review, with the result that it has not been possible to confirm that the
Government obtained reasonable value for money in the transaction. Further,
and although according to information available the Ministry has requested the
Commissioner of Lands to avail the valuation report, as well as ownership
document for the property, no response had been received as of May 2010.


BANK RECONCILIATION STATEMENTS

Development Cashbook

1293. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement amounting to Kshs.175,153,352.40. However, the figures reflected in
the Schedule attached to the Reconciliation Statement differ with the respective
transaction entries appearing in the Cashbook by an aggregated total of
Kshs.10,191,617.60. The differences have not been reconciled or explained.

Deposits Cashbook

1294. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.2,586,596.15, out of which an amount of
Kshs.2,576,441.50 relates to the period between 1984 and January 2008. No
action appears to have been taken to investigate the unpresented cheques which
have been outstanding for a considerably long period of time. Further, the
Schedule attached to the Reconciliation Statement shows an amount of
Kshs.10,154.65 against Cheque No.005002, while the Cashbook shows a figure
of Kshs.20,906.45. No reconciliation or explanation has been provided for the
difference of Kshs.10,751.80.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.21

1295. The Statement of Assets and Liabilities for Vote R.21 as at 30 June 2009
reflects five debit balances totalling Kshs.442,253,687.55 under Salary
Advances, Standing Imprests, Temporary Imprests, District Suspense Control
and Clearance Suspense Accounts and one credit amount of
Kshs.1,127,483,559.80 against the General Suspense Account, all of which have
not been analysed.

In absence of the analyses, it has not been possible to ascertain the
completeness and correctness of the balances.




                                      241 
 
1296. The Statement also reflects Standing Imprest and Temporary Imprests
balances of Kshs.10,966,270.00 and Kshs.55,807,882.35 respectively, which
have not been analysed with the result that their completeness and accuracy
could not be ascertained. Further, the above balances include amounts of
Kshs.3,780,402.10 and Kshs.46,484,587.90 respectively, relating to 2007/2008
and earlier years. No reason has been given for failure to have the long
outstanding amounts surrendered or otherwise accounted for.

1297. The Statement further reflects Excess Vote debit balances totalling
Kshs.4,403,942.90 and General Account of Vote credit balances of
Kshs.821,050,919.80 relating to the period between 1983/1984 and 2003/2004.
No clarification has been provided as to why the Excess Vote of
Kshs.4,403,942.90 has not been regularized or the net surplus figure of
Kshs.499,999,758.30 remitted to the Exchequer.

1298. The Statement shows balances totalling Kshs.325,584,583.00 in respect
of Exchequer under-issues, relating to the period between 1995/1996 and
2006/2007. Failure to clear the long outstanding under-issues has not been
explained.

1299. The Statement also shows Excess Appropriations-In-Aid amounting to
Kshs.52,224,668.50 relating to 2002/2003. It has not however been explained
why the Appropriations-In-Aid had not been remitted to the Exchequer on or
before 30 June 2009.

1300. The Statement further shows a Paymaster General Account (PMG) debit
balance of Kshs.1,174,685,240.95, while the June Ledger shows an amount of
Kshs.6,903,585,322.42 against the Account.            The PMG balance of
Kshs.1,174,685,240.95 also differs with the Cashbook balance of
Kshs.1,755,854.50 as at 30 June 2009. No reconciliation or explanation has
been provided for the differences between the three sets of records.

1301. The Statement in addition shows a General Suspense Account credit
balance of Kshs.1,127,483,559.80, which includes an amount of
Kshs.215,395,922.40 relating to 2007/2008 and earlier years. It has not however
been indicated why the latter balance had not been cleared from the books of
account as at 30 June 2009.

1302. The Statement also reflects a Clearance Suspense Account debit balance
of Kshs.170,025,722.75. No explanation has been provided for the debit balance
in an account which under normal circumstances should reflect a credit or nil
balance.




                                     242 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.21

1303. The Statement of Assets and Liabilities for Vote D. 21 as at 30 June 2009
reflects various debit and credit Account balances totalling Kshs.545,927,127.25
and Kshs.377,140,553.65 respectively, which have not been analysed.

1304. In absence of the analyses it has not been possible to confirm the
completeness and accuracy of the balances. Further, it has not been clarified as
to what the credit amount of Kshs.159,484,472.20 under the Standing Imprest
Account represents.

1305. The Statement also reflects Exchequer Account balances totalling
Kshs.1,637,249,814.00 relating to the period between 1984/1985 and 2007/2008.
No reasons have been provided for failure to clear these long outstanding
balances.

1306. The Statement further reflects General Account of Vote balances totalling
Kshs.1,512,859,599.85 for the period 1994/95 to 2005/2006. As in the previous
instance, no reasons have been provided for failure to clear the balances.

1307. The Statement shows an Excess Vote of Kshs.36,458,423.85 relating to
2002/2003. Failure to have this long outstanding Excess Vote regularized has
not been clarified.

1308. The Statement also shows a Paymaster General debit balance of
Kshs.213,958,290.55, while the Cashbook and the Trial Balance as at 30 June
2009 show balances of Kshs.56,263,865.25 and Kshs.1,771,285,904.05,
respectively. The differences between the three sets of records have not been
reconciled or explained.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1309. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects a debit balance of Kshs.299,804.35 against the District Suspense
Account      and two credit balances of Kshs.21,451,037.90 and
Kshs.135,540,257.55 against Vote Adjustment - Ministry of Water and
Miscellaneous Deposits Accounts respectively, all of which have not been
analysed.

Consequently, the completeness and accuracy of the balances could not be
confirmed.




                                      243 
 
1310. The Statement also reflects a Vote Adjustment Account (Ministry of Water
and Irrigation) credit balance of Kshs.21,451,037.90, relating to 2007/2008 and
earlier years. No reason has been provided for failure to clear this long
outstanding balance.

1311. The Statement further reflects a Paymaster General Account debit
balance of Kshs.189,887,422.05, while the Cashbook as at 30 June 2009 shows
an amount of Kshs.196,849,118.65.            The resultant difference of
Kshs.6,961,696.60 between the two sets of records has not been reconciled or
explained.




    MINISTRY OF CO-OPERATIVE DEVELOPMENT AND
                    MARKETING

APPROPRIATION ACCOUNT FOR VOTE R.22 FOR THE YEAR ENDED 30
JUNE 2009

1312. The Appropriation Account for Vote R.22 for the year ended 30 June 2009
reflects under-collection of Appropriations-In-Aid of Kshs.3,522,900.00,
representing     approximately     27%     of    the   estimated     receipts   of
Kshs.13,000,000.00. The under-collection has been attributed to an over-
estimation of the expected receipts in respect of Administrative fees and charges,
under Sub Vote 221 – Co-operative Management. However, no indication has
been given on how the Ministry is addressing the underlying cause of under-
collection of Appropriations-In-Aid.


PENDING BILLS

1313. Records maintained at the Ministry’s Headquarters indicated that bills
totalling Kshs.19,448,642.87 chargeable to Recurrent and Development Votes
were not settled during the year 2008/2009, but were instead carried forward to
2009/2010.

1314. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.22 for the year ended 30 June
2009 would have reflected an Excess Vote of Kshs.8,386,391.08 instead of the
Net Surplus to be Surrendered to the Exchequer of Kshs.6,402,936.79 now
shown. Similarly, the Appropriation Account for Vote D.22 would have shown a
reduced Net Surplus of Kshs.1,251,076.30 instead of Kshs.5,910,391.30 now
recorded.


                                       244 
 
OUTSTANDING IMPRESTS

1315. Examination of Imprest Records maintained at the Ministry’s Headquarters
revealed that imprests totalling Kshs.648,745.00, which ought to have been
surrendered or otherwise accounted for, on or before 30 June 2009 were still
outstanding as at that date. Out of the total, an amount of Kshs.232,850.00 was
owing from officers on Job Group ‘M’ and above, while the balance of
Kshs.415,895.00 was due from officers on Job Group ‘L’ and below.

1316. It was further observed that one officer was issued with additional imprest
before having accounted for balances previously issued.


CONSTRUCTION OF NEW OFFICE BLOCK IN TRANS - NZOIA WEST
DISTRICT

1317. Examination of records maintained at the District Co-operative Office,
Trans-Nzoia West District revealed that during the year 2008/2009, the Office
received an amount of Kshs.1,000,000.00 for construction of a new office block
in the District. However, the Office decided to split the contract into two, that is,
purchase of materials and supply of labour service. No reason was provided for
splitting the contract.

1318. According to further information available, the labour service was awarded
to a construction firm based in Kitale at a contract sum of Kshs.467,669.25, while
the balance of Kshs.532,330.75 was allocated to procurement of materials.

1319. An Audit inspection visit carried out at the site on 18 September 2009
however revealed that only 52% of the labour service works had been utilized
although the full payment of Kshs.467,669.25 had been made to the contractor.
Accordingly, and in view of the foregoing, the Ministry may have to look for
additional funding to cover the remaining 48% cost of labour service.

1320. Apart from the fact that the District Co-operative Officer has not provided
any justification for payment of the full contract price while only 52% of the labour
service had been utilized, it is a matter of concern that no measures have been
put in place to ensure that further cost overruns on the project are avoided.


APPARENT MISAPPROPRIATION OF                     CASH     AT    THE     MOMBASA
PROVINCIAL CO-OPERATIVE OFFICE

1321. Examination of financial records maintained at the Mombasa Provincial
Co-operative Office revealed that on 22 December 2008, the Coast Provincial
Co-operative Officer requested through letter Ref.No.Coast/CER/1/Vol.2/27

                                        245 
 
addressed to the Mombasa District Treasury that District Co-operative Officers in
Coast Province be issued with imprests ranging between Kshs.40,000.00 and
Kshs.50,000.00, to facilitate planning and organization of the Centenary
Celebrations of the Co-operative movement in their respective Districts.

1322. Further records seen show that imprests totalling Kshs.580,000.00 issued
for the purpose were surrendered or accounted for by the respective District Co-
operative Officers in January 2009. However, a further scrutiny of the records
disclosed that the amounts in the signed schedules used to surrender or account
for the imprests by the officers were apparently fraudulent, in that the amounts
surrendered or accounted for had been altered by inserting digit one ‘1’ to the left
hand side of the surrendered amounts and in so doing irregularly claimed
amounts totalling Kshs.1,200,000.00.

1323. Although in a letter dated 8 December 2009 the Ministry indicated that
investigations on the matter were to be carried out, the findings of such
investigations have not been seen and the amount of Kshs.1,200,000.00 has not
yet been recovered.


MANAGEMENT SUPERVISION AND LIQUIDATION FUND

Unanalysed Balances.

1324. The Management Supervision and Liquidation Fund Accounts for the year
ended 30 June 2009 reflects in the Balance Sheet amounts of Kshs.4,626,872.20
and Kshs.46,321,933.45 under Cooperative Societies Liquidation Control
Account and Debtors-Management Supervision Fees respectively, which have
not been analysed or supported with the relevant records. Similarly not analysed
or supported is the figure of Kshs.28,941,790.00 under Total Income in the
Income and Expenditure Account.

In absence of the analyses, it has not been possible to confirm completeness and
accuracy of the three balances.

Debtors.

1325. As similarly observed in the previous year, the Ministry is yet to draw up a
policy on provision for bad and doubtful accounts which in turn would facilitate
maintenance and preparation of more accurate Accounts. Consequently, and in
absence of a provision for bad and doubtful accounts, the recoverability of the
debtors balance of Kshs.46,321,933.45 as at 30 June 2009 could not be
ascertained.




                                        246 
 
BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

1326. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Cashbook not yet recorded in the Bank
Statement of Kshs.19,930,683.55, which include stale cheques amounting to
Kshs.2,131,646.00, some dating back to as far as in 2006. No explanation has
been provided for failure to replace or reverse the cheques in the Cashbook.

1327. The Statement also reflects receipts in the Cashbook not yet recorded in
the Bank Statement of Kshs.844,019.05, which include an amount of
Kshs.318,940.00 receipted in the Recurrent Cashbook while the actual banking
had been made in the Deposits Account. It is not clear why the amount has not
been transferred to the Recurrent Bank Account.

Development Cashbook

1328. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects payments totalling Kshs.281,937.90 in the Bank Statement
not recorded in the Cashbook, out of which an amount of Kshs.275,937.90
relates to payments made to the Ministry’s staff. The Ministry has not however
explained how payments were made through the bank without having first been
recorded in the Cashbook.

1329. The Statement also reflects receipts in the Cashbook not recorded in the
Bank Statement of Kshs.36,621.00, out of which an amount of Kshs.36,518.00
relates to bankings made in the Deposits Bank Account. No explanation has
been given for the erroneous entries.

Deposits Cashbook

1330. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects payments of Kshs.3,896,120.00 in the Cashbook not recorded
in the Bank Statement, out of which an amount of Kshs.127,620.00 represents
stale cheques. No explanation has been provided for failure to replace the
cheques or crediting the Cashbook with an equivalent amount.

1331. The Statement also reflects payments in the Bank Statement not recorded
in the Cashbook of Kshs.262,872.00, out of which an amount of Kshs.46,056.00
is described as representing dishonoured cheques not reversed in the Cashbook.
It has not however been explained why action has not been taken to have the
cheques reversed or otherwise cleared from the Statement. The Statement
further shows undercasts of Kshs.6,330.50 and Kshs.170,185.00 relating to June
2006 and January 2008 respectively. It has similarly not been clarified why these
undercasts have not been adjusted.

                                      247 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.22

1332. The Statement of Assets and Liabilities for Vote R.22 as at 30 June 2009
reflects a Salary in Advance Account debit balance of Kshs 421,237.05 relating
to 2007/2008 and earlier years. No analysis has been provided for the balance,
and as a result its completeness and accuracy could not be ascertained. The
balance has also been outstanding for a considerably long period of time.

1333. The Statement also reflects a Temporary Imprest Account debit balance of
Kshs 5,014,487.35 which has not been analysed. The balance also includes an
amount of Kshs.2,384,231.40 relating to 2007/2008 and earlier years, and which
ought to have been surrendered or otherwise accounted for, on or before 30
June 2009. No reason has been provided for lack of the analysis for the figure of
Kshs.5,014,487.35 or non-clearance of the balance of Kshs.2,384,231.40.

1334. The Statement similarly reflects a Standing Imprest Account debit balance
of Kshs 496,870.40, which has not been analysed. The balance also includes
an amount of Kshs.281,592.50 relating to 2007/2008 and earlier years. Lack of
an analysis and non-clearance of the respective balances have not been
explained.

1335. The Statement shows a Paymaster General Account balance of
Kshs.101,132,273.20, while the Cashbook as at 30 June 2009 reflects an
amount of Kshs.3,208,544.55. The difference of Kshs.97,923,728.65 between
the two sets of records has not been reconciled or explained.

1336. The Statement also shows an Agency Account debit balance of
Kshs.294,850.00, which relates to 2007/2008 and earlier years. No reason has
been provided for its non clearance. The balance has also not been analysed,
with the result that its accuracy could not be ascertained.

1337. The Statement further shows a District Suspense Control Account debit
balance of Kshs.22,973,753.35 relating to 2007/2008 and earlier years. The
Statement in addition reflects a District Suspense Account debit balance of
Kshs. 102,432,822.95, which includes an amount of Kshs.98,813,561.60 relating
to 2007/2008 and earlier years. Apart from lack of analyses to support these
balances, no reasons have been provided for failure to clear the amounts of
Kshs.22,973,753.35 and Kshs.98,813,561.60 under the control and Suspense
Accounts respectively.

1338. The Statement in addition reflects Exchequer Account debit balances
totalling Kshs.125,918,033.90, which include an amount of Kshs.125,873,033.90
relating to 2007/2008 and earlier years. As in the previous instances, no



                                      248 
 
explanation has been given for the non-clearance of the long outstanding
balance.

1339. Excess Appropriations-In-Aid of Kshs.130,842.00 relating to 2007/2008
had not as at 30 June 2009 been remitted to the Exchequer and no clarification
has been made for the anomaly.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.22

1340. The Statement of Assets and Liabilities for Vote D.22 as at 30 June 2009
reflects Exchequer Account debit balances totalling Kshs.861,780,647.80 relating
to 2007/2008 and earlier years. No reason has been given for non-clearance of
the long outstanding balances.

1341. The Statement also reflects a Paymaster General Account debit balance
of Kshs.2,060,249.85, while the Cashbook shows a figure of Kshs.1,532,880.45
as at 30 June 2009. The difference of Kshs.527,369.40 between the two sets of
records has not been reconciled or explained.

1342. The Statement further reflects a Temporary Imprest Account net debit
balance of Kshs.1,467,072.00, which includes an erroneously brought forward
balance of Kshs.1,480,738.00. It has not however been clarified as to why the
error had not been corrected as at 30 June 2009. Further, no reason has been
provided for failure to clear the long outstanding Account.

1343. The Statement shows a District Suspense Account debit balance of
Kshs.8,785,302.40, which includes an erroneously brought forward balance of
Kshs.4,136,842.10 instead of the closing balance of Kshs.5,306,842.10 as at 30
June 2008. The Statement also shows a District Suspense Control Account
debit balance of Kshs.29,148,138.00 relating to 2006/2007 and earlier years.
Apart from lack of analyses, no explanation has been provided for failure to clear
the long outstanding amounts totalling Kshs.33,284,980.10 in respect of the two
Suspense Accounts.

1344. The Statement in addition shows General Account of Vote (GAV) credit
balances totalling Kshs.903,241,410.05, which include an amount of
Kshs.854,362,064.10 relating to 2005/2006 and earlier years. No reason has
been provided for failure to clear the latter balance. Further, the GAV balance for
2007/2008 brought forward to 2008/2009 has been shown as Kshs.1,619,016.55
instead of the correct figure of Kshs.2,819,016.55. The discrepancy of
Kshs.1,200,000.00 has not been reconciled or explained.




                                       249 
 
STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1345. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects two net debit balances totalling Kshs.6,923,860.50 against the Deposits
Account. No reason has been provided as to why the Account was as at 30 June
2009 reflecting debit balances instead of nil or credit as would be expected.

1346. The Statement also reflects Registration & Miscellaneous Deposits and
Co-operative Tribunal Deposits credit and debit balances of Kshs.171,665.40
and Kshs.4,675,353.65 respectively, which have not been analysed with the
result that their completeness and accuracy could not be confirmed.

1347. The Statement further reflects Temporary and Standing imprests balances
of Kshs.533,135.55 and Kshs.53,930.00 respectively. Failure to surrender or
otherwise account for the imprests totalling Kshs.587,065.55 has not been
explained. In addition, the Temporary Imprests balance of Kshs.533,135.55 has
not been analysed to show who the holders were.

1348. The Statement shows a Paymaster General Account debit balance of
Kshs.3,699,756.35, while the Cashbook as at 30 June 2009 reflects a figure of
Kshs.4,583,460.50. The resultant difference of Kshs.883,704.15 between the
two sets of records has not been reconciled or explained.

1349. The Statement also shows a credit balance of Kshs.1,581,051.65 against
the New KCC Shares Refund Deposit. This balance has not however been
supported with an analysis, consequent upon which it has not been possible to
ascertain its correctness.

1350. The Statement further shows credit balances of Kshs.2,934,628.10 and
Kshs.18,400.00 under the Retention Monies and Famine Relief Accounts
respectively, which relate to the current year. However, the balances have not
been analysed and as a result, it has not been possible to ascertain their
accuracy.

1351. The Statement in addition shows a credit balance of Kshs.2,039,160.05
against the Returned Salaries Account, out of which an amount of
Kshs.2,743,102.45 relates to 2007/2008 and earlier years. No reason has been
provided for failure to re-credit the long outstanding amount in the payroll.




                                      250 
 
                            CABINET OFFICE

APPROPRIATION ACCOUNT FOR VOTE D.23 FOR THE YEAR ENDED 30
JUNE 2009

1352. The Appropriation Account for Vote D.23 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.1,383,604,522.50 or approximately 46%
of the approved estimates of Kshs.2,947,241,000.00 and a deficiency in
Appropriations-In-Aid of Kshs.1,360,683,595.00, representing about 48% of the
estimated receipts of Kshs.2,815,241,000.00. According to the footnotes to the
Appropriation Account and other information, the under-expenditure and under-
collection of Appropriations-In-Aid were caused by slow pace of utilization of
donor funds and delay in awarding of contracts during the year.


PENDING BILLS

1353. Records maintained at the Cabinet Office indicated that bills totalling
Kshs.9,416,738.30 relating to 2008/2009 and chargeable to the Recurrent Vote
were not settled during the year, but were instead carried forward to 2009/2010.

1354. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.23 for the year would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.60,051,502.10 instead of the Kshs.69,468,240.40 now shown.

1355. According to information available, failure to settle the bills was caused by
inadequate release of exchequer during the year.


OUTSTANDING IMPRESTS

1356. Records maintained at the Cabinet Office indicated that imprests totalling
Kshs.1,811,243.00 which ought to have been surrendered or otherwise
accounted for, on or before 30 June 2009 were still outstanding as at that date.
Out of the total, imprests amounting to Kshs.517,760.00 were owed by officers
on Job Group ‘M’ and above, while the balance of Kshs.1,293,483.00 was due
from officers on Job Group ‘L’ and below. No clarification has been provided for
failure to have these long outstanding imprests surrendered or accounted for.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.23

1357. The Statement of Assets and Liabilities for Vote R.23 as at 30 June 2009
reflects an Imprests Account debit balance of Kshs.4,110,668.10, out of which an

                                       251 
 
amount of Kshs.2,132,093.25 relates to 2007/2008 and earlier years. No reason
has been provided for failure to surrender or otherwise account for the imprests
on the due dates. Further, the balance of Kshs.4,110,668.10 differs with the
Imprest Register figure of Kshs.6,533,622.00, by Kshs.2,422,953.90. The
difference has not been reconciled or explained.

1358. The Statement also reflects an Inter-Ministerial Agency debit balance of
Kshs.14,867,889.20, which has not been analysed with the result that its
completeness and accuracy could not be ascertained. Further, the balance of
Kshs.25,467,894.90 cleared in 2008/2009 differs by a figure of Kshs.933,009.80
from the amount of Kshs.24,534,885.10 reflected in the supporting schedules.
The difference has similarly not been reconciled or explained.

1359. The Statement further reflects an Exchequer Account balance of
Kshs.75,247,071.80 for 2008/2009, while Treasury records show a figure of
Kshs.74,852,500.00 against the Account. As in the previous instances, no
reconciliation or explanation has been provided for the difference of
Kshs.394,571.80 between the two set of records.

1360. The Statement shows a General Deposits balance of Kshs.4,397,910.35,
which has not been analysed. Consequently, it has not been possible to
establish what it represents or ascertain its completeness and accuracy.

1361. The Statement also shows a General Account of Vote balance of
Kshs.25,568,240.15 for 2008/2009, while the Appropriation Account for Vote
R.23 for the year ended 30 June 2009 reflects a Net Surplus to be Surrendered
to the Exchequer of Kshs.69,468,240.00.         The resultant difference of
Kshs.43,899,999.85 has not been reconciled or explained.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D. 23

1362. The Statement of Assets and Liabilities for Vote D.23 as at 30 June 2009
reflects an Imprest Account balance of Kshs. 403,887.20, relating to 2007/2008
and earlier years. No reason has been provided for failure to surrender or
otherwise account for the balance.

1363. The Statement also reflects an Inter - Ministerial Agency debit balance of
Kshs. 31,110,212.10 for 2007/2008, relating to the Office of the Prime Minister.
This balance ought to have been cleared from the books of account on or before
30 June 2009.

1364. The Statement further reflects an Exchequer Account debit balance of
Kshs.21,346,645.20, while records maintained at the Treasury show a figure of
Kshs.22,000,000.00 against the Account. The difference of Kshs.653,354.80
between the two sets of records has not been reconciled.

                                      252 
 
1365. The Statement shows a Contractors Retention Account credit balance of
Kshs.1,397,194.10, which has not been fully analysed. As a result, it has not
been possible to confirm its correctness.

1366. The Statement also reflects a General Account of Vote credit balance of
Kshs.20,248,257.35 for 2008/2009, while the Appropriation Account for Vote
D.23 for the year ended 30 June 2009, shows a Net Surplus to be Surrendered
to the Exchequer of Kshs.22,920,927.50. The difference of Kshs.2,636,670.15
has not been reconciled.



         MINISTRY OF EAST AFRICAN COMMUNITY

APPROPRIATION ACCOUNT FOR VOTE R.24 FOR THE YEAR ENDED 30
JUNE 2009

1367. Payment vouchers and other related records for expenditure totalling
Kshs.48,346,247.00 incurred under Vote R.24 during the year were not availed
for audit review, with the result that the propriety of the expenditure could not be
ascertained.    The expenditure mainly related to basic salaries, personal
allowances, foreign travel and subsistence, training, office general supplies and
services, purchase of vehicles and other transport equipment, printing,
advertising, operating expenses and subscriptions to international organizations.


PENDING BILLS

1368. Records maintained at the Ministry’s Headquarters indicated that bills
totalling Kshs.6,977,144.00 relating to 2008/2009 and chargeable to the
Recurrent Vote were not settled during the year but were instead carried forward
to 2009/2010.

1369. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Recurrent Appropriation Account for the year ended 30 June
2009 would have reflected an Excess Vote of Kshs.5,176,654.65 instead of the
Net Surplus to be Surrendered to the Exchequer of Kshs.1,800,489.35 now
shown.

1370. According to information available, the Ministry was unable to process and
settle some of the bills during the year, due to inadequate procurement staff and
challenges relating to operations of IFMIS.



                                        253 
 
PROCUREMENT OF GOODS AND SERVICES

1371. An examination of procurement records at the Ministry’s Headquarters
revealed that various goods and services including furniture, training and internet
upgrading, valued at Kshs.3,447,598.00 may have been procured on a single
source basis, contrary to the requirements of Section 74 of the Public
Procurement and Disposal Act, 2005.


IRREGULAR PAYMENT OF MEAL ALLOWANCES

1372. During the year under review, the Ministry paid meal allowances totalling
Kshs.6,803,300.00 to various officers for working outside the normal working
hours, and charged the expenditure to the Appropriation Account for Vote R.24
for the year ended 30 June 2009. It was however observed that some of the
duties for which the officers were drawing the allowances including preparation of
MTEF budget, checking operations of IFMIS, working in open and secret
registries, reviewing of Schemes of Service and expansion of the Ministry’s
stores, fall within their substantive appointments, and therefore would have been
expected to be performed during the normal working hours.

In the circumstances, the propriety of the expenditure of Kshs.6,803,300.00 could
not be ascertained.


BANK RECONCILIATION STATEMENT

1373. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.4,342,581.55,    which include stale cheques of
Kshs.480,214.40. No reason has been provided for failure to have the cheques
replaced.

1374. The Statement also reflects payments in the Bank Statement not recorded
in the Cashbook amounting to Kshs.1,423,300.75, in respect of Net Surplus
recovered directly from the Ministry’s bank account. It has not however been
clarified why the Cashbook had not been updated accordingly as at 30 June
2009.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.24

1375. The Statement of Assets and Liabilities for Vote R.24 as at 30 June 2009
reflects an Exchequer Account balance of Kshs.135,831,470.00, which includes
an amount of Kshs.135,632,260.00 relating to 2007/2008 and earlier years. No



                                       254 
 
reason has however been provided for failure to clear the long outstanding
balance of Kshs.135,632,260.00.

1376. The Statement also reflects an Advances Account balance of
Kshs.2,563,188.55, while the Ledger for the month of June 2009 shows a figure
of Kshs.996,505.35 against the Account.         The resultant difference of
Kshs.1,566,683.20 between the two sets of records has not been reconciled.

1377. The Statement further reflects a Paymaster General Account debit
balance of Kshs.80,866,484.95, while both the Cashbook and the Ledger as at
30 June 2009 show a figure of Kshs.194,911.80.           The difference of
Kshs.80,671,573.15 has not been reconciled or explained.

1378. The Statement shows a Temporary Imprest Account debit balance of
Kshs.1,707,967.45, while the Ledger for the month of June 2009 reflects a figure
of Kshs.409,852.20. As in the previous instances, the resultant difference of
Kshs.1,298,105.25 has not however been reconciled or explained.

1379. The Statement also shows a General Account of Vote (GAV) credit
balance of Kshs.152,490,710.30, out of which an amount of
Kshs.130,036,735.15 relates to 2005/2006 and earlier years.

It has not however been clarified why the long outstanding balance of
Kshs.130,036,735.15 has not been cleared from the books of account.

1380. The Statement continues to show an Excess Appropriations-In-Aid
balance of Kshs.368,897.00 relating to 2006/2007. The Ministry has not however
explained why this long outstanding balance has not been remitted to the
Exchequer.




                         STATE LAW OFFICE

APPROPRIATION ACCOUNT FOR VOTE D.25 FOR THE YEAR ENDED 30
JUNE 2009

1381. The Appropriation Account for Vote D.25 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.5,762,506.35 representing
approximately 13% of the approved estimate of Kshs.43,000,000.00. The under-
expenditure mainly occurred under Sub-Vote 252 – Registrar General
Department, Head 855 – Registration Services Subhead 0000 – Headquarter
Services, which recorded gross under-expenditure of Kshs.5,705,640.00 against
a voted provision of Kshs.14,000,000.00.


                                      255 
 
1382. According to the footnote to the Account, the under-expenditure was
attributed to failure by a supplier to deliver some fifty (50) desktop computers to
the State Law Office during the year.


APPROPRIATION ACCOUNT FOR VOTE R.25 FOR THE YEAR ENDED 30
JUNE 2009

1383. The Trial Balance as at 30 June 2009 from which the Appropriation
Account for Vote R.25 for the year then ended was drawn reflects various credit
balances totalling Kshs.8,565,117.80, against expenditure items under Heads
872, 858, 850, 590, 588, 584, 268 and 593. Information available indicates that
the items in question include; Printing, Advertising and Information Services;
Rental of Produced Assets; Specialized Machinery; Domestic Travel and
Subsistence; Other Transportation Costs; Other Operating Expenses; Personal
Allowances; Fuel, Oil and Lubricants; Routine Maintenance of Vehicles and
Other Transportation Equipment; and, Routine Maintenance of Other Assets.

1384. Although according to the Law Office the credit balances were caused by
revision of the Annual Estimates without due consideration to the expenditure
levels at the time of such revision, it has not however been clarified as to why the
balances had not been reversed or corrected in the books of account as at 30
June 2009.


OUTSTANDING IMPRESTS

1385. Examination of Imprests Records maintained at the Law Office revealed
that imprests totalling Kshs.1,808,503.45 which ought to have been surrendered
or otherwise accounted for on or before 30 June 2009 were still outstanding as at
that date.

1386. Out of the total, imprests amounting to Kshs.1,067,099.25 were due from
officers on Job Group ‘M’ and above, Kshs.438,077.40 from officers on Job
Group ‘L’ and below, Kshs.277,456.45 from non-civil servants, while the balance
of Kshs.25,870.35 represented Standing Imprests.

1387. A review of the position as at 18 August 2009 disclosed that out of the
balance of Kshs.1,808,503.45 outstanding as at 30 June 2009, an amount of
Kshs.9,100.00 had been recovered, leaving a balance of Kshs.1,799,403.45 still
outstanding.




                                        256 
 
BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

1388. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Bank Statement not recorded in the
Cashbook of Kshs.1,506,755.20,          which include amounts totalling
Kshs.1,102,799.20 in respect of Value Added Tax (VAT), relating to the period
between June 2007 and June 2008.
No reasons have been provided for failure to enter in the Cashbook the amount
of Kshs.1,102,799.20.

1389. The Statement also reflects receipts of Kshs.1,128,338.55, in the
Cashbook not recorded in the Bank Statement which include amounts of
Kshs.112,837.65 and Kshs.1,015,500.90 referred to as Bankings and Cheques
overcast/undercast respectively. It has not however been indicated as to why the
overcasts and undercasts have not been investigated and the respective
balances cleared from the Statement.

Deposits Cashbook

1390. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects an amount of Kshs.10,413,753.70 in respect of payments in
the Cashbook not recorded in the Bank Statement.             The amount of
Kshs.10,413,753.70 includes stale cheques totalling Kshs.1,106,159.35, relating
to 2007/2008 and earlier years. It has not however been clarified why the
cheques had not been replaced or reversed in the Cashbook as at 30 June 2009.

1391. The Statement also reflects amounts totalling Kshs.46,973,787.90 in
respect of payments in the Bank Statement not recorded in the Cashbook. The
above total includes an amount of Kshs.14,540,261.00 described as transfers
from R25 relating to 1997/98, another of Kshs.10,000,000.00 indicated as
representing a payment to the Attorney General, relating to 2002/2003, and
finally of Kshs.9,102,491.85 in respect of a payment made to a local law firm, and
relating to 2001/2002, amongst others.

No reason has been provided for failure to update the Cashbook with these
payments.

1392. The Statement in addition reflects receipts of Kshs.21,043,655.30 in the
Cashbook not yet recorded in the Bank Statement, relating to 2007/2008 and
earlier years. It has not been explained as to why the substantial amount of
Kshs.21,043,655.30 had not been banked as at 30 June 2009.




                                       257 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.25

1393. The Statement of Assets and Liabilities for Vote R.25 as at 30 June 2009
reflects an Exchequer Account debit balance of Kshs.650,133,224.26 which
includes an opening balance of Kshs.623,886,134.26 as at 1 July 2008. The
opening balance however differs with the previous year’s closing balance of
Kshs.588,124,795.00 as at 30 June 2008 by Kshs.35,761,339.26. Under normal
circumstances, the two balances should be equal.

1394. The Statement also reflects an Advances Account debit balance of
Kshs.15,072,248.80      which has not been properly analysed. The balance
includes long outstanding Unsettled Losses and Refer to Drawer Cheques
totalling Kshs.934,563.25 and Kshs.131,163.05 respectively. No reason has
been provided for failure to fully analyse the balance of Kshs.15,072,248.80 or
clear the long outstanding Losses and Cheques.

1395. The Statement further reflects a Temporary Imprests Account debit
balance of Kshs. 12,870,010.60 which includes an amount of Kshs.8,689,464.50
relating to 2007/2008 and earlier years. Non-clearance of this particular amount
has not been clarified. The balance of Kshs.12,810,010.60 also includes
unanalysed and unexplained figure of Kshs.12,164,037.20.

1396. The Statement in addition reflects an Agency Account debit balance of
Kshs.158,660.45 relating to 2006/2007 and earlier years, which has not been
cleared. The balance has also not been analysed with the result that its
completeness and accuracy could not be ascertained.

1397. The Statement shows a Provincial/District Suspense Account debit
balance of Kshs.29,916,500.42 against which no analysis has been provided.
Besides, the balance includes an amount of Kshs.29,221,661.87 relating to
2007/2008 and earlier years, which has not been cleared. No reasons have been
provided for lack of the analysis or failure to clear this long outstanding balance.

1398. The Statement also shows a Paymaster General Account balance of
Kshs.239,497,262.75 which however differs with the Cashbook balance of Kshs.
3,319,684.20 as at 30 June 2009. No reconciliation or explanation has been
provided for the difference of Kshs.236,177,578.55 between the two sets of
records. Additional information available however indicates that an analysis of
the Account is underway.

1399. The Statement further shows a General Account of Vote credit balance of
Kshs.774,994,808.92, which includes an amount of Kshs.714,343,281.58 relating
to 2006/2007 and earlier years. According to records seen, Treasury guidance
on the matter is being awaited.




                                        258 
 
1400. The Statement in addition shows a Suspense Account credit balance of
Kshs.19,209,369.25, out of which an amount of Kshs.19,011,080.55 relates to
2007/2008 and earlier years. The balance of Kshs.19,209,369.25 also includes a
figure of Kshs.658,264.30 relating to Refer to Drawer Cheques. No reason has
however been provided for non-clearance of the balance of Kshs.19,011,080.55
or replacing the Cheques.

1401. The Statement similarly reflects a Standing Imprests Account credit
balance of Kshs.449,890.60. Apart from lack of an analysis, no clarification has
been provided for this unusual credit balance against an Account which under
normal circumstances should reflect nil or a debit balance.

1402. The Statement also reflects a Clearance Account credit balance of
Kshs.13,708,160.30 which has not been analysed and as a result, its
completeness and accuracy could not be ascertained. Further, no reason has
been provided for non-clearance of the balance which has been outstanding for a
considerably long period of time.

1403. The Statement further reflects an Excess Appropriations-In-Aid balance of
Kshs.139,285,678.21. The amount includes an opening balance of
Kshs.95,089,904.15 which however differs with the previous year’s closing figure
of Kshs.102,280,097.25. The difference of Kshs.7,190,193.10 has not been
reconciled or explained.


STATEMENT OF ASSETS AND LIABILITIES VOTE D.25

1404. The Statement of Assets and Liabilities for Vote D.25 as at 30 June 2009
reflects various balances under Imprests, Agency, Suspense, District/Provincial
Suspense Accounts which have not been properly analysed.
Consequently, and in absence of the analyses, it has not been possible to
confirm the validity and accuracy of the balances.

1405. The Statement also reflects an Exchequer Account opening balance of
Kshs.73,856,662.60, which however differs with the previous year’s closing
balance of Kshs.68,894,890.00 by a figure of Kshs.4,961,772.60. The difference
has not been reconciled or explained.

1406. The Statement further reflects a General Account of Vote credit balance of
Kshs.56,155,024.85, out of which an amount of Kshs.49,673,507.20 relates to
2006/2007 and earlier years. No reason has been provided for non-clearance of
the latter balance which has been outstanding for considerably long period of
time.




                                      259 
 
1407. The Statement similarly reflects various debit and credit balances relating
to 2007/2008 and earlier years under Imprests, Excess A.I.A, Clearance,
Suspense, District/Provincial Suspense Accounts, which have not been cleared.

As in the previous instance, no reason has been given for the delay in clearing
the balances from the books of account.

1408. The Statement finally shows a Paymaster General Account credit balance
of Kshs.6,177,487.25, while the Cashbook reflects a debit balance of
Kshs.10,631,225.05 as at 30 June 2009. The difference of Kshs.16,808,712.30
between the two sets of records has not been reconciled or explained.


STATEMENT OF ASSET AND LIABILITIES FOR DEPOSITS

1409. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects a District Suspense Account debit balance of Kshs.3,701,743.20, brought
forward from the previous years. No analysis has been provided for the balance
consequent upon which its completeness and accuracy could not be ascertained.
Further, no reason has been provided for its non-clearance.

1410. The Statement also reflects a Paymaster General Account debit balance
of Kshs.137,276,432.90, while the Cashbook shows an amount of
Kshs.93,855,096.65 as at 30 June 2009. The difference of Kshs.43,421,336.25
between the two sets of records has not been reconciled or explained.

1411. The Statement further reflects a Provincial Suspense Account credit
balance of Kshs.179,632.30 relating to year 1992/93. Apart from lack of an
analysis, it has also not been indicated as to why this long outstanding balance
has not been cleared from the books of account.



                     JUDICIARY DEPARTMENT

APPROPRIATION ACCOUNT FOR VOTE R.26 FOR THE YEAR ENDED 30
JUNE 2009

Excess Vote

1412. The Appropriation Account for Vote R.26 for the year ended 30 June 2009
reflects an Excess Vote of Kshs.2,265,287.14. The Excess Vote appears to
have been caused by a deficiency in the collection of Appropriations-In-Aid and
over-expenditure against various Heads.


                                      260 
 
Exclusion of Expenditure

1413. Expenditure totalling Kshs.2,061,995.70 incurred under Head 860, Item
2620100 relating to Membership Fees and Dues, and Subscription to
International Organizations was excluded from the Appropriation Account for
Vote R.26 for the year ended 30 June 2009. Consequently, the net total
expenditure of Kshs.1,482,498,486.78 against the Vote has been understated by
an equivalent amount.

Unsupported Expenditure

1414. Payment vouchers and other related records for expenditure totalling
Kshs.48,822,509.25, charged against Foreign Travel and Subsistence Costs,
Rentals of Produced Assets, Training, Insurance, Specialized Materials and
Furniture and General Equipment, were not availed for audit verification. As a
result, the propriety of the expenditure could not be ascertained.

 
APPROPRIATION ACCOUNT FOR VOTE D.26 FOR THE YEAR ENDED 30
JUNE 2009

Excess Vote

1415. The Appropriation Account for Vote D.26 for the year ended 30 June 2009
reflects an Excess Vote of Kshs.37,676,547.70. The Excess Vote appears to
have been caused by over-expenditure against various Heads under the Vote.

Misallocation of Expenditure

1416. Expenditure totalling Kshs.87,876,964.73 relating to Training Expenses,
Construction of Buildings, Refurbishment of Buildings and Purchase of Office
Furniture and General Equipment was charged against unrelated expenditure
items. No Treasury authority for reallocation of the expenditure has been seen.


PENDING BILLS

1417. Records maintained at the Department’s Headquarters indicated that bills
totalling Kshs.175,269,707.81 relating to 2008/2009 were not settled during the
year but were instead carried forward to 2009/2010. Out of the total, an amount
of Kshs.138,926,078.51 was chargeable to Development Vote while the balance
of Kshs.36,343,629.30 represented those in respect of the Recurrent Vote.

1418. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote D.26 for the year would have
reflected an Excess Vote of Kshs.124,630,842.91 instead of the Net Surplus to

                                     261 
 
be Surrendered to the Exchequer of Kshs.14,295,235.60 now shown, while the
Appropriation Account for Vote R.26 would have reflected an increased Excess
Vote of Kshs.36,608,898.08 instead of Kshs.265,286.78 now recorded.


OUTSTANDING IMPRESTS

1419. Examination of Imprest Records maintained at the Department during the
year indicated that imprests totalling Kshs.1,639,041.90, which ought to have
been surrendered or otherwise accounted for, on or before 30 June 2009 were
still outstanding as at that date.

1420. Out of the total, imprests amounting to Kshs.503,080.80 were due from
Judges, while the balance of Kshs.1,135,961.10 was due from other officers.

1421. Further, it was observed that some officers were issued with additional
imprests before having surrendered or accounted for previous balances.


CONVERSION OF INCOME TAX HOUSE INTO LAW COURTS

1422. A review of the Department’s records for 2008/2009 disclosed that a
contract for conversion of the former Income Tax House into law courts was on
18 October 2004 competitively awarded by the Judiciary Tender Committee to a
local construction firm at a sum of Kshs.696,101,909.00.

Scope of Work and Contract Period

1423. According to the contract records seen, the scope of work relating to the
transformation of the Tax House into law courts included; demolitions,
alterations, re-building and supply of furniture, alongside associated civil
engineering, electrical and mechanical works. The contract commenced on 3
February 2005 and was planned to run for a period of two hundred (200) weeks.
The anticipated date of completion of the project was therefore 26 December
2008.

Project Progress

1424. Although as indicated above the project was expected to have been
completed and handed over to the Department on 26 December 2008, additional
information available appears to indicate that the date of completion was later
revised and extended to 8 April 2009, while the contract price was raised by an
amount      of     Kshs.94,487,522.00      from     Kshs.696,101,909.00       to
Kshs.790,589,431.00. No evidence has however been provided to confirm that
these variations were approved by the Tender Committee, as required under
Section 47 of the Public Procurement and Disposal Act, 2005.

                                      262 
 
1425. Further and despite the extension of the contract period from 26
December 2008 to 8 April 2009, the project had still not been completed as at 30
June 2009.

Other Audit Findings

1426. Payment certificates Nos. 31 and 35 appear to have been overpaid by
amounts of Kshs.10,500,000.00 and Kshs.1,843,280.00 respectively. The
overpayments had not however been recovered from the contractor’s fees as at
30 June 2009.

1427. Although, and as indicated above the contract period for completing the
project elapsed on 8 April 2009, no indication has however been given by the
Department as to whether the contractor had compensated the Government for
failure to complete the project in accordance with the contract agreement.


UNSURRENDERED REVENUE – KERICHO LAW COURTS

1428. Examination of records maintained at the Kericho Law Courts revealed
that revenue totalling Kshs.2,966,128.00 collected at the Courts during the year
was not banked intact as required by the Government Financial Regulations and
Procedures. Instead, the collections were held at the Courts in form of partly
paid vouchers, refer to drawer cheques and loans or IOUs.

1429. No reason has been given for the failure to bank the collections as
required or to recover the refer to drawer cheques and IOUs of Kshs.50,500.00
and Kshs.46,750.00 respectively.


UNSURRENDERED REVENUE – ELDORET LAW COURTS

1430. Examination of the records maintained at the Eldoret Law Courts during
the month of June 2009 revealed that receipts totalling Kshs.3,742,746.00 in
respect of court fees, fines and deposits were not banked during the year, but
were instead held as partly paid vouchers, IOUs and refer to drawer cheques, in
the amounts of Kshs.3,018,246.00, Kshs.560,500.00 and Kshs.164,000.00
respectively. No satisfactory reasons have been provided for failure to bank the
revenue.


STATEMENT OF REVENUE HEAD 1430100 – FINES AND FORFEITURES

1431. The Statement of Revenue for Head 1430100 – Fines and Forfeitures for
the year ended 30 June 2009 reflects a balance carried forward of

                                      263 
 
Kshs.109,405,135.85 in respect of revenue collected during the year. It has not
however been clarified why the revenue had not been remitted to the Exchequer
as at the close of the year.

1432. The Statement also reflects receipts totalling Kshs.159,515,695.85
collected during the year under review. However, no analysis or other relevant
documentation has been produced in support of the balance, with the result that
its accuracy could not be ascertained.

1433. The Statement of Arrears of Revenue as at 30 June 2009 reflects Arrears
totalling Kshs.47,951,556.00, out of which an amount of Kshs.41,372,729.00 or
approximately 86% of the total, relates to 2007/2008 and prior years. No reason
has been provided for failure to collect the steadily increasing arrears.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

1434. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.118,410,802.05, which include stale cheques amounting
to Kshs.4,767,255.15. No reason has been provided for failure to replace the
cheques.

1435. The Statement also reflects receipts in the Cashbook not recorded in the
Bank Statement amounting to Kshs.7,866,137.00, which include refer to drawer
cheques for Kshs.128,406.00. No reason has been provided for failure to have
the cheques replaced or reversed in the Cashbook.

1436. The Statement further reflects receipts in the Bank Statement not
recorded in the Cashbook totalling Kshs.21,325,305.55, which have been
described as “Bankings”. No effort appears to have been made to have the
items identified and properly entered in the Cashbook.

1437. The Statement also reflects payments in the Bank Statement not recorded
in the Cashbook of Kshs.37,432,884.95, which include unpaid and return to
drawer cheques totalling Kshs.8,094,960.40 and Kshs.890,231.25 respectively.
No reason has been provided for failure to update the Cashbook with the long
outstanding payments.

Development Cashbook

1438. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.17,338,342.90, which include an amount of

                                     264 
 
Kshs.259,380.15 relating to the period between 12 September 2008 and 27
October 2008. No reason has been provided for failure to have the payments
posted in the Bank Statement.

1439. The Statement also shows payments in the Bank Statement not recorded
in the Cashbook totalling Kshs.12,299,378.10. As in the previous instances, no
explanation has been given for failure to record or update the Cashbook with the
long outstanding payments.

1440. The Bank Statement further shows receipts in the Cashbook not recorded
in the Bank Statement totalling Kshs.962,630.20, which include an amount of
Kshs.137,274.00 relating to the period between 12 August 2006 and 13
December 2006. No action appears to have been taken to facilitate posting of
the receipts in the Bank Statement.

Deposits Cashbook

1441. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement of Kshs.7,611,149.35, which include stale cheques amounting to
Kshs.1,200,273.55. No reason has been provided for failure to have the
cheques replaced or reversed in the Cashbook.

1442. The Statement also reflects receipts in the Cashbook not recorded in the
Bank Statement amounting to Kshs.39,703,512.65, which include collections of
Kshs.9,137,920.65 relating to the period between 29 June 2007 and 8 December
2008.     The amount of Kshs.39,703,512.65 also includes a figure of
Kshs.802,453.00 representing sums banked in the Recurrent Bank Account
instead of the Deposits. These anomalies and omissions have not been clarified.

1443. The Statement further reflects receipts in the Bank Statement not
recorded in the Cashbook of Kshs.103,208,778.40, out of which collections
totalling Kshs.24,410,866.40 relate to the period between 11 June 2007 and 25
November 2008. It has not however been explained why the collections of
Kshs.24,410,866.40 had not been recorded in the Cashbook as at 30 June 2009.

1444. The Statement also shows payments in the Bank Statement not recorded
in the Cashbook amounting to Kshs.8,086,673.85, which include a figure of
Kshs.2,842,012.65 relating to the period between 25 October 2007 and 19
August 2008. No reason has been provided for failure to update the Cashbook
as appropriate.




                                      265 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.26

1445. Statement of Assets and Liabilities for Vote R.26 as at 30 June 2009
reflects a Paymaster General Account debit balance of Kshs.722,555,837.97,
while both the Trial Balance and the Cashbook as at the same date show a debit
balance of Kshs.4,141,841.85. No reconciliation or explanation has been
provided for the resultant difference of Kshs.681,413,996.12 between the two
sets of records.

1446. The Statement also reflects an Exchequer Account debit balance of
Kshs.23,928,935.00, which includes an amount of Kshs.23,661,605.00 relating to
2006/2007 and earlier years. No reason has been provided for failure to clear
the long outstanding balance of Kshs.23,661,605.00.

1447. The Statement further reflects a General Account of Vote debit balance of
Kshs.95,624,132.63, which includes Excess Vote of Kshs.95,358,845.85 relating
to 1998/1999 and prior years. No explanation has been given for failure to have
the Excess Vote regularized. The Statement also shows a General Account of
Vote credit balance of Kshs.535,526,136.10 relating to 2006/2007 and earlier
years. As in the previous instance, no reason has been provided for failure to
have the long outstanding balance cleared from the books of account.

1448. The Statement further shows an Advances Account debit balance of
Kshs.1,474,297.75, while the Computer Payroll Summary reflects a figure of
Kshs.1,386,256.85 against the same Account. The difference of Kshs.88,040.90
has not been reconciled or explained.

1449. The Statement in addition reflects an Agency Account debit balance of
Kshs.14,752,945.50, which includes an amount of Kshs.10,387,945.50 in respect
of refer to drawer cheques. Apart from the fact that the cheques have not been
analysed, it has also not been explained why these cheques have not been
replaced.

1450. The Statement also shows an unanalyzed District Imprest Account credit
balance of Kshs.209,147.50 relating to 1999/2000. In absence of an analysis, it
has not been possible to confirm what the amount represents. It has similarly not
been clarified why the figure had not been cleared from the books of account as
at 30 June 2009.

1451. The Statement also reflects Excess Appropriations-In-Aid (A.I.A) of
Kshs.306,069,466.20 relating to 2005/2006 and earlier years. No reason has
been provided for failure to remit the long outstanding amount to the Exchequer.

1452. The Statement further shows a Provincial and District Suspense Account
credit balance of Kshs.17,883,083.38, which has not been analysed. As a result,
its completeness and accuracy could not be ascertained. The balance also

                                      266 
 
includes an amount of Kshs.15,299,858.15 relating to 2007/2008 and earlier
years. No reason has been provided for non-clearance of the amount.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.26

1453. The Statement of Assets and Liabilities for Vote D.26 as at 30 June 2009
reflects an Exchequer Account debit balance of Kshs.254,260,510.00 in respect
of exchequer under-issues, relating to 2007/2008 and earlier years. No reason
has been provided for non-clearance of this long outstanding balance.

1454. The Statement also reflects a General Account of Vote debit balance of
Kshs.31,324,227.00 relating to various Excess Votes incurred in 1997/1998 and
earlier years. Failure to regularize these Excess Votes has not been explained.
The Statement also shows a General Account of Vote credit balance of
Kshs.347,228,517.05 representing net surpluses, which include an amount of
Kshs.332,739,069.35 relating to 2006/2007 and earlier years.          Delay in
surrendering the surpluses to the Exchequer has not been explained.

1455. The Statement in addition reflects a District Imprest debit balance of
Kshs.1,623,505.00 relating to 2007/2008 and earlier years, and which has not
been analysed. Apart from non-clearance of the balance, no reason has been
given for lack of its analysis.

1456. The Statement also shows a Paymaster General Account debit balance of
Kshs.165,046,961.35, while the Cashbook as at 30 June 2009 reflects a figure
of Kshs.4,397,787.40. The difference of Kshs.160,649,173.95 between the two
sets of records has not been reconciled or explained.

1457. The Statement also reflects an Excess Appropriations-In-Aid (A.I.A)
balance of Kshs.30,714,306.00 relating to 2007/2008 and earlier years. It has
not, however, been clarified why the Excess A.I.A had not been remitted in the
Exchequer as at 30 June 2009.

1458. The Statement further shows a District Suspense Account credit balance
of Kshs.46,868,173.25 which has not been analysed. The balance has also
been outstanding in the books of account for a considerably long period of time.
Failure to analyse the balance or have it cleared from the Statement has not
been clarified.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1459. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects a Paymaster General Account debit balance of Kshs.402,228,844.20,
while the Deposits Cashbook as at the same date shows an amount of

                                      267 
 
Kshs.328,418,081.20. The difference of Kshs.73,810,763.00 between the two
sets of records has not been reconciled or explained.

1460. The Statement also reflects a Suspense Account debit balance of
Kshs.6,891,124.00, which includes an amount of Kshs.3,367,517.10 relating to
2007/2008 and earlier years. The latter balance ought to have been cleared from
the books of account by 30 June 2009.

1461. The Statement further reflects a District Suspense Account debit balance
of Kshs.71,187,342.65 relating to 2007/2008 and earlier years. Apart from failure
to analyse the balance, no reason has been provided for its non-clearance.

1462. The Statement shows unanalysed General Suspense Account credit
balance of Kshs.10,009,037.90, which differs with Trial Balance figure of
Kshs.10,814,011.25, by Kshs.804,973.35. As in the previous instances, the
difference has not been reconciled or explained.



         PUBLIC SERVICE COMMISSION OF KENYA

PENDING BILLS

1463. Records held at the Public Service Commission of Kenya show that bills
totalling Kshs.8,405,418.00 chargeable to the Recurrent Vote were not settled
during the year but were instead carried forward to 2009/2010.

1464. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.27 for the year would have
reflected an Excess Vote of Kshs.6,778,051.10 instead of a Net Surplus to be
Surrendered to the Exchequer of Kshs.1,627,366.90 now shown.


BANK RECONCILIATION STATEMENT

1465. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.28,119,352.25, which include stale cheques amounting
to Kshs.685,442.95. No reason has been provided for failure to have the
cheques replaced or reversed in the Cashbook.




                                      268 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.27

1466. The Statement of Assets and Liabilities for Vote R.27 as at 30 June 2009
reflects a Paymaster General Account debit balance of Kshs.11,474,104.30,
while the Cashbook as at 30 June 2009 shows a figure of Kshs.1,692,888.65.
The difference of Kshs.9,781,215.65 between the two sets of records has not
been reconciled or explained.

1467. The Statement also reflects a General Account of Vote debit balance of
Kshs.9,368,316.85 for 2008/2009, while the Appropriation Account for Vote R.27
for the period shows a Net Surplus to be Surrendered to the Exchequer of
Kshs.3,125,843.45. No satisfactory explanation has been provided for the
discrepancy.

1468. The Statement further reflects a Clearance Accounts credit balance of
Kshs.784,651.55, out of which an amount of Kshs.98,378.10 relates to
2007/2008 and earlier years. Apart from failure to clear the latter balance, no
reason has been provided for failure to provide an accurate analysis for the
amount of Kshs.784,651.55.




                        NATIONAL ASSEMBLY

APPROPRIATION ACCOUNT FOR VOTE R.29 FOR THE YEAR ENDED
30 JUNE 2009

Charge of Expenditure to Refurbishment of Buildings

1469. The Appropriation Account for Vote R.29 for the year ended 30 June 2009
reflects expenditure totalling Kshs.21,912,969.00 incurred during the year against
Item 3110300 – Refurbishment of Buildings under Head 881- Legislative.
However, expenditure documents seen indicate that out of the above total, an
amount of Kshs.12,574,000.00 related to payments made to various
Constituencies Offices in respect of wages for temporary employees, office
running expenses, rent and purchase of furniture and equipment.

1470. The expenditure of Kshs.12,574,000.00 was therefore irregularly charged
to Item 3110300 – Refurbishment of Buildings, instead of Items 2110200 – Basic
Wages Temporary Employees, 2211300 – Other Operating Expenses and
3111000 – Purchase of Office Furniture and General Equipment.




                                       269 
 
Charge of Expenditure to Construction of Buildings

1471. The Appropriation Account also reflects expenditure totalling
Kshs.47,742,215.00 incurred during the year against Item 3110200 –
Construction of Buildings. However, expenditure documents examined indicate
that out of the total, an amount of Kshs.19,006,000.00 was paid to various
Constituencies Offices to cover wages for temporary employees, office running
expenses and rent on leased Constituency Offices, while the balance of
Kshs.21,582,378.00 was spent on settlement of custom duties on imported motor
vehicles.

No reasons have been provided for misallocation of the expenditure.


PENDING BILLS

1472. Records held at the National Assembly indicated that bills totalling
Kshs.51,239,409.80 chargeable to the Recurrent Vote were not paid during the
year but were instead carried forward to 2009/2010.

According to information available, settlement of some of the bills was delayed by
inadequate documentation to support certain payments and reimbursements.

1473. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Recurrent Appropriation Account for the year would have
reflected a Net Surplus to be Surrendered to the Exchequer of
Kshs.197,987,355.40 instead of Kshs.249,226,765.20 now shown.


OUTSTANDING IMPRESTS

1474. Imprests records maintained at the National Assembly show that
Temporary Imprests totalling Kshs.11,005,189.30 which should have been
surrendered or otherwise accounted for, on or before 30 June 2009 were
outstanding as at that date.      Out of the total, imprests amounting to
Kshs.2,573,925.15 were owed by Members of Parliament, Kshs.6,999,405.40 by
members of staff, while the balance of Kshs.1,431,858.75 was due from former
Members of Parliament and ex-staff.


UNCOLLECTED RENTAL INCOME

1475. In the report for 2007/2008, reference was made to a piece of land under
L.R. No.209/5412 which had been leased out by the National Assembly to a local
firm for use as a commercial parking space. Information available indicates that
the lease was terminated on 31 August 2008 following accumulation of rent

                                       270 
 
arrears which stood at Kshs.656,000.00 as at 30 June 2008. A further amount of
Kshs.80,000.00 for the months of July and August 2008 was due and payable,
raising the total rent in arrears to Kshs.736,000.00 as at 31 August 2008.
However, and separately, other records show that the firm had paid an amount
of Kshs.200,000.00 on 31 July 2008, leaving a balance of Kshs.536,000.00
outstanding as at the date of termination of the lease.

1476. The firm appears to have been dissatisfied with the termination of the
lease by the National Assembly subsequent upon which it sued the National
Assembly through Civil Case No.411 of 2008 at the High Court, Nairobi on 11
September 2008. In the suit, the firm sought a court injunction restraining the
Parliamentary Service Commission from alleged illegal eviction and unlawful
termination of lease. The firm also sought general damages arising from the loss
suffered. However, the High Court on 18 December 2009 ruled in favour of the
Commission and upheld termination of the lease and eviction of the tenant from
the plot.

1477. A physical verification conducted on 9 February 2009 however revealed
that the ex-tenant’s truck and a semi-permanent shelter structure are still at the
site. Apart from the fact that it has not been clarified as to the circumstances
under which the ex-tenant’s property is still lying at the plot despite termination of
lease, the outstanding rent of Kshs.536,000.00 had not been recovered as of
February 2009.


BANK RECONCILIATION STATEMENTS

Delay in the Preparation of Bank Reconciliation Statements

1478. The Bank Reconciliation Statements for Vote R.29 for seven (7)
consecutive months from December 2008 up to June 2009 have not been
prepared and submitted for audit, contrary to Section 5.9.2 of the Government
Financial Regulations and Procedures, which requires that a Bank Reconciliation
Statement be prepared at least once every month and copies be sent to Treasury
and Controller and Auditor General. No reason has been provided for failure to
prepare the Statements.

Bank Reconciliation Statement – Recurrent Cashbook

1479. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
November 2008 reflects payments totalling Kshs.311,173,131.35 in the
Cashbook not recorded in the Bank Statement, which include stale cheques of
Kshs.5,800,762.45. No reason has been provided for failure to replace or re-
credit the Cheques.




                                         271 
 
1480. The Reconciliation Statement also reflects payments totalling
Kshs.141,430,440.90 in the Bank Statement not recorded in the Cashbook, out
of which an amount of Kshs.5,242,221.25 relates to 2007/2008. It has not
however been clarified why such significant payments had not been recorded in
the Cashbook as at 30 June 2009.

1481. The Statement further reflects receipts amounting to Kshs.7,141,803.10 in
the Cashbook not recorded in the Bank Statement, out of which a sum of
Kshs.25,000.00 relates to 2007/2008. Failure to bank the receipts has not been
clarified.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R. 29

1482. The Statement of Assets and Liabilities for Vote R.29 as at 30 June 2009
reflects various Opening Account balances under Exchequer, GAV, Excess AIA,
Imprest Advances and Bank balances Accounts, which differ with the
corresponding amounts in the audited Statement for 2007/2008. No reasons
have been provided for the differences.

1483. The Statement also reflects an Exchequer Account balance of
Kshs.2,878,513,300.00, out of which an amount of Kshs.2,750,657,750.00
relates to 2007/2008 and earlier years. It has not however been clarified why the
long outstanding amount of Kshs.2,750,657,750.00 has not been cleared from
the books of account.

1484. The Statement further reflects a balance of Kshs.13,896,806.45 against
the Advances Account, while the analysis provided show an amount of
Kshs.13,924,806.35 against the Account.          The resultant difference of
Kshs.27,999.90 has not been reconciled or explained.

1485. The      Statement     in   addition  reflects a    Bank    balance    of
Kshs.103,874,350.05, while both the Cashbook and the Board of Survey Report
show a figure of Kshs.91,638,232.05. No reconciliation or explanation has been
provided for the difference of Kshs.12,236,118.00.

1486. The Statement also shows a General Account of Vote balance of
Kshs.3,010,648,509.05, out of which an amount of Kshs.1,471,722,868.75
relates to 2003/2004 and earlier years. The Department has not clarified why the
long outstanding balance of Kshs.1,471,722,868.75 has not been cleared from
the books of account.

1487. The Statement further shows an Excess Appropriations-In-Aid balance of
Kshs.2,656,429.90, which includes an amount of Kshs.1,196,170.90 relating to
2007/2008 and earlier years. As in the previous instances, no reason has been
given for failure to remit the amount of Kshs.1,196,170.90 to the Exchequer.

                                      272 
 
                        MINISTRY OF ENERGY

APPROPRIATION ACCOUNT FOR VOTE D.30 FOR THE YEAR ENDED 30
JUNE 2009

Excess Vote

1488. The Appropriation Account for Vote D.30 for the year ended 30 June 2009
reflects an Excess Vote of Kshs.86,224,169.60. The Excess Vote appears to
have been caused by a deficiency in the collection of Appropriations-In-Aid,
whereby out of estimated receipts of Kshs.10,114,324,624.00 during the year,
only collections amounting to Kshs.9,328,473,070.00 were realized, occasioning
a shortfall of Kshs.785,851,554.00.

Discrepancy Between Appropriation Account and Trial Balance

1489. The Appropriation Account also reflects total actual expenditure of
Kshs.30,560,727,109.60, while the Trial Balance as at 30 June 2009 shows a
corresponding figure of Kshs.22,954,286,091.05. The resultant difference of
Kshs.7,606,441,018.55 between the two sets of records has not been reconciled
or explained.

1490. The Account further reflects total actual Appropriations-In-Aid of
Kshs.9,328,473,070.00 against a figure of Kshs.3,980,842,190.65 shown in the
Trial Balance. As in the previous instance, the significant difference of
Kshs.5,347,630,879.35 has not been reconciled or explained.

Unaccounted for Appropriations-In-Aid

1491. The      Appropriation     Account    shows     actual    collections    of
Kshs.714,492,830.00 against Actual Receipts Not Classified Elsewhere under
Sub-Vote 302 Head 435 – National Grids Systems, representing KPLC’s
contribution to the Energy Sector Recovery Project. However, expenditure
returns submitted by KPLC indicate that the company’s actual contribution to the
Project during the year totalled Kshs.737,400,533.00. The resultant difference of
Kshs.22,907,703.00 has not been reconciled or explained.

1492. The Account also shows Actual Receipts Not Classified Elsewhere of
Kshs.787,878,879.00 under Head 436 – Geothermal Resources Exploration, in
respect of KenGen’s contribution to the Recovery Project. However, and as in
the previous instance, expenditure returns submitted by KenGen show that the
company’s actual contribution to the project stood at Kshs.1,890,285,002.00 as
at 30 June 2009. The resultant difference of Kshs.1,102,407,023.00 has similarly
not been reconciled or explained.

                                      273 
 
Discrepancy between Appropriation Account and KenGen’s Financial
Statements

1493. The Appropriation Account further shows under Head 436 – Geothermal
Resources Exploration, Item 3110500 – Construction and Civil Works, an
Expenditure of Kshs.4,475,000,000.00 representing the sum released to KenGen
for Geothermal Resource Exploration during the year. However, KenGen’s
financial statements for the year ended 30 June 2009 show under Note 21 to the
statements that an amount of Kshs.4,472,700,000.00 was received from the
Ministry for the above purpose. The resultant difference of Kshs.2,300,000.00
between the two sets of records has not been reconciled or explained.

1494. The Account in addition shows under Head 435 – National Grids Systems,
Items 2630100 and 2630200 – Current Grants and Capital Grants to Government
Agencies & Other Levels of Government respectively, grants totalling
Kshs.6,306,181,228.10 remitted to KenGen for Emergency Power Project.
However, KenGen’s financial statements for 2008/2009 reflect under Note 34 a
sum of Kshs.6,253,492,000.00 as having been received from the Ministry. As in
the previous instance, the difference of Kshs.52,689,228.10 has not been
reconciled or explained.


STATEMENT OF PARTICIPATION BY GOVERNMENT OF KENYA IN QUASI-
GOVERNMENT AND OTHER STATUTORY ORGANIZATIONS

1495. The Statement of Participation by the Government of Kenya in Quasi -
Government and Other Statutory Organizations as at 30 June 2009 indicates that
the Government through the Ministry of Energy held a total of 267,072 shares,
valued at Kshs.5,342,760.00 in six (6) state corporations including KenGen,
Kenya Power & Lighting Company, Kenya Pipeline Company, National Oil
Corporation of Kenya, Kenya Electricity Transmission Company and Geothermal
Development Company. Of the six (6) corporations, Government shareholding in
the Kenya Power & Lighting Co. Ltd. and Kenya Electricity Transmission
Company has not been confirmed, while in the case of the other four (4), none
has produced the original share certificates for audit verification. As a result, it
has not been possible to confirm the Government’s shareholding valued at
Kshs.5,342,760.00 as at 30 June 2009.


STATEMENT OF OBLIGATIONS GUARANTEED BY THE GOVERNMENT OF
KENYA

1496. The Statement of Obligations Guaranteed by the Government of Kenya as
at 30 June 2009 reflects outstanding contingent liabilities totalling Japanese yen
21,433,038,903, equivalent to Kshs.17,287,460,518.38 (at an exchange rate of

                                        274 
 
1497. As in the Previous year, the Ministry did not maintain accounting records
to support loans guaranteed by the Government but appears to have relied on
borrower’s and lender’s confirmations to prepare the Statement under review.
Consequently, and as observed in 2007/2008, the Ministry may not be able to
accurately establish or confirm at any one time, the level of loans guaranteed by
the Government. Further, it has also not been clarified how the Ministry oversees
or tracks down repayment of loans or ensures compliance with the terms and
conditions of such loans by the Kenya Electricity Generating Company Limited, in
absence of the loans records.


COAL EXPLORATION

1498. In the report for 2006/2007, mention was made of the fact that the Ministry
of Energy entered into a four month coal drilling service contract in Kitui and
Mwingi districts, with a local engineering firm on 30 June 2005, at a contract price
of Kshs.35,635,200.00. According to records available, the firm was to drill eight
wells with a cumulative depth of 3000 metres. Additional information show that
the firm was paid an initial sum of Kshs.8,908,800.00.

1499. A review of the position during 2008/2009 indicated that the firm failed to
achieve the target of 3000 meters within the contract period subsequent to which
it requested the Ministry to consider an extension. The Ministry agreed to extend
the contract to 31 December 2008 within which period the firm was expected to
reach the required depth of 3000 metres. Information however indicates that by
the end of December 2008, the firm had only managed to drill a cumulative depth
of 1,984.75 metres, representing approximately 66% of the agreed depth.

1500. Examination of expenditure records maintained at the Ministry’s
Headquarters revealed that the Ministry had as at 30 June 2009 paid the firm a
total of Kshs.27,048,616.40 for drilling, bringing the cumulative payments to the
firm to Kshs.35,957,416.40 as at that date. As may be noted, the amount of
Kshs.35,957,416.40 exceeded the contract price of Kshs.35,635,200.00 by
Kshs.322,216.40.

1501. Apart from the fact that the contractor failed to achieve the desired depth
of 3,000 metres, it has also not been explained why the Ministry proceeded to
pay the full amount of the contract price, in addition to a further and unexplained
excess payment of Kshs.322,216.40.

                                        275 
 
ENERGY CENTRES

1502. In the report for 2006/2007, reference was made to the fact that the
Ministry of Energy had not obtained title deeds for its ten (10) Energy Centres
located in Kitui, Migori, Busia, Uasin Gishu, Kericho, Mtwapa, Bukura, Kisii
and Nyeri. A review of the position in 2008/2009 revealed that no ownership
documents had been obtained as at 30 June 2009. In the circumstances,
there is a clear risk that the land may be illegally encroached into by squatters
or other parties.

1503. The Ministry incurred an expenditure of Kshs.10,865,356.00 during the
year towards the cost of acquisition of four (4) hectares of land at the
Wambugu Farmers Training Centre in Nyeri District, where one of the energy
centres is located. However, and although the amount of Kshs.10,865,356.00
was delivered and received by the Ministry of Agriculture, the land had not yet
been transferred to the Ministry of Energy as at 30 June 2009 apparently
because there is a dispute amongst trustees of the Training Centre.


PETROLEUM DEVELOPMENT FUND

1504. The Petroleum Development Fund’s Income Statement for the year ended
30 June 2009 reflects actual Petroleum Development Levy income of
Kshs.1,247,500,000.00, while the Appropriation Account for Vote D.30 for the
period shows receipts totalling Kshs.2,183,611,545.00 against the item. The
resultant difference of Kshs.936,111,545.00 between the two sets of records has
not been reconciled or explained.

1505. The Fund’s Balance Sheet as at 30 June 2009 shows a Cash at Bank
balance of Kshs.337,191,912.00, while the Cashbook as at the same date
reflects  an   amount    of    Kshs.268,640,135.00.      The difference of
Kshs.68,551,777.00 has not been reconciled or explained.

1506. The Balance Sheet also shows a payables balance of Kshs.59,581,878.00
under Current Liabilities, relating to various unpresented cheques. It has not
however been explained why the cheques are reflected as payables in the
Balance Sheet.




                                      276 
 
KENYA ENERGY SECTOR ENVIRONMENT AND SOCIAL RESPONSIBILITY
PROGRAMME (KEEP) FUND

1507. The audit of the Kenya Energy Sector Environment and Social
Responsibility Programme (KEEP) Fund for the year ended 30 June 2009
revealed the following unsatisfactory matters:-

Unaccounted for Expenditure

1508. The Ministry entered into an agreement with the Maendeleo ya Wanawake
Organization on 4 February 2009, for implementation of tree planting activities for
a period of three years under the Kenya Energy Sector Environment and Social
Responsibility Programme. Accordingly, and pursuant to the agreement, the
Ministry paid, during the year, an amount of Kshs.11,375,000.00 to the
Organization for the Programme. However, the basis on which the Organization
was identified and its fee for implementing the programme determined has not
been clarified, considering the fact that the requirements of the Public
Procurement and Disposal Act, 2005 do not appear to have been complied with.

Ministry of Youth Affairs and Sports Programme

1509. The Ministry also entered into an agreement with the Ministry of Youth
Affairs and Sports in March 2009, for the implementation of Trees for Jobs
Programme by the latter Ministry. Subsequently, and during the year, an amount
of Kshs.37,589,444.00 was paid to the Ministry of Youth Affairs and Sports for
the Programme. Although records available show that the amount was paid on
26 June 2009, no quarterly reports on how the Programme Managers utilized the
funds have been seen.

Inaccuracy of the Fund Accounts

1510. The Fund’s Income and Expenditure Account reflects total expenditure of
Kshs. 43,242,951.05, which does not include the payments totalling
Kshs.38,714,036.00 made during the year. Consequently, the Net Surplus of
Kshs.66,314,331.65 as at 30 June 2009 has been overstated by an equivalent
amount.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

1511. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Bank Statement not recorded in the
Cashbook totalling Kshs.54,866.55. The amount of Kshs.54,866.55 includes two
cheques which are described as unpaid by the Ministry.

                                       277 
 
It has not however been explained how the cheques were processed through the
Bank without first having been recorded in the Cashbook.

Deposits Cashbook

1512. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects a payment in the Bank Statement not recorded in the
Cashbook of Kshs.281,502.20. The payment relates to a debit entry made on 20
June 2004 against cheque No.001252 of the same date. No explanation has
been provided for failure to update the Cashbook with the payment.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.30

1513. The Statement of Assets and Liabilities for Vote R.30 as at 30 June 2009,
reflects an Exchequer Account debit balance of Kshs.11,071,819.00, which
includes an amount of Kshs.10,134,729.00 relating to 2007/2008 and earlier
years. Non-clearance of the amount of Kshs.10,134,729.00 has not been
explained although indications are that the Ministry has been communicating with
Treasury over the matter.

1514. The Statement also reflects Advances Account debit balance of
Kshs.488,207.95 which has not been analysed to confirm its completeness and
accuracy. The balance also includes an amount of Kshs.222,087.90 relating to
2007/2008 and earlier years. No reason has been provided for lack of the
analysis and non-clearance of the amount of Kshs.222,087.90

1515. The Statement further reflects an Imprest Account debit balance of
Kshs.2,460,868.80, which includes an amount of Kshs.2,166,542.80 relating to
2007/2008 and earlier years. Apart from lack of an analysis for the balance of
Kshs.2,460,868.80, no reason has been provided for failure to have the long
outstanding imprest amount of Kshs.2,166,542.80 surrendered or otherwise
accounted for.

1516. The Statement shows a District Suspense Account debit balance of
Kshs.6,317,085.15, which has not been analyzed with the result that its accuracy
could not be ascertained. Out of the amount, a sum of Kshs.5,847,597.35
relates to 2007/2008 and earlier years. It has not however been clarified as to
why this long outstanding balance had not been cleared from the books of
account as at 30 June 2009.

1517. The Statement further shows a General Account of Vote credit balance of
Kshs.153,573,789.70 which includes an amount of Kshs.103,531,628.25 relating
to 2006/2007 and earlier years. This particular amount has been outstanding for
a considerably long period of time. Further, the General Account of Vote figure

                                      278 
 
of Kshs.17,364,860.35 for 2008/2009 differs with the balance of
Kshs.17,264,860.35 reflected in the Appropriation Account Vote R.30 for the year
ended 30 June 2009 as Net Surplus to be Surrendered to the Exchequer. The
resultant difference of Kshs.100,000.00 has not been explained.

1518. The Statement in addition reflects Excess Appropriations-In-Aid of
Kshs.29,567,848.75 relating to 2007/2008 and earlier years. This balance ought
to have been remitted to the Exchequer on or before 30 June 2009. Further,
Excess Appropriations-In-Aid amounting to Kshs.1,008,522.65 for the year,
payable separately to the Exchequer has not been disclosed in the Statement of
Assets and Liabilities.

1519. The Statement also reflects balances of Kshs.2,793,418.25 and
Kshs.663,598.60 under the General Suspense and Suspense Account
Adjustments Accounts respectively, which have not been analysed and as a
result, their correctness could not be ascertained. Further, the two balances
have been outstanding for a considerably long period of time.

1520. Similarly not analysed is a balance of Kshs.3,936,999.65 under the
Clearance Account. This balance also includes a long outstanding amount of
Kshs.3,887,574.65 which is yet to be cleared from the Statement.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.30

1521. The Statement of Assets and Liabilities for Vote D.30 as at 30 June 2009
reflects an Exchequer Account balance of Kshs.9,351,599,354.75 which includes
an amount of Kshs.8,001,091,348.55 relating to 2007/2008 and earlier years. No
explanation has been provided for non-clearance of the long outstanding balance
of Kshs.8,001,091,384.55. Further, the amount of Kshs.1,350,508,006.20 for
2008/2009 differs with the figure of Kshs.1,046,766,985.00 shown in the
Exchequer records maintained at the Treasury, by an amount of
Kshs.303,741,021.20. The difference between the two sets of records has not
been reconciled or explained.

1522. The Statement also reflects a District Suspense Account debit balance of
Kshs.5,362,328.30, out of which an amount of Kshs.5,263,273.70 relates to
2007/2008 and earlier years. Further, the balance of Kshs.5,263,373.70 differs
with the closing figure of Kshs.1,134,921.30 reflected in the audited Statement
for 2007/2008. In addition, the balance of Kshs.5,362,328.30 also differs with the
amount of Kshs.17,781,595.85 appearing in the Trial Balance as at 30 June
2009. No explanation has been provided for the above anomalies.

1523. The Statement further reflects a Cash at Bank balance of
Kshs.547,355,111.40, while the Cashbook as at 30 June 2009 shows a figure of
Kshs.11,977,866.80, resulting in a difference of Kshs.537,377,244.60. The

                                       279 
 
difference has not been reconciled or explained. The Statement also reflects a
Cash on Hand balance of Kshs.27,158.00 as at 30 June 2009, while a Cash
Survey Result as at the same date shows nil amount against the item. Again, no
reconciliation or explanation has been provided for the difference.

1524. The Statement shows a General Account of Vote balance of
Kshs.10,830,157,849.85, which includes an amount of Kshs.10,130,530,465.45
relating to 2007/2008 and earlier years. The latter balance however differs with
the previous year’s audited closing balance of Kshs.8,057,153,039.05, by
Kshs.2,073,377,426.40. The difference has not been reconciled or explained.

1525. The Statement also shows a General Account of Vote credit balance of
Kshs.699,627,384.40 for 2008/2009, while the Appropriation Account for the
period reflects an Excess Vote of Kshs.86,224,169.60 against the Account. The
resultant difference of Kshs.785,851,554.00 between the two sets of records has
not been explained.

1526. The Statement further shows a General Suspense Account debit balance
of Kshs.7,395,525.20 which has not been analysed. Consequently, the
completeness and accuracy of the balance could not be ascertained.

1527. The debit balance of Kshs.360,929.55 against the Imprests Account has
not similarly been analysed with the result that its completeness and correctness
could not be continued.

1528. The Statement in addition shows an Excess Appropriations-In-Aid (A.I.A)
brought forward debit balance of Kshs.1,756,013,533.45, which however differs
with previous year’s closing credit balance of Kshs.313,235,540.55, by a figure of
Kshs.2,069,249,074.00. No explanation has been provided for the significant
difference.     The       Statement       also     reflects    Excess        A.I.A
balance of Kshs.785,851,554.00 for 2008/2009, while the Appropriation Account
for the period shows a deficiency of A.I.A of equivalent amount. No explanation
has been given for the irregular accounting.

1529. The Statement similarly shows a credit balance of Kshs.51,743,607.25
against Suspense Account Adjustments, which has not been supported with the
relevant documents. In the circumstances, it has not been possible to ascertain
the completeness and correctness of the balance.

1530. The Statement does not include various below-the-line debits and credits
balances totalling Kshs.22,896,640.70 and Kshs.32,245,064.25 respectively,
under Head 438, although they appear in the Trial Balance as at 30 June 2009.

No reason has been provided for failure to include these balances in the
Statement.



                                       280 
 
STATEMENT OF ASSETS AND LIABILITIES FOR FUNDS, SCHEMES AND
DEPOSITS

1531. The Statement of Assets and Liabilities for Funds, Schemes and Deposits
as at 30 June 2009 reflects a Cash at Bank balance of Kshs.17,030,606.50
brought forward from 1996/97 financial year, comprising receipts from the Kenya
Pipeline Company Ltd. for Kipevu Oil Storage Facility, National Youth
Development Fund Contributions and the Energy Development Fund. As
reported in the previous year, and apart from the fact that it has not been
explained what the balance represents, available information indicates that the
Ministry has for the last twelve (12) years been waiting for instructions from
Treasury on how to clear the amount.

1532. The Statement also reflects Cash at Bank amounting to
Kshs.563,104,129.00 and Cash on Hand of Kshs.116,367.20, both totalling
Kshs.563,220,496.20, while the Cashbook as at 30 June 2009 shows a figure of
Kshs.41,404,758.50. The resultant difference of Kshs.521,815,737.70 between
the two sets of records has not been reconciled or explained.

1533. The Statement further reflects a Funds, Schemes and Deposits balance of
Kshs.578,147,348.70, which has not been analyzed and as a result, it has not
been possible to confirm its completeness and accuracy.

1534. The Statement also shows a balance of Kshs.2,103,664.00 under the
Energy Development Fund, which has been outstanding for the last ten (10)
years. As similarly observed in the previous year, this amount ought to have
been cleared in accordance with Legal Notice No. 6 of 30 December 1999, under
which the Fund was wound up.

No reason has been provided for failure to clear the balance.



                     MINISTRY OF EDUCATION

APPROPRIATION ACCOUNT FOR VOTE R.31 FOR THE YEAR ENDED 30
JUNE 2009

Under-Collection of Appropriations-In-Aid

1535. The Appropriation Account for Vote R.31 for the year ended 30 June 2009
reflects under-collection of Appropriations-In-Aid of Kshs.29,274,235.75,
representing   approximately   26%      of   the     estimated   receipts  of
Kshs.114,260,000.00. The under-collection occurred mainly under Sub-Votes

                                       281 
 
311 and 315 relating to Basic and Technical Education respectively. The reasons
provided for the under-collection of Appropriations-In-Aid include reduced
disbursements from the World Food Programme and fewer activities at various
institutions during the year.

1536. As in the previous year, the Ministry has not provided an indication on the
steps it has taken to address the underlying causes of under-collection of
Appropriations-In-Aids.


APPROPRIATION ACCOUNT FOR VOTE D.31 FOR THE YEAR ENDED 30
JUNE 2009

Unsupported Expenditure

1537. The Appropriation Account for Vote D.31 for the year ended 30 June 2009
reflects expenditure totalling Kshs.34,529,215.70 incurred under Sub-Vote 314,
Policy and Planning, Head 695, Sub-Head 0000 and Item 2210700 Training
Expenses, which includes an amount of Kshs.27,294,694.80, representing direct
payments made by VVOB – Belgium for Health Learning and ICT Integration
Programs to various training institutions during the year. Although the payments
were journalized and captured in the Appropriation Account, the Journal entries
were not supported with the relevant documentary evidence. Further, there were
also no returns from the recipient institutions confirming receipt of the goods or
services offered.      Consequently, and in the absence of supporting
documentation, the propriety of the expenditure of Kshs.27,294,694.80 could not
be confirmed.

Irregular Procurement of Laboratory Equipment

1538. The Appropriation Account also reflects expenditure totalling
Kshs.261,326,532.00 incurred under Sub-Vote 313, Head 835 Item 2211000
Specialized Materials and Supplies (School Equipment Production Unit) in
respect of procurement of various pieces of laboratory equipments for 1,457
secondary schools spread across the country. The procurement however
appears to have been single sourced contrary to Section 74 of the Public
Procurement and Disposal Act, 2005. Further, there were no confirmations of
receipt of the equipment by the targeted schools. Consequently, the propriety of
the expenditure could not be ascertained.




                                       282 
 
IRREGULAR EXPENDITURE UNDER KENYA EDUCATION SECTOR SUPPORT
PROGRAMME (KESSP)

Capacity Building

1539. The Appropriation Account similarly reflects gross expenditure of
Kshs.5,479,395,511.90 under Sub-Vote 311-Basic Education Head 844-
Directorate of Basic Education, Sub Head 0061-Free Primary Education. Out of
the above total, an amount of Kshs.53,262,250.00 was issued as temporary
imprests to various officers in the Ministry for various capacity building activities
under KESSP. However, the amount of Kshs.53,262,250.00 was not used for
the intended purposes and in accordance with the Programme Agreement as
summarized in the ensuing paragraphs:-

Forged Transport Claims

1540. Transport claims totalling Kshs.5,648,010.00 were raised by ten (10)
officers in respect of transport reimbursements made to various workshop
participants in Nairobi, Mombasa, Nakuru and Kakamega. However, the list of
participants in the payment schedules did not match that of the same participants
as contained in the attendance register. Further, signatures of some of the
participants in both lists were not consistent, raising doubts as to their
genuineness.

This inconsistency has not been explained and indications are that the funds
were misappropriated.

Unsupported Transport Claims

1541. Claims totalling Kshs.2,460,400.00 raised and paid to two (2) officers, and
relating to various sensitization workshops held in Eastern, Coast and Nyanza
Provinces amongst other regions, were not supported with the relevant
participants attendance registers. Consequently, the purposes for which the
funds were utilized could not be established.

Overpayment to facilitators

1542. Various facilitators and resource persons were paid amounts in excess of
the approved rates of per-hour session, as well as on night out allowances. In
other instances, the numbers of days applied for session facilitation were more
than the actual sessions. In this connection, irregular over-payments totalling
Kshs.8,208,500.00 were recorded.

Overpayment of Coordinators Allowances

1543. Coordinators for various workshops held in Kisumu, Eldoret, Nakuru and
Mombasa were similarly paid for more days than the actual periods of the events.

                                        283 
 
In this regard, an irregular over-payment of Kshs.936,000.00 to five (5) officers
was revealed during the audit.

Overpayment to Institutions

1544. Various institutions including Teachers Training Colleges, Institutes of
Science & Technology and Polytechnics charged higher rates for
accommodation to participants than normal during various sensitization
workshops, resulting in irregular over-payments totalling Kshs.19,742,300. 00.

Unaccounted for Disbursement

1545. During the year, the Ministry disbursed a sum of Kshs.7,050,000.00 to
sixty (60) District Educational Officers stationed at various offices spread across
the country. According to information available, each District Education Officer
was to receive an amount of Kshs.117,500.00 for facilitation of HIV and Aids
Training activities in their respective regions. However, no evidence of such
training activities having taken place in the regions was seen.

1546. Further, an audit verification carried out in seven (7) districts revealed that
six (6) District Education Officers did not receive any funds, although such funds
amounting to Kshs.7,050,000.00 had been disbursed from the Ministry’s
headquarters. Indications therefore are that the amount of Kshs.7,050,000.00
may have been misappropriated.

Forged Payment Receipts

1547. Payments totalling Kshs.9,217,040.00 were made to various officers in
respect of hiring laptop computers, venue halls, purchase of stationery and
vehicle fueling in six (6) education institutions in Kisumu, Eldoret, Mombasa,
Nyeri and Embu. The payment receipts purported to have been issued by these
institutions were however on verification found not to be genuine. Consequently,
the expenditure of Kshs.9,217,040.00 was not utilized on Project activities and
was therefore ineligible.

School Infrastructure Improvement Programme

1548. The     Appropriation   Account   further  reflects   expenditure     of
Kshs.2,643,508,398.80 under Sub-Vote 311 – Basic Education, Head 844 –
Directorate of Basic Education, Sub-Head 0061 Free Primary Education, Item
3111100 Purchase of Specialised Plant Equipment and Machinery, in respect of
disbursements made to various primary and secondary schools during the year.

1549. An audit verification carried out in two hundred and thirty seven (237)
schools, however revealed that a sum of Kshs.42,374,888.15 incurred in ninety



                                        284 
 
five (95) schools was not spent on infrastructure improvements and the amount
therefore may have been misappropriated.

Unaccounted for Grants

1550. Examination of records relating to grants revealed that amounts totalling
Kshs.24,312,585.15 were disbursed to thirty six (36) schools for purposes of
various infrastructure improvements during the year. However, no records
including invoices, payment vouchers or cash sale receipts showing how the
funds were utilized were seen. In absence of the records in question, indications
are that the money was not spent on such improvements and may have been
embezzled.

Overpayments to contractors

1551. Sixteen (16) schools paid various contractors and suppliers amounts
totalling Kshs.1,735,191.00 over and above the sums agreed upon in the
respective contract agreements. No reasons were provided for the
overpayments. The overpayments were therefore irregular and constituted
ineligible expenditure.

Ineligible Payments

1552. Expenditure totalling Kshs.12,553,253.00 was incurred in twenty one (21)
schools with respect to payment of electricity bills, purchase of bus, settlement
of court awards and payment of salaries, among other items. These particular
items do not however fall under those covered in the Joint Financing Agreement.
The expenditure of Kshs.12,553,253.00 was therefore unauthorized and
ineligible.

Irregular Payments of allowances

1553. Various District Works Officers in Coast and Central Provinces were paid
works inspection allowances totalling Kshs.170,000.00 for inspection of
infrastructure improvements in a number of schools in the two Provinces.
However, no reason has been given for payment of these unusual and irregular
allowances.

Unexplained withdrawals

1554. An amount of Kshs.300,000.00 disbursed during the year to a school in
Maara District in Eastern Province was transferred from the school bank account
to an unidentified bank account without any explanation. Indications are
therefore that the amount was embezzled.




                                      285 
 
Irregular Procurement

1555. During the year, nine (9) schools failed to comply with proper procurement
procedures, by not purchasing various goods and services from the lowest
evaluated bidders. Consequently, a saving of Kshs.2,553,859.00 was lost.

1556. Further, fifty one (51) other schools procured goods and services worth
Kshs.43,804,224.00 through single sourcing and therefore denied the
Programme the advantages of competitive bidding.

Unspent Grants

1557. Four (4) schools in Nairobi and Central provinces received grants totalling
Kshs.3,000,000.00 for infrastructure improvement. However, the amounts had
not been utilized as at the date of this audit report, raising the issue of whether
the funds were, in the first instance, required by the schools.

Irregular Advance

1558. An advance payment of Kshs.750,000.00 was made to a contractor in
Bungoma South District for construction of various classroom blocks in two
schools. However, and according to information available, the contractor
disappeared and abandoned the site immediately he received the payment and
has not been seen since. The expenditure of Kshs.750,000.00 is therefore
considered as nugatory.

Unexplained Payment to Ministry’s Staff

1559. Examination of a bank statement for the month of May 2009 in respect of
a secondary school in Nyanza Province revealed that a payment of
Kshs.300,000.00 was made to a Ministry’s official at the headquarters on 19 May
2009. No reason however has been given for the payment or the purpose for
which the amount was utilized. Indications therefore are that the amount of
Kshs.300,000.00 was embezzled.

Early Childhood Development

1560. A risk based fiduciary audit conducted by the Internal Audit Department at
the Treasury during the year indicated that a school in Eldoret failed to account
for grants totalling Kshs.223,000.00 received in 2007 and 2008 in respect of
Early Childhood Development. It is therefore doubtful that the amount was spent
on Programme activities and in accordance with the Financing Agreement.
The audit further established that disbursements to various centres were not
consistent, as some centres received grants below enrollment levels.




                                       286 
 
Adult Basic Education

1561. The Appropriation Account shows under Sub-Vote 311, Basic Education,
Head 844 Directorate of basic Education, Sub-head 0000, Headquarters, gross
expenditure of Kshs.292,914,896.00, which includes an amount of
Kshs.58,325,610.00 relating to the Adult Basic Education Component. According
to information available, the amount was spent on purchase of materials for adult
education learning at various learning centres. However, no expenditure returns
were made by the centres during the year, with the result that the propriety of the
expenditure of Kshs.58,325,610.00 could not be ascertained.

Education Management Information System (EMIS)

1562. The Appropriation Account also shows under Sub-Vote 311, Basic
Education and Head 844, Directorate of Basic Education, an expenditure of
Kshs.1,030,300.00 indicated in the records as having been spent on an
Education Management Information System workshop. However, the signatures
of participants who were paid transport reimbursements of equivalent amount
appeared to have been falsified. The expenditure was therefore irregular and
ineligible.

Grants to Disadvantaged Groups

1563. The Appropriation Account further shows under Sub-Vote 311, Head 844
an amount of Kshs.27,227,020.00, which was disbursed to non-formal education
centres spreads across the country. However, and out of this total, a balance of
Kshs.1,793,595.00 was disbursed to seven (7) privately owned schools which
are not eligible for funding by the Programme. As in the previous instance, the
expenditure of Kshs.1,793,595.00 was irregular and ineligible.

Monitoring and Evaluation

1564. Sub-Vote 311, Head 844 in the Appropriation Account reflects an
expenditure of Kshs.61,187,223.10 incurred on Monitoring and Evaluation of the
Progamme. The expenditure of Kshs.61,187,223.10 includes a payment of
Kshs.6,000,000.00 made to Kenya Education Staff Institute, in respect of various
consultancy services at the Institute. However, and although the amount is
shown in the Appropriation Account as an expenditure, it had actually not been
spent as at 30 June 2009.

Technical, Industrial, Vocational and Entrepreneurships Training (TIVET)

1565. Sub-Vote 311, Head 844 in the Appropriation Account also includes an
expenditure of Kshs.296,000.00 incurred on Technical, Industrial, Vocational and
Entrepreneurships Training (TIVET). Records maintained in respect of TIVET
show that an expenditure of Kshs.296,000.00 was incurred in respect of

                                       287 
 
payments to various facilitators of a TIVET training and sensitization workshop
held in Mombasa in June 2009. However, and out of the above figure, an
amount of Kshs.148,000.00 represented an irregular over-payment, arising from
use of erroneous facilitation rates.

Instructional Materials

1566. During the six years (6) of the Free Primary Education Programme, fifty
eight (58) million text books have been purchased through the Programme, out of
which 36 million are actively being used in schools. However, and out the 58
million text books purchased during the period as indicated above, some
5,100,372 books estimated at Kshs.1,708,624,907.00 have been lost or stolen.
No indication has been given as to how the Ministry is addressing and resolving
the issue of theft of books in schools and other learning institutions.

1567. It was also observed during the audit that the Ministry needs to review the
strengths of the schools’ audit and the quality assurance systems, both at
technical and more importantly at managerial levels. Such kind of review would
provide the Ministry with the assurance that controls within the Programme are
working.

1568. Although the use of the banking sector in the Programme has largely been
successful, there is need to consider re-tendering these services so as to ensure
that the Ministry continues to receive the benefits of competitive bidding.

1569. The Ministry also needs to consider building efforts to encourage parental
involvement in school management and to train parents, teachers and other
stakeholders on how to make their partnership effective and how to better
manage the Instructional Materials Programme and other initiatives.

1570. There is similarly a need for the Ministry to ensure that all new Head
Teachers and Deputy Head Teachers have gone through an introductory training
in the administration of the Instructional Materials Programme and other related
aspects. Equally, the school management committees require to be sensitized
on school finances in simple terms so that they can constructively engage in the
scrutiny of the budget and monitoring of expenditure.


PENDING BILLS

1571. Examination of records maintained at the Ministry’s Headquarters
revealed that bills totalling Kshs.122,169,127.70 and Kshs.106,126,911.10
relating to 2008/2009, chargeable to Recurrent and Development Votes
respectively, were not settled during the year but were instead carried forward to
2009/2010.



                                       288 
 
1572. Had the bills been settled and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.31 for the year would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.378,170,616.90 instead of Kshs.500,339,744.60 now shown, while the
Appropriation Account for Vote D.31 for the same period would have reflected a
reduced Net Surplus of Kshs.739,555,133.15 instead of Kshs.845,682,044.25
now recorded.


OUTSTANDING IMPRESTS

1573. Examination of Imprests Records maintained at the Ministry’s
Headquarters indicated that Temporary Imprests totalling Kshs.27,985,826.85
which ought to have been surrendered on or before 30 June 2009 were still
outstanding at that date, with some such imprests relating to as far back as in
1990.

1574. Out of the total, imprests amounting to Kshs.13,849,498.40 were owed
by officers on Job Group ‘M’ and above, Kshs.13,038,623.10 by officers on Job
Group ‘L’ and below, while the balance of Kshs.1,097,705.35 was held by
politicians.

1575. It was further observed that various officers were issued with additional
imprests before having surrendered or accounted for amounts previously issued.

1576. A review of the position as at 31 January 2010 disclosed that imprests
totalling Kshs.15,375,104.00 had been recovered leaving a balance of
Kshs.12,610,722.85 outstanding.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.31

1577. The Statement of Assets and Liabilities for Vote R.31 as at 30 June 2009
reflects various General Account of Vote (GAV) debit and credit balances
totalling Kshs.40,166,826.55 and Kshs.9,433,955,814.00 respectively, relating to
2005/2006 and earlier years. No reasons have been provided for failure to clear
these long outstanding balances.

1578. The Statement also reflects various Exchequer Account debit balances
totalling Kshs.8,712,116,140.55 in respect of Exchequer Under Issues for the
years 1995/1996 to 2007/2008. As in the previous instance, no reasons have
been provided for failure to clear these balances.

1579. The Statement further reflects a balance of Kshs.686,312,793.07 against
the District/Provincial Suspense Account, which includes an amount of
Kshs.662,309,150.70 relating to 2007/2008 and earlier years. The Ministry has

                                      289 
 
1580. The Statement also shows a Standing Imprests Account balance of
Kshs.98,765,781.90, which includes an amount of Kshs.89,974,987.90 relating to
2007/2008 and prior years. In addition, and although an Imprest Account should
under normal circumstances reflect a debit or nil balance, the current year’s
balance is a credit of Kshs.209,206.50. No reason has been provided for non-
recovery of long outstanding imprest balance or the existence of a credit balance.

1581. The Statement in addition shows a balance of Kshs.104,248,896.70 under
the Suspense General Account, which includes an amount of
Kshs.106,602,040.15 relating to 2007/2008 and earlier years. As in the previous
instances, no reason has been provided for failure to clear the latter balance.

1582. The Statement further shows a debit balance of Kshs.2,815,986,400.44
against the Paymaster General (PMG) Account, while the Cashbook as at 30
June 2009 shows a debit amount of Kshs.158,824.40. The Ledger on the other
hand reflects a PMG credit figure of Kshs.1,689,305,265.45 as at the same date.
The differences between the three sets of records which ideally should reflect the
same figure have not been reconciled or explained.

1583. The Statement also reflects Excess Appropriations-In-Aid (AIA) totalling
Kshs.40,318,715.20 relating to 2005/2006 and earlier years and which ought to
have been surrendered to the Exchequer by 30 June 2009.

No explanation has however been provided for failure to surrender the A.I.A to
the Exchequer.

1584. The Statement in addition reflects various credit and debit balances of
Kshs.53,668,893.90 and Kshs.1,340,249.60 respectively which have not been
analysed or supported with the relevant records.

Consequently, the completeness and accuracy of these balances could not be
ascertained.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.31

1585. The Statement of Assets and Liabilities for Vote D.31 as at 30 June 2009
reflects various balances totalling Kshs.13,192,487,261.60 under the General
Account of Vote, some which have been outstanding for a considerably long
period of time. No reason has been provided for failure to clear the balances.




                                       290 
 
1586. The Statement also reflects a balance of Kshs.28,693,520.00 relating to
Excess Vote incurred in 2005/2006. Failure to regularize this long outstanding
balance has not been explained.

1587. The Statement further reflects various Exchequer Account balances
totalling Kshs.13,152,915,778.00, representing Exchequer Under-Issues for the
period between 1994/1995 and 2007/2008. The Ministry has not however
indicated the action it intends to take to clear these long outstanding balances.

1588. The Statement in addition reflects a Paymaster General Account credit
balance of Kshs.158,698,997.25, while the Cashbook as at 30 June 2009 shows
a figure of Kshs.325,871.30. The difference of Kshs.159,024,868.55 between
the two sets of books has not been reconciled or explained.

1589. The Statement shows an Extra Exchequer Receipts credit balance of
Kshs.72,140,582.20 brought forward from 1998/1999. As previously reported,
the amount relates to a reimbursement made in 1998/1999 by a lender to the
Ministry under the University Investment Project Credit Agreement, which
amount however was irregularly spent under various items instead of being paid
to the Exchequer. It has still not been clarified why this long outstanding issue
has not been resolved and the balance cleared from the books of account.

1590. The Statement also shows balances of Kshs.48,911,531.40,
Kshs.131,119,437.75 and Kshs.41,706.50 under District Suspense, Suspense
General and Miscellaneous Items Accounts respectively, which have not been
analysed. Consequently, the completeness and accuracy of the balances could
not be confirmed. Further, the opening balance of Kshs.188,306,173.55 under
the Suspense General Account does not agree with the closing balance of
Kshs.1,927,195,895.60 for 2007/2008. The resultant difference of
Kshs.1,738,889,722.05 has not been reconciled or explained.

1591. The Statement further shows an Agency Account balance of
Kshs.82,405,195.10 which includes an amount of Kshs.48,730,726.50 relating to
2007/2008 and earlier years. As in the previous instances, no reason has been
provided for delay in the clearance of the long outstanding balance.

1592. The Statement in addition shows a Temporary Imprest Account balance of
Kshs.3,410,539.85 relating to 2006/2007 and prior years. It has not been
clarified as to why the Imprests had not been surrendered or otherwise
accounted for as at 30 June 2009.

1593. The Appropriation Account for Vote D.31 for the year ended 2008/2009
reflects Excess Appropriations-In-Aid (A.I.A) of Kshs.359,992,196.00 separately
payable to the Exchequer. However, this amount is not reflected in the
Statement under review and no explanation has been provided for the anomaly.



                                      291 
 
STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1594. As reported in the previous year, the Statement of Assets and Liabilities
for Deposits as at 30 June 2009 reflects outstanding debit and credit balances
totalling Kshs.5,821,707.95 and Kshs.21,252.30 respectively, relating to
2007/2008 and earlier years, against various Accounts. The balances have not
been supported with the relevant analyses, with the result that it has not been
possible to ascertain the validity, completeness and accuracy of the amounts.

1595. The Statement also reflects a Paymaster General Account balance of
Kshs.204,798,084.80, while the Cashbook as at 30 June 2009 shows an amount
of Kshs.204,315,697.70 against the Account. The Ledger for the month of June
2009 on the other hand reflects a figure of Kshs.202,498,660.05. The
differences between the three sets of records have not been reconciled or
explained.

1596. The Statement further reflects a brought forward balance of
Kshs.7,805,087.60 under Postings to Non-existing Accounts, while the audited
Statement for 2007/2008 shows a carried forward figure of Kshs.9,771,504.40.
As in the previous instance, no reconciliation or explanation has been provided
for the difference of Kshs.1,966,416.80



    MINISTRY OF INFORMATION AND COMMUNICATIONS

APPROPRIATION ACCOUNT FOR VOTE D.32 FOR THE YEAR ENDED 30
JUNE 2009

1597. The Appropriation Account for Vote D.32 for the year ended 30 June 2009
reflects surplus of gross estimates over expenditure of Kshs.591,402,045.00,
representing    approximately     29%     of   the    approved    provision of
Kshs.2,017,570,669.00.      The Account also reflects nil collections of
Appropriations-in-Aid against estimated receipts of Kshs.493,570,669.00.

1598. The reasons provided in the footnotes to the Account for the under-
expenditure and under-collection of Appropriations-In-Aid include late release of
exchequer issues by Treasury and failure by a donor to release funds due to
non-availability of expenditure returns by Telkom Kenya Ltd.




                                      292 
 
PENDING BILLS

1599. Examination of records held at the Ministry’s Headquarters revealed that
bills totalling Kshs.12,712,843.27 relating to 2008/2009 were not settled during
the year, but were instead carried forward to 2009/2010. Out of the total, bills
amounting to Kshs.12,213,843.27 related to the Recurrent Vote, while the
balance of Kshs.499,000.00 was in respect of those under the Development
Vote.

1600. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for the Recurrent Vote for the year would
have reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs. 7,688,448.88 instead of Kshs.19,902,292.15 now shown, while the
Appropriation Account for the Development Vote for the same period would have
reflected a reduced Net Surplus of Kshs.97,332,376.00 instead of Kshs.
97,831,376.00 now recorded.


STATEMENT OF OUTSTANDING OBLIGATIONS GUARANTEED BY THE
GOVERNMENT OF KENYA

1601. The Statement of Outstanding Obligations Guaranteed by the Government
of Kenya as at 30 June 2009 reflects two obligations of Kshs.7,592,075,401.50
and Kshs.370,371,939.49 in respect of Government of Japan loan No.KE-P12
and EDC Canada respectively. However, the two loan balances could not be
confirmed as at 30 June 2009 due to lack of the relevant supporting Loan
Register and other related records.


OUTSTANDING IMPRESTS

1602. Examination of Imprests Records held at the Ministry’s Headquarters
indicated that imprests totalling Kshs.1,982,487.00, which ought to have been
surrendered or otherwise accounted for on or before 30 June 2009 were still
outstanding as at that date.

1603. Out of the total of Kshs.1,982,487.00, imprests amounting to
Kshs.1,306,362.00 were owed by officers in Job Group ‘M’ and above, while the
balance of Kshs.676,125.00 was due from officers in Job Groups ‘L’ and below.

1604. In addition, some officers were noted to have been issued with additional
imprests before having surrendered balances previously issued.




                                      293 
 
PURCHASE OF LAND

1605. During the year under review, the Ministry advertised in the local media its
intention to purchase land in Kitengela, Athi River area, for the purpose of
implementing various Vision 2030 projects which include; An ICT Park; A
Science Park; An Industrial Park; and An SME Park.

1606. Additional information indicates that the land under reference was to be
categorized as a Special Economic Zone, fulfilling the following specific
conditions:-

    •   Be within thirty (30) minutes drive from Jomo Kenya International Airport;
    •   Be free from any encumbrances;
    •   Be at least 3,000 acres,
    •   Be accessible from major highways in the area ; and
    •   Be available for immediate use.

1607. Three (3) firms responded to the invitation and following valuation by
Ministry of Lands, the Ministerial Tender Committee accepted the offer for five
thousand (5000) acres at Kshs.200,000.00 per acre by a Ranching Company
based in Machakos District.

1608. Further records seen indicate that an Agreement for Sale of the land
between the Ranching Company and the Permanent Secretary to the Treasury
(on behalf of Ministry of Information and Communications) was drawn and signed
on 17 June 2009, subsequent to which payments of Kshs.400,000,000.00 and
Kshs.600,000,000.00 were processed and made on 26 June 2009 and 11
January 2010 respectively to the Company through its advocates.

1609. Although the registration of transfer of the land to the Permanent
Secretary to the Treasury was completed on 15 December 2009, following which
a Certificate of Title was issued, a letter ref. No. 70009/XVI/167 dated 20 March
2009 from the Commissioner of Lands indicates that the land had some
encumbrances.

1610. Records so far made available for audit review do not however indicate
the nature of the encumbrances in question or how such encumbrances were
addressed before the Agreement was signed.


BANK RECONCILATION STATEMENT

1611. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects unpresented cheques of Kshs.1,233,260.70, out of which
cheques worth Kshs.97,080.00 were stale. The Reconciliation Statement also
reflects payments in the Bank Statement not recorded in the Cashbook totalling

                                        294 
 
Kshs.3,255,659.90, out of which an amount of Kshs.90,120.00 is indicated as
representing unpaid cheques. It has not been explained why unpaid cheques
would be reflected under “payments in the Bank Statement not recorded in the
Cashbook” in the Reconciliation Statement.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.32

1612. The Statement of Assets and Liabilities for Vote R.32 as at 30 June 2009
reflects a Paymaster General Account debit balance of Kshs.37,573,981.21,
while both the Cashbook and Board of Survey Report as at the same date show
a figure of Kshs.10,056,357.55. The difference of Kshs.27,517,623.66 has not
been reconciled or explained.

1613. The Statement also reflects a Clearance Account credit balance of
Kshs.890,441.80 resulting from a reduction of Kshs.1,341,555.00 during the
year. However, no documentary evidence has been made available to support
clearance of the balance of Ksh.1,341,555.00.

1614. The Statement further reflects debit and credit balances totalling
Kshs.5,493,500.75 and Kshs.28,470,761.66 respectively, relating to 2007/2008
and earlier years under General Account of Vote, Exchequer, Advance,
Temporary Imprest, Suspense, District Suspense and Clearance Accounts.

No reason has however been provided for failure to clear these long outstanding
balances from the books of account.


STATEMENT OF ASSETS AND LIABILITIES FOR DEVELOPMENT VOTE
D.32

1615. The Statement of Assets and Liabilities for Vote D.32 as at 30 June 2009
reflects an Exchequer Account debit balance of Kshs.1,227,554,900.00, which
includes an amount of Kshs.1,990,100.00 relating to 2006/2007 and earlier
years. No explanation has been provided for failure to clear this long outstanding
amount.

1616. The Statement also reflects a Paymaster General (PMG) Account debit
balance of Kshs.104,257,534.77, while the Cashbook as at 30 June 2009 shows
a figure of Kshs.1,002,617.25. The difference of Kshs.103,254,917.52 between
the two sets of records has not been reconciled or explained.

1617. The Statement further reflects nil balance under the Suspense Account,
after clearing an amount of Kshs.2,899,490.90 during the year under review. No
documentary evidence to support clearance of the balance has however been



                                       295 
 
produced for audit review, with the result that the authenticity of the transaction
could not be confirmed.

1618. The Statement also shows a General Account of Vote (GAV) credit
balance of Kshs.1,331,198,761.37, which includes an amount of
Kshs.106,025,505.25 relating to 2006/2007 and earlier years. It has not however
been explained why the amount of Kshs.106,025,505.25 had not been cleared
from the books of account as at 30 June 2009.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1619. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects a Paymaster General Account debit balance of Kshs.646,849.25, while
the Cashbook as at the same date shows an amount of Kshs.788,728.95. The
difference of Kshs.141,879.70 between the two sets of records, which ideally
should reflect the same balance, has not been reconciled or explained.

1620. The Statement also reflects a credit balance of Kshs.646,849.25 under the
Facilitation Account, representing a reduction of Kshs.1,324,651.75 from the
amount of Kshs.1,971,501.00 as at 30 June 2008. However, documentary
evidence to support the movement of Kshs.1,324,651.75 during the year has not
been availed for audit verification.




    INTERIM INDEPENDENT ELECTORAL COMMISSION

NON-SUBMISSION OF ACCOUNTS

1621. Section 4 (1) of the Public Audit Act, 2003 requires each Accounting
Officer to prepare and submit for audit Appropriation Accounts and Other Public
Accounts within three months after the end of the financial year. The Interim
Independent Electoral Commission has not, however, submitted a Statement of
Assets and Liabilities for Deposits and the Electoral Commission Car Loan
Scheme Fund Accounts for the year ended 30 June 2009.

The Commission is therefore in breach of the law.




                                       296 
 
APPROPRIATION ACCOUNT FOR VOTE R.33 FOR THE YEAR ENDED 30
JUNE 2009

Late Submission of Accounts

1622. Although as indicated in the preceding paragraph, the Public Audit Act
requires each Accounting Officer to prepare and submit Appropriation Accounts
and related Statements for audit within three (3) months after the end of the
financial year, the Commission submitted the Appropriation Account for Vote
R.33 for the year ended 30 June 2009 and the Statement of Assets and
Liabilities for Vote R.33 as at the same date on 5 March 2010, over five (5)
months after the statutory deadline of 30 September 2009. The Commission was
again in breach of the law.

Under-Expenditure

1623. The Appropriation Account for Vote R.33 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.301,747,730.75, representing
approximately 36% of the approved estimates of Kshs.838,453,533.00.
According to the footnote provided in the Account, the under-expenditure was
caused by disbandment of the Electoral Commission of Kenya in December
2008.

Unvouched Expenditure

1624. The Appropriation Account also reflects expenditure totalling
Kshs.159,656,239.85 incurred under Heads 570 - Secretariat and 591 - District
Election Coordinating Offices, which has not been supported with payment
vouchers and other related records. Consequently, the propriety of this significant
expenditure could not be ascertained.

Failure to Provide footnotes for Material Differences

1625. Although Section 11.7 of the Government Financial Regulations and
Procedures requires that footnotes be provided to explain variances of
Kshs.1,000,000.00 or above the approved estimates and the actual expenditure
or collections of Appropriations-In-Aid, the Appropriation Account reflects
variances in excess of Kshs.1,000,000.00 in respect of forty one (41) items for
which no footnotes were provided. No reason has been provided for failure to
provide the footnotes.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.33

1626. The Statement of Assets and Liabilities for Vote R.33 as at 30 June 2009
reflects an Exchequer Under-Issues debit balance of Kshs.1,418,031,100.00,

                                       297 
 
1627. The Statement also reflects an Advances Account balance of
Kshs.9,838,435.00 which has not been analysed and as a result, its
completeness and accuracy could not be ascertained. The balance includes an
amount of Kshs.744,809.10 relating to 2007/2008 and earlier years. No reason
has been provided for non-clearance of the long outstanding amount.

1628. The Statement further reflects an Imprest Account debit balance of
Kshs.1,945,357.80 relating to 2007/2008 and earlier years. No reasons have
been provided for failure to have the imprests surrendered or otherwise
accounted for on their due dates. Further, the imprests balance has not been
analysed with the result that its completeness and accuracy could not be
ascertained.

1629. The Statement shows General Suspense Account debit and credit
balances of Kshs.900,985,091.00 and Kshs.26,347,836.80 respectively, which
similarly have not been analysed. As in the previous instance, it has not been
possible to confirm the completeness and accuracy of the balances.

1630. The Statement also shows a Provincial/District Suspense Account debit
balance of Kshs.875,829,994.65 relating to 2007/2008 and earlier years. Apart
from the fact that the accuracy of this balance could not be ascertained owing to
lack of an analysis, it has also not been clarified why the amount had not been
cleared from the books of account as at 30 June 2009.

1631. The Statement further shows a Cash on Hand and Cash at Bank figure of
Kshs.1,161,814,918.30, while the Board of Survey Report reflects a balance of
Kshs.280,369,147.40 as at 30 June 2009. No reconciliation or explanation has
been provided for the resultant difference of Kshs.881,445,770.90 between the
two sets of records.

1632. The Statement in addition reflects a General Account of Vote balance of
Kshs.812,400,000.00, while the Appropriation Account for Vote R.33 for the year
ended 30 June 2009 shows a Net Surplus to be Surrendered to the Exchequer of
Kshs.301,747,650.75. The difference of Kshs.510,652,349.25 has not been
reconciled or explained.

1633. The Statement also reflects an Excess Appropriations-In-Aid balance of
Kshs.55,121,108.85, which includes an amount of Kshs.55,005,108.90 relating to
2007/2008. No explanation has been provided for failure to surrender the
balance of Kshs.55,005,108.90 to the Exchequer.




                                      298 
 
1634. The Statement finally reflects a Salary Clearance Account balance of
Kshs.623,602.15, brought forward from 2007/2008. As in the previous instances,
failure to clear this long outstanding balance has not been explained.



    MINISTRY OF STATE FOR SPECIAL PROGRAMMES

APPROPRIATION ACCOUNT FOR VOTE R. 35 FOR THE YEAR ENDED 30
JUNE 2009

Inaccuracy of the Account

1635. The Appropriation Account for Vote R.35 for the year ended 30 June 2009
reflects total net expenditure balance of Kshs. 11,716,580,478.00, whereas the
June Ledger against which the Account was prepared and the Summary to the
Appropriation Account show amounts of Kshs.11,734,004,364.90 and
Kshs.11,716,640,920.90 respectively. These discrepancies have not been
explained.

Disbursement to the Strategic Grain Reserve Fund

1636. The Appropriation Account also reflects disbursements totalling
Kshs.7,639,000,000.00 made to the Strategic Grain Reserve Fund during
2008/2009, while Fund’s Accounts for the period show receipts amounting to
Kshs.6,343,432,142.30. The significant difference of Kshs.1,295,567,857.70
between the two sets of records has not been reconciled or explained.


APPROPRIATION ACCOUNT FOR VOTE D. 35 FOR THE YEAR ENDED 30
JUNE 2009

Inaccuracy of the Account

1637. The Appropriation Account for Vote D.35 for the year ended 30 June 2009
reflects a net total expenditure balance of Kshs.414,320,503.00 in respect of
Western Kenya Community Development and Flood Mitigation Project, while the
Project’s financial statements for the period show a total expenditure figure of
Kshs.877,555,968.20. The resultant difference of Kshs.463,235,465.20
represents expenditure which has been excluded from the Appropriation
Account.

1638. The Appropriation Account Summary reflects an incorrect Gross Total
Expenditure figure of Kshs.3,741,921,000.00 instead of the correct amount of
Kshs.3,968,068,320.00. The Summary further reflects an incorrect Net Total

                                      299 
 
Approved Estimates of Kshs.3,515,773,680.00 instead of the correct provision of
Kshs.3,741,921,000.00. These discrepancies have not been reconciled or
explained and as a result, the accuracy of the Account as drawn could not be
ascertained.

Under-Expenditure and Under-Collection of Appropriations-In-Aid

1639. The Appropriation Account also reflects a surplus of gross estimates over
expenditure of Kshs.822,036,473.00, representing approximately 22% of the
approved estimates of Kshs.3,741,921,000.000. The Account further reflects
under-collection of Appropriations-In-Aid of Kshs.226,147,320.00 or 100% of the
estimated receipts. According to the footnotes to the Account, the under-
expenditure was caused by incomplete processing of transactions by IFMIS and
failure by various officers to account for Authority to Incur Expenditure (AIEs)
issued to the Districts. No explanation has however been provided for the under-
collection of Appropriations-In-Aid.

Grant to National Aids Control Council

1640. The Appropriation Account in addition reflects expenditure totalling
Kshs.1,092,308,558.00 under the National Aids Control Council, while the
financial statements for 2008/2009 for the Council show receipts of
Kshs.1,797,711,758.00 during the period. The difference of Kshs.705,403,200.00
between the two sets of records has not been reconciled or explained.

Transfers to National Humanitarian Fund

1641. The Appropriation Account shows under Headquarters Administrative
Services, Item 2640502 - Capital Transfer to Individuals and Households, an
expenditure of Kshs.950,000,000.00 in respect of transfers from the Account to
the National Humanitarian Fund. However, a list of individuals and households
who benefitted from the transfers has not been seen. This apart, it has also not
been possible to establish how the beneficiaries were identified and selected.


OUTSTANDING IMPRESTS

1642. Examination of Imprest Records maintained at the Ministry Headquarters
indicated that Temporary Imprests totalling Kshs.3,200,476.50 which ought to
have been surrendered or otherwise accounted for, on or before 30 June 2009,
were still outstanding as at that date. Out of the total, imprests amounting to
Kshs.1,494,737.50 were owed by officers on Job Group ‘ M’ and above, while the
balance of Kshs.1,705,739.00 was due from officers on Job Group ‘L’ and below.
A review of the position in January 2010 showed that imprests totalling
Kshs.1,458,938.00 had been recovered leaving a balance of Kshs.1,741,538.50
outstanding.

                                      300 
 
PROCUREMENT OF GOODS AND SERVICES

Non-Competitive Procurement

1643. During the year under review, the Ministry procured various goods and
services including tyres, chairs, mobile phones, air tickets, hire of helicopter and
printing amongst others, at a cost of Kshs.6,701,991.00. The goods and services
do not however appear to have been competitively sourced, with the result that it
has not been possible to establish that the government obtained reasonable
value for money from the transactions.

Stores Unaccounted for

1644. The Ministry also incurred expenditure totalling Kshs.2,693,690.00 on
purchase of various size of tyres. The tyres do not however appear to have been
entered in the stock control records, and as a result, it has not been possible to
ascertain that they were delivered and properly accounted for.


EXPENDITURE ON INTERNALLY DISPLACED PERSONS (IDPs)

Molo District

1645. The Ministry’s of Headquarters issued Authority to Incur Expenditure (AIE)
for an amount of Kshs.361,070,000.00 to the Molo District Commissioner during
2008/2009, to facilitate the Government’s support to the Internally Displaced
Persons (IDPs) in Molo District. According to information available, each IDP
was to receive a sum of Kshs.10,000.00 in form of cash support and an
additional amount of Kshs.25,000.00 for every house burnt during the post-
election violence in 2008. However, and out of the sum of Kshs.361,070,000.00
disbursed to the District Commissioner, an amount of Kshs.13,490,000.00
appears to have been paid to individuals who were not in the approved list of
IDPs and were therefore not eligible for the support.

Nakuru District

1646. A total of Kshs.135,783,960.00 was similarly disbursed to Nakuru District
during the same period, on account of Government’s support to the IDPs in the
District.  However, and out of the total, propriety of payments totalling
Kshs.33,450,000.00 made to ten (10) officers in the District, on 7 November
2008 and 10 June 2009 could not be ascertained due to lack of the relevant
supporting documents, including a list of the IDPs assisted.




                                        301 
 
1647. A further amount of Kshs.74,181,158.00 paid to nine (9) other officers
between August 2008 and November 2008 could not also be accounted for due
to lack of various supporting documents, including IDPs’ photographs and copies
of identity cards.

Eldoret (Uasin Gishu) District

1648. Records maintained at the District Commissioner’s Office – Eldoret in
respect of Government’s support to the IDPs in the District indicate that during
the year, an amount of Kshs.246,975,000.00 was paid to the District
Commissioner for the support. However, the propriety of a sum of
Kshs.8,450,000.00 paid out to IDPs at the Eldoret Show Ground could not be
confirmed due to lack of a list of payees and witnesses to the payments. In
addition, the payments do not appear to have been authorized by three officials
as required.

Payment of IDPs through Cooperative Bank of Kenya

1649. Available information indicates that the Cooperative Bank of Kenya
received a sum of Kshs.207,760,000.00 for payment to IDPs in Molo, Koibatek
and Uasin Gishu Districts. This arrangement followed a Memorandum of
Understanding and Partnership Agreement between the Ministry and the
Cooperative Bank, signed on 11 June 2008. However, and according to records
made available during the audit, there appears to have been a balance of
Kshs.8,540,000.00 which the bank ought to have refunded the Ministry as at 30
September 2009. No records have been seen to confirm that a refund of this
particular amount has been received by the Ministry.


STRATEGIC GRAIN RESERVE TRUST FUND

Cash and Bank Balances

1650. The Fund’s Balance Sheet as at 30 June 2009 reflects an amount of
Kshs.2,494,380,143.30 under Cash at Bank, while the Cashbook, Bank
Certificate and Board of Survey Report, all show a figure of Kshs.948,001.55
against the item. No reconciliation or explanation has been provided for the
resultant difference of Kshs.2,493,432,141.75.

Accumulated Exchequer Issues

1651. The Balance Sheet also reflects Accumulated Exchequer issues of
Kshs.14,618,389,684.30, which include a balance of Kshs.6,343,432,142.30 for
2008/2009. The Appropriation Account for Vote R.35 for the year ended 30 June
2009 however indicates that a sum of Kshs.7,639,000,000.00 was transferred to



                                      302 
 
the Fund during the year. No reconciliation or explanation has been provided for
the difference of Kshs.1,295,567,857.70 between the two sets of records.

Sales

1652. The Income and Expenditure Account for the year ended 30 June 2009
shows a grain sales figure of Kshs.6,627,195,847.20, which includes commercial
sales of Kshs.5,262,195,847.20.        Records maintained at the Ministry’s
Headquarters however reflect receipts from commercial sales amounting to
Kshs.5,989,462,208.00, resulting in unaccounted for sales revenue of
Kshs.727,266,360.80.

1653. Further, the records also indicate that the Fund received during the period,
sales revenue totalling Kshs.2,465,792,346.80 and Kshs.62,578,494.00 from
Transfers to Relief & Rehabilitation and Sale of Maize Flour Accounts
respectively. However, these two particular amounts have not been included in
the sales figure of Kshs.6,627,195,847.20 reflected in the Income and
Expenditure Account and no information has been seen showing how revenue
totalling Kshs.2,528,370,840.80 was accounted for.

Accounts Receivable

1654. The Balance Sheet Accounts Receivable figure of Kshs.1,965,000,000.00
includes, as similarly reflected in Note (8) to the Accounts, an amount of
Kshs.1,700,000,000.00 received from the Famine Relief Account. The Ministry’s
records however indicate that an amount of Kshs.2,465,792,346.80 was received
in respect of the Relief Account during the year. The difference of
Kshs.765,792,346.80 between the two sets of records has not been reconciled or
explained.

Stocks

1655. The Balance Sheet reflects a stocks balance of Kshs.5,418,159,572.70
made up of 1,866,529 bags of maize worth Kshs.5,221,623,882.70 and
1,511,813 gunny bags valued at Kshs.196,535,690.00. However, the supporting
stock sheets for the two balances have not been made available for audit review,
with the result that such balances could not be ascertained as at 30 June 2009.
Further, the Strategic Grain stocks are not segregated from the National Cereals
and Produce Boards (NCPB) ones, and in consequence, the accuracy of
Balance Sheet stocks figure of Kshs.5,418,159,572.00 as at 30 June 2009 could
not be confirmed.

1656. Further, and as observed under Note (6) to the Accounts, the physical
stocks as at 30 June 2009 as per NCPB records were 1,789,301 bags of maize,
which differ by a figure of 77,228 with the stocks balance of 1,866,529 bags
reflected in the Accounts under review. The resultant discrepancy has been

                                       303 
 
attributed to normal and plant loss of stocks during 2004/2005, 2005/2006,
2006/2007, 2007/2008 and 2008/2009, in the amounts of 15,992, 5,406, 15,621,
19,643 and 20,566 bags respectively. It has not however been explained how
these significant losses occurred.

Unsupported and Unvouched Balances

1657. The Accounts reflect balances totalling Kshs.28,474,858,640.05 under
various items namely; purchase of maize and gunny bags, sale of maize, stock,
receivables and payables all of which have not been supported with analyses,
schedules, local purchase/ service orders, invoices, goods received notes,
contract documents, procurement/tender committee minutes, stock sheets,
sales/purchases ledgers and other related records.

1658. In absence of the records indicated above, the validity, completeness and
accuracy of the balance of Kshs.28,474,858,640.05 could not be ascertained. In
addition, and arising from the inadequate and/or poorly kept records, the above
balance could not be reconciled with the Accounts maintained at NCPB.

Other Observations

1659. During the year under review, and according to information seen, NCPB
appears to have sold 277,000 bags of maize which had not been authorized by
the Fund.

1660. The Fund does not appear, and for unclear reasons, to have exercised
meaningful control and management, including maintenance of adequate and
accurate documentation, on a scheme involving importation of significant
quantities of maize during the year, to top up the Strategic Grant Reserve.


HUMANITARIAN  FUND    FOR    MITIGATION   OF   EFFECTS   AND
RESETTLEMENT OF VICTIMS OF 2007 - POST ELECTION SKIRMISHES

Failure to Reflect Comparative Figures

1661. The Fund Accounts for the year ended 30 June 2009 do not reflect
comparative figures for 2007/2008, contrary to the requirements under
Paragraph 11.10 of the Government Financial Regulations and Procedures. No
explanation has been provided for the anomaly.

Income and Expenditure Account

1662. The Income and Expenditure Account for the year ended 30 June 2009
reflects receipts of Kshs.2,344,181,427.25, which exclude contributions
amounting to Kshs.200,000,000.00 and Kshs.827,500.00 received from the


                                     304 
 
Government and the Orthodox Church respectively. No explanation has been
provided for the omission.

1663. The total receipts of Kshs.2,344,181,427.25 include a balance brought
forward of Kshs.932,433,208.00, while the audited Accounts for 2007/2008
reflect an excess income over expenditure balance of Kshs.1,332,209,805.35 as
at 30 June 2008. The resultant difference of Kshs.399,776,597.35 between the
two sets of records has not been reconciled or explained.

1664. Payment vouchers, expenditure returns and other related records for
expenditure totalling Kshs.1,055,324,178.45 reflected in the Income and
Expenditure Account were not made available for audit review. As a result, the
propriety of expenditure could not be ascertained.

Statement of Assets and Liabilities

1665. The Fund’s Statement of Assets and Liabilities PMG (CBK) debit balance
of Kshs.96,990,633.95 differs with the figure of Kshs.96,307,103.65 reflected in
the Bank Reconciliation Statement as at 30 June 2009, by Kshs.683,530.30. No
reconciliation or explanation has been provided for the difference.

1666. The Statement also reflects a District Suspense Account debit balance of
Kshs.1,061,985,278.10, which is described under note 9 to the Accounts as a
balancing item. No analysis has been provided to explain this item. It has also
not been clarified as to whether the figure is represented by an actual cash
balance.

1667. The Statement further reflects Imprests totalling Kshs.3,965,500.00, which
ought to have been surrendered or otherwise accounted for, on or before 30
June 2009. No reason has been provided for failure to recover the imprests.


BANK RECONCILIATION STATEMENT

Recurrent Cashbook

1668. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Bank Statement not recorded in the
Cashbook totalling Kshs.29,781,277.15, which include a payment of
Kshs.4,127,500.00 made through cheque No.00387 of 1 December 2008. It has
not however been explained what this payment represented.




                                      305 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.35

1669. The Statement of Asset and Liabilities for Vote R.35 as at 30 June 2009
reflects an Exchequer Account debit balance of Kshs.148,160.00 for 2008/2009,
while the Exchequer records maintained at the Treasury show a figure of
Kshs.98,160.00 against the Account. The difference of Kshs.50,000.00 between
the two sets of records has not been reconciled or explained. Further, an
amount of Kshs.946,940.00 under the Account has not been cleared from the
books of account, although it relates to 2007/2008 and earlier years.

1670. The Statement also reflects a Paymaster General (PMG) Account balance
of Kshs.341,636,856.60, while the Cashbook as at 30 June 2009 shows a figure
of Kshs.212,556,624.90. The resultant difference of Kshs.129,080,231.70
between the two sets of records has not been reconciled or explained.

1671. The Statement further reflects an Imprests Account debit balance of
Kshs.9,377,913.80, which includes an amount of Kshs.5,494,182.80 relating to
2007/2008 and earlier years. No reason has been provided for failure to have
the imprests surrendered or otherwise accounted for, on or before 30 June 2009.
Further, no reconciliation has been provided for the difference of
Kshs.2,687,236.00 between the imprests balance of Kshs.9,377,913.80 reflected
in the Statement and that of Kshs.6,570,967.00 appearing in the Imprests
Register.

1672. The Statement in addition reflects a District Suspense Account debit
balance of Kshs.353,947,456.60, which has not been analysed. The balance
also includes an amount of Kshs.22,663,055.00 relating to 2007/2008 and earlier
years. No reason has been provided for non-clearance of this long outstanding
balance.

1673. The Statement also shows a General Account of Vote credit balance of
Kshs.546,464,417.50 for 2008/2009, while the Appropriation Account for Vote
R.35 for the year ended 30 June 2009 reflects a Net Surplus to be Surrendered
to the Exchequer of Kshs.362,965,739.10.                The difference of
Kshs.183,498,678.40 between the two sets of records has not been reconciled or
explained.

1674. The Statement further shows an Excess Appropriations-In-Aid Account
balance of Kshs.2,102,325.00, which includes an amount of Kshs.693,825.00
relating to 2007/2008 and earlier years. No explanation has been given for
failure to surrender the amount to the Exchequer. The Statement also reflects an
Excess Appropriations-In-Aid Account debit balance of Kshs.533,200.00 for
2007/2008, while there was no such an amount in the Accounts for that year. No
reason has been provided for the anomaly.




                                      306 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.35

1675. The Statement of Assets and Liabilities for Vote D.35 as at 30 June 2009
reflects an Exchequer Account debit balance of Kshs.503,498,217.00, which
includes an amount of Kshs.154,397,717.00 relating to 2007/2008 and earlier
years. No explanation has been given for failure to clear the long outstanding
balance from the books of account.

1676. The Statement also reflects Imprest Account debit and credit balances of
Kshs.271,224.00 and Kshs.567,072.30 respectively, which have not been
analysed, with the result that their completeness and accuracy could not be
ascertained. Further, no clarification has been made on the unusual credit
balance of Kshs.567,072.30 under an Imprest account.

1677. The Statement further reflects District Suspense Account debit and credit
balances of Kshs.514,247,626.00 and Kshs.302,345,616.60 respectively, which
have not been analysed. In absence of the analyses, the completeness and
accuracy of the balances could not be confirmed.

1678. The Statement also shows a General Account of Vote credit balance of
Kshs.1,180,967,775.41, which includes an amount of Kshs.262,804,178.65
relating to 2006/2007. No clarification has been made for non-clearance of the
long outstanding balance.



                         MINISTRY OF LANDS

APPROPRIATION ACCOUNT FOR VOTE D.36 FOR THE YEAR ENDED 30
JUNE 2009

Under-Expenditure and Under-Collection of Appropriations-In-Aid

1679. The Appropriation Account for Vote D.36 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.206,600,246.55 or approximately 37%
of the approved estimates of Kshs.560,114,225.00. The Appropriation Account
also reflects under-collection of Appropriations-In-Aid of Kshs.42,894,437.00,
representing about 54% of the estimated receipts of Kshs.79,339,225.00. The
under-expenditure and under-collection of Appropriations-In-Aid were recorded
mainly under Sub-Votes 360 and 363 – General Administration and Planning and
Survey of Kenya respectively.

1680. The explanations provided in the footnotes to the Account for the under-
expenditure and under-collection of Appropriations-In-Aid include; late signing of
the memorandum of understanding between the Ministry and various

                                       307 
 
development partners on land reforms, non release of funds by donors and delay
in getting building plans from Ministry of Public Works.


PENDING BILLS

1681. Records maintained at the Ministry’s Headquarters indicated that bills
totalling Kshs.35,457,435.15 relating to 2008/2009 were not settled during the
year but were instead carried forward to 2009/2010. Out of the total, an amount
of Kshs.12,953,867.20 was chargeable to the Recurrent Vote, while the balance
of Kshs.22,503,567.95 was in respect of those relating to the Development Vote.

1682. The reasons provided for non-payment of the bills include; inadequate
funds, late submission of invoices and reduction of voted provision during the
year while expenditure had already been incurred.

1683. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Recurrent Appropriation Account for the year would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.59,284,889.40 instead of Kshs.72,238,756.60 now shown. Similarly, the
Development Appropriation Account would have reflected a reduced Net Surplus
of Kshs.141,202,241.60 instead of Kshs.163,705,809.55 now recorded.


UNVOUCHED EXPENDITURE

1684. Expenditure totalling Kshs.58,716,694.35 incurred against various items in
the Appropriation Account for Vote R.36 for the year ended 30 June 2009 was
not supported with the relevant payment vouchers and other related records.
Consequently, the propriety of the expenditure could not be ascertained.


NUGATORY EXPENDITURE

1685. Records held at the Ministry’s Headquarters indicate that a parcel of land
in Kileleshwa, Nairobi under L.R. 209/3088 (also registered as L.R. 209/12004)
measuring approximately 0.464 hectares was previously Government land, on
which a residential house for occupation by civil servants stood. On 10 August
1994, the land was jointly allocated through an allotment letter Ref. No.36599 to
an individual and a company based in Nairobi. The allottees later transferred the
land to an Investment firm also based in Nairobi, through its lawyers for a
consideration of Kshs.2,000,000.00. A form of transfer was subsequently signed
by the Commissioner of Lands on 18 June 1995 following which a grant L.R.
No.209/12004 was on 24 July 1995 issued to the Investment firm.




                                      308 
 
1686. Information available indicates that in 1998, the same land was, and for
unclear reasons, jointly allocated through allotment letter Ref. 48026/V/192 of
1998 to another individual and a company, again based in Nairobi. Additional
records indicate that this particular individual was apparently the occupant of the
house standing on the plot, at that time. In turn, the second allottees sold the
property to a third company on 19 March 2001, for a consideration of
Kshs.10,000,000.00. A transfer signed by the Commissioner of Lands was
executed in the favour of the third company on 18 July 2001, and apparently
without the knowledge of the Investment firm.

1687. Shortly thereafter, and after failing to gain access to the property because
it had been allocated and later sold a third company, the Investment firm moved
to the High Court, on 30 July 2002, Nairobi and filed a civil suit under No. 1114 of
2002. The matter was heard before the Court and a judgement was delivered on
12 May 2006.

1688. In the judgement, the validity of the title held by the Investment firm was
upheld and the Commissioner of Lands was ordered to among other things:

    •   Pay a sum of Kshs.151,500,000.00 and interest thereon from the date of
        filing the suit to the third company, being the costs and expenses incurred
        in the purchase and improvement of the suit property;

    •   Meet all costs incidental to removal of the structures on the suit land;

    •   Cancel title held by the third company to L.R. No.209/3088 which the
        Court had declared as invalid.

    •   Pay the costs of the suit to the Investment firm and the third company.

1689. According to further records available, and following the judgement by the
Court, consultations and negotiations ensued between the Office of Attorney
General and the advocates representing the Investment firm and the third
company. Subsequently, and as a result of the negotiations, a consent order
was made on 28 June 2007 in the High Court whereby it was agreed that the
Government shall pay the Investment firm an amount of Kshs.67,500,000.00 in
exchange for the title to the property. A further consent order was made on 17
October 2007 whereby it was agreed that; the title to L.R. No.209/3088 held by
the third company be validated; and, that the third company be paid costs of suit
totalling Kshs.20,000,000.00.

1690. Expenditure records maintained at the Ministry’s Headquarters indicate
that the total sum of Kshs.87,500,000.00 has since been paid as agreed upon
between the parties, whereupon an amount of Kshs.48,000,000.00 was paid in
2007/2008 and the balance of Kshs.39,500,000.00 in 2008/2009.


                                         309 
 
1691. From the sequence of events, it is clear that the poor manner in which
various officials at the Ministry handled the management and allocation of public
property led to the Government not only loosing prime land in the city for a paltry
sum of Kshs.404,846.00, but also incurring nugatory expenditure amounting to
Kshs.87,500,000.00 for the same property.


STATEMENT OF REVENUE HEAD 150-360: LAND REVENUE

1692. The Statement of Revenue for Head 150-360: Land Revenue for the year
ended 30 June 2009 reflects revenue totalling Kshs.73,495,498.80 as having
been paid to the Exchequer during the year. Records held at the Treasury
however indicate revenue amounting to Kshs.1,135,342,883.05 as having been
received. The resultant difference of Kshs.1,061,847,384.25 between the
Ministry’s records and those at the Treasury has not been reconciled or
explained.

1693. The Statement also reflects a balance on hand of Kshs.943,470.92 as at
30 June 2009 against the Revenue Account. No reason has been provided for
failure to remit the balance to the Exchequer.

Arrears of Revenue

1694. The Statement of Arrears of Revenue for the year ended 30 June 2009
indicates that an amount of Kshs.1,106,139,260.00 in respect of such arrears,
out of a total of Kshs.8,908,139,694.50 outstanding as at 30 June 2008, was
received or waived during the year, leaving a balance of Kshs.7,802,000,434.50
as at 30 June 2009. The amount of Kshs.1,106,139,260.00 comprised of
receipts and waivers of Kshs.572,315,909.00 and Kshs.533,823,351.00
respectively.

1695. However, related information shows that additional Arrears of Revenue
amounting to Kshs.560,493,611.50 were recorded during the same period,
raising the outstanding balance to Kshs.8,362,494,046.00 as at 30 June 2009.

1696. As noted in the previous years’ reports, the Ministry does not appear to
have put in place an effective and long term mechanism to address the persistent
challenge of long outstanding Arrears of Revenue.


UNSUPPORTED EXPENDITURE AT THE KIRINYAGA DISTRICT LANDS
OFFICE

1697. Examination of records maintained at the Kirinyaga District Lands Office
revealed that on 10 September 2008, Authority to Incur Expenditure (A.I.E.)
No.462792 for Kshs.4,494,560.00 was issued to the Lands Office, to pay pending

                                       310 
 
bills in respect of Land Dispute and Boards in the District. Out of the above
amount, a sum of Kshs.3,597,590.00 was paid to the Lands Tribunal members
for sitting, transport and lunch allowances covering the period between 2004 and
2008.

1698. However, the relevant documents in support of the payments including,
dates of the sittings, minutes of the meetings, attendance registers and schedule
of payments were not availed for audit review. In consequence, the propriety of
the expenditure of Kshs.3,597,590.00 could not be confirmed.


UNSUPPORTED EXPENDITURE AT THE NYANDARUA NORTH DISTRICT
LANDS OFFICE

1699. During the year, the Nyandarua North District Lands Officer, made
payments totalling Kshs.3,054,500.00 comprising Kshs.2,301,500.00 and
Kshs.753,000.00 relating to the District Land Dispute Tribunal and the District
Land Control Board allowances, respectively. An examination of the relevant
Schedules however revealed that payments in respect of the District Lands
Control Board allowances of Kshs.753,000.00 were not signed by the persons
who purportedly received the cash. Instead, the amounts were collected on their
behalf by third party individuals, who do not appear to have been authorized by
the bona fide payees.

1700. Further, it was observed that payments of Kshs.2,301,500.00 made in
respect of the Tribunal allowances were not supported with minutes of meetings
as well as attendance registers for the Tribunal Committee.               In the
circumstances, the propriety of expenditure totalling Kshs.3,054,500.00 incurred
at the Lands Office could not be confirmed.


FINANCIAL STATEMENTS FOR THE AGRICULTURAL SETTLEMENT FUND

Failure to Submit Accounts

1701. The Ministry has not submitted for audit, financial statements for the
Agricultural Settlement Fund for 2007/2008 and 2008/2009 financial years. As a
result, the propriety of grants totalling Kshs.1,315,000,000.00 received from the
Ministry during the period could not be ascertained.

1702. Further, the financial statements for 2005/2006 and 2006/2007, including
the Balance Sheet and Income and Expenditure Account were submitted for
audit on 8 February 2010, contrary to Section 6(4) of the Public Audit Act, 2003,
which requires that such statements be submitted within three months after the
end of a financial year.



                                      311 
 
Outstanding Imprests

1703. Examination of imprest records maintained by the Settlement Fund
Trustees revealed that Temporary Imprests totalling Kshs.1,690,584.00 which
ought to have been surrendered or otherwise accounted for, on or before 30
June 2009 were still outstanding as at that date, with some such imprests dating
as far back as 1998. No reasons have been provided for failure to have the
imprests accounted for as required.

1704. Further, information available shows that some officers were issued with
additional imprests before having surrendered or accounted for balances
previously issued.

Bank Reconciliation Statement

1705. The Bank reconciliation Statement for the Settlement Fund Trustees as at
30 June 2009 reflects payments of Kshs.7,644,433.80 in the Cashbook not
recorded in the Bank Statement, which include four (4) stale cheques for an
amount of Kshs.72,932.25. It has not however been explained why these
cheques have not been replaced or reversed in the Cashbook.

1706. The Statement also reflects receipts of Kshs.3,514,875.55 in the
Cashbook not recorded in the Bank Statement, which have been attributed to a
Cashbook undercast. The undercast has not however been investigated or
explained.

1707. The Statement also shows payments totalling Kshs.36,665.25 in the Bank
Statement not recorded in the Cashbook. No reason has been given for failure
to update the Cashbook with the payments.

1708. A Board of Survey Report in support of the Cashbook balance for the
Fund as at 30 June 2009 was not produced for audit review. As a result, the
actual Cash on Hand and at Bank as at the same date could not be determined.


TOWNSHIP ROADS AND DRAINS ACCOUNT

1709. In the previous year’s report, mention was made of an unsupported
Journal Voucher dated 30 September 2005 for an amount of
Kshs.361,196,634.45    used     to  clear   an   accumulated    deficit   of
Kshs.345,585,533.65, against the Township Roads and Drains Account as at 30
June 2004.

1710. A review of the position during 2008/2009 indicated that the Ministry has
not yet obtained approval from Treasury to clear the deficit and again, no reason



                                      312 
 
has been provided as to why the approval had not been granted as at 30 June
2009.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

1711. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments of Kshs.109,371,825.50 in the Cashbook not
recorded in the Bank Statement (unpresented cheques), which include stale
cheques of Kshs.4,660,001.00 and Kshs.8,616,565.15 for the years 2007/2008
and 2008/2009 respectively. No reason has been provided for failure to
investigate and replace the cheques or credit them back in the Cashbook.

1712. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook of Kshs.10,428,885.35, which include an amount of
Kshs.6,913,956.00 relating to the year 2007/2008. No action appears to have
been taken to have the receipts recorded in the Cashbook.

1713. The Statement further reflects payments in the Bank Statement not
recorded in the Cashbook of Kshs.11,321,557.45, which include an amount of
Kshs.7,633,991.00 relating to 2007/2008. No explanation has been provided for
failure to update the Cashbook with the payments.

1714. The Statement in addition reflects receipts amounting to
Kshs.2,678,550.00 in the Cashbook not recorded in the Bank Statement, relating
to 2007/2008 and earlier. Failure to bank the receipts has similarly not been
explained.

Development Cashbook

1715. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement of        Kshs.70,141,735.75, which include stale cheques of
Kshs.2,333,230.00 and Kshs.1,320,493.00 relating to 2007/2008 and 2008/2009
respectively. No reason has been provided for failure to replace the cheques or
credit them in the Cashbook.

1716. The Statement also reflects payments of Kshs.3,709,395.90 in the Bank
Statement not recorded in the Cashbook, which have been described as A.I.Es.
As in the previous instance, no reason has been provided for failure to record the
payments in the Cashbook.




                                       313 
 
Deposits Cashbook

1717. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects payments of Kshs.28,262,627.50 in the Cashbook not
recorded in the Bank Statement, which includes stale cheques of
Kshs1,086,900.00. It has not, however, been explained why the cheques had
not been replaced as at 30 June 2009.

1718. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook of Kshs.1,608,301.90, some dating as far back as 2004. It
has not been clarified as to why these receipts have not been recorded in the
Cashbook.

1719. The Statement further reflects payments of Kshs.13,345,644.85 in the
Bank Statement not recorded in the Cashbook, some relating to 2002 and
indicated as representing unpaid cheques. It has not however been clarified as
to how such cheques would have been shown in the Statement as payments in
the Bank Statement not in the Cashbook as at 30 June 2009.

1720. The Statement in addition reflects receipts in the Cashbook not recorded
in the Bank Statement totalling Kshs.41,524,363.95, out of which an amount of
Kshs.40,232,012.60 relates to 1998/99 and earlier years. No reason has been
provided for failure to bank the receipts.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.36

1721. The Statement of Assets and Liabilities for Vote R.36 as at 30 June 2009
reflects an Exchequer Account balance of Kshs.313,088,102.90, relating to
2007/2008 and earlier years. No reason has been provided for non-clearance of
this long outstanding balance. The Statement also reflects an Exchequer
Account credit figure of Kshs.15,553,135.60 relating to 2008/2009, while records
maintained at the Exchequer Section, Treasury show an amount of
Kshs.809,320.00 against the Account. The resultant difference of
Kshs16,362,455.60 between the two sets of records has not been reconciled or
explained.

1722. The Statement further reflects General Account of Vote debit balances of
Kshs.42,620,925.90 and Kshs.3,162,012.00, relating to Excess Votes incurred in
1998/1999 and 1999/2000 respectively. It has not however been clarified why
these balances have not been regularized. In addition, the Statement shows a
General Account of Vote credit balance of Kshs.528,387,903.98, out of which an
amount of Kshs.456,112,147.40 relates to 2005/2006 and earlier years. No
reason has been given for failure to surrender the amount of
Kshs.456,112,147.40 to the Exchequer.



                                      314 
 
1723. The Statements shows a Paymaster General debit balance of
Kshs.153,985,655.81, while the Cashbook reflects a figure of Kshs.47,403.30 as
at 30 June 2009. The difference of Kshs.153,938,252.51 has not been
reconciled or explained.

1724. The Statement also shows an Advances Account debit balance of
Kshs.943,560.90 relating to 2007/2008 and earlier years. It has not however
been clarified why this long outstanding balance had not been recovered from
salaries of the respective officers as at 30 June 2009.

1725. The Statement in addition shows a Temporary Imprest Account balance of
Kshs.2,689,605.30, which includes an amount of Kshs.215,640.15 relating to
2007/2008 and earlier years. No reason has been provided for failure to have
the long outstanding imprests balances surrendered or otherwise accounted for.

1726. The Statement further shows a refer to drawer cheques debit balance of
Kshs.1,982,155.00 and a stale cheques credit balance of Kshs.3,428,559.90.
The supporting analyses for the two balances have not however been seen with
the result that their completeness and accuracy could not be ascertained.
Further, no reason has been given for non-clearance of these balances.

1727. The Statement also reflects a District Suspense Account debit balance of
Kshs.51,909,972.47, which includes an amount of Kshs.16,397,959.44 relating to
2007/2008 and earlier years. As in the previous instance, no reason has been
provided for non-clearance of the long outstanding amount.

1728. The Statement also shows a credit balance of Kshs.528,811.00 under the
Inter-Ministerial Agency Account which has not been analysed. As a result, the
validity and correctness of this balance could not be confirmed.

1729. The Statement further reflects an Excess Appropriations-In-Aid balance of
Kshs.37,301,711.60, brought forward from 2006/2007. This balance ought to
have been surrendered to the Exchequer on or before 30 June 2009.

1730. The Statement similarly shows a credit balance of Kshs.699,004.10 under
the Government Agency Clearance Account which has not been analysed.
Consequently, the completeness and accuracy of the balance could not be
ascertained.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.36

1731. The Statement of Assets and Liabilities for the Vote D.36 as at 30 June
2009 reflects an Exchequer Account debit balance of Kshs.351,511,329.80,
which includes an amount of Kshs.233,265,330.00 relating to the period
1999/2000 to 2005/2006. No reason has been provided for failure to clear the

                                     315 
 
long outstanding balance. In addition, the Statement reflects an Exchequer
Account credit balance of Kshs.89,175,549,225.00 for 2008/2009, while records
maintained at the Exchequer Section in Treasury show a debit figure of
Kshs.118,246,000.00. The difference of Kshs.89,293,795,225.00 between the
two sets of records has not been reconciled or explained.

1732. The Statement also reflects a debit balance of Kshs.122,386,039.00 under
the Paymaster General Account (PMG), while the Cashbook as at 30 June 2009
shows a figure of Kshs.1,674,400.65.        As in the previous instance, no
reconciliation or explanation has been provided for the difference of
Kshs.120,711,638.35.

1733. The Statement further reflects a General Account of Vote debit balance of
Kshs.436,357.05 relating to 2004/2005. No reason has been provided for failure
to have the excess vote regularized.

1734. The Statement in addition reflects a General Account of Vote credit
balance of Kshs.470,107,272.45, which includes an amount of
Kshs.306,401,462.90 relating to 2005/2006 and earlier years. Failure to clear the
long outstanding amount of Kshs.306,401,462.90 has similarly not been clarified.

1735. The Statement also shows a District Suspense Account credit balance of
Kshs.4,226,453.85 brought forward from 2007/2008 and earlier years. As in the
previous instances, no reason has been provided for failure to clear this balance
from the books of account.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1736. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects a Paymaster General Account brought forward balance of
Kshs.383,340,607.22, while the audited Statement for 2007/2008 shows a
closing balance of Kshs.338,355,580.17 against the Account. The resultant
difference of Kshs.5,014,972.95 between the two sets of records has not been
reconciled or explained.

1737. The Statement also reflects three balances totalling Kshs.1,291,296.70
under Personal Deposits, Deposits for Plots and EALS Exam which have not
been analysed.

Consequently, it has not been possible to establish what the balances represent
or ascertain their accuracy.

1738. The Statement shows opening balances of Kshs.229,601.25 and
Kshs.245,839.52 under Students’ Welfare and Revenue Accounts respectively,
while the audited Statement for 2007/2008 reflects figures of Kshs.221,601.25

                                      316 
 
and Kshs.5,268,812.47 respectively against the Accounts. These discrepancies
have not been clarified.

1739. The Statement also shows balances of Kshs.44,621,842.65,
Kshs.662,867.80 and Kshs.943,470.92 under contributions in lieu of rates, stamp
duty and land revenue respectively, which ought to have been surrendered to
the respective institutions on or before 30 June 2009.

No reason has been provided for the anomaly.

1740. Receipts and Payment Voucher for amounts of Kshs.208,626,276.00 and
Kshs.7,797,230.00 respectively, although recorded in the Deposits Cashbook
were not availed for audit review. In absence of the Receipts and Vouchers, the
validity and accuracy of the two balances could not be ascertained.




       MINISTRY OF STATE FOR IMMIGRATION AND
              REGISTRATION OF PERSONS

APPROPRIATION ACCOUNT FOR VOTE R.40 FOR THE YEAR ENDED 30
JUNE 2009

Over-Expenditure on Basic Salaries and Other Personal Emoluments

1741. The Appropriation Account for Vote R.40 for the year ended 30 June 2009
shows that the Ministry incurred an over-expenditure of Kshs.144,324,242.00 on
Basic Salaries and Personal Allowances paid as part of Salary under Heads 053
– Refugee Affairs Department, 374 – Jomo Kenyatta International Airport and
393 – Coast Region.

1742. Although the over-expenditure has been indicated in the footnotes as
having arisen from recruitments, promotions or transfers of officers, the
explanation does not however appear plausible considering the fact that
estimates on personal emoluments are based on known actual establishments.
Expenditure on these items would therefore be expected to be within the
budgeted limits.

Unaccounted for Appropriations-In-Aid

1743. The Appropriation Account reflects under-collection of Appropriations-In-
Aid (AIA) of Kshs.497,211,968.00 in respect of various regional offices and
immigration border control points. The under-collection of AIA has been
explained in the footnotes as having been caused by non-capture of data from

                                     317 
 
the Districts. No clarification has however been provided for failure to capture
and account for the amount, which has resulted in understatement of AIA in the
Account.


APPROPRIATION ACCOUNT FOR VOTE D.40 FOR THE YEAR ENDED 30
JUNE 2009

1744. The Appropriation Account for Vote D.40 for the year ended 30 June 2009
reflects total expenditure of Kshs.448,890,741.85 under Sub-Vote 400 – General
Administration and Planning, while the Ministry’s Ledger for the month of June
2009 shows a figure of Kshs.448,627,737.85. The difference of Kshs.263,004.00
between the two records has not been reconciled or explained.


PENDING BILLS

1745. Examination of records maintained at the Ministry’s Headquarters
revealed that bills totalling Ksh.44,214,003.25 were not settled during the year
under review but were instead carried forward to 2009/2010. Out of the total,
bills amounting to Ksh.40,723,003.25 were chargeable to the Recurrent Vote
while the balance of Ksh.3,491,000.00 was in respect of those relating to the
Development Vote.

1746. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.40 for the year would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Ksh.166,814,737.50 instead of Ksh.207,537,740.75 now shown, while the
Appropriation Account for Vote D.40 for the same period would have reflected an
Excess Vote of Ksh.2,126,073.20 instead of a Net Surplus of Kshs.1,364,926.80
now recorded.

According to the Ministry, failure to settle the hills was caused by breakdown of
IFMIS.


OUTSTANDING IMPRESTS

1747. Imprest records maintained at the Ministry’s Headquarters indicated that
imprests totalling Kshs.17,562,397.10 which ought to have been surrendered or
otherwise accounted for on or before 30 June 2009, were still outstanding as at
that date.

1748. Out of the total of Kshs.17,562,397.10, an amount of Kshs.4,453,974.40
was owed by officers on Job Group `M’ and above, Kshs.11,977,136.40 by
officers in Job Group `L’ and below, Kshs.260,000.00 by politicians, while the

                                      318 
 
balance of Kshs.388,287.00 was held by officers who have since been
transferred to other ministries. It was further observed that, additional imprests
were issued to some officers before they had surrendered or accounted for
various balances previously issued.

1749. A review of the position as at 10 November 2009 disclosed that imprests
totalling Kshs.5,175,136.00 had been recovered, leaving a balance of
Kshs.12,387,261.10 still outstanding.


UNACCOUNTED FOR BULK FUEL AT THE WAJIR EAST IMMIGRATION
OFFICE

1750. Examination of records held at the Wajir East Immigration Office during
the year revealed that the Office purchased 10,058 litres of bulk petrol fuel worth
Kshs.1,053,052.00 from a service station based in Wajir. The fuel had not
however been accounted for as at 30 June 2009, as apparently the work tickets
for vehicle No. GK A 296D which was indicated as having used the fuel were not
properly maintained. The propriety of the expenditure could not therefore be
ascertained.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

1751. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.484,542,820.25, which include an amount of
Kshs.518,897.00 representing stale cheques. No reason has been given for
failure to replace the cheques.

1752. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook amounting to Kshs.232,219,568.00. The source of these
receipts has not however been explained other than being indicated as Banking
and Exchequer.

1753. The Statement further reflects payments in the Bank Statement not
recorded in the Cashbook totalling Kshs.1,104,544.80, which include R.D
cheques amounting to Kshs.1,094,671.65. The Ministry has not provided an
explanation why these cheques have not been replaced.

1754. The Statement shows receipts in the Cashbook not recorded in the Bank
Statement totalling Kshs.171,161,680.85, which includes an amount of
Kshs.145,488,000.00 described as “Overcast Banking”. It has not however been
clarified as to what the “Overcast Banking” represents.


                                       319 
 
Development Cashbook

1755. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects a payment of Kshs.3,932,500.00 in the Bank Statement
not recorded in the Cashbook, transacted on 16 July 2007. No reason has been
provided for not recording the payment in the Cashbook. Further, the Statement
also shows receipts in the Cashbook not recorded in the Bank Statement
amounting to Kshs.2,773,833.30. The amount includes a figure of
Kshs.999,999.75 described as an “Overcast of Exchequer”. As in the previous
instance, it has not been clarified as to what “Overcast of Exchequer” represents.

Deposits Cashbook

1756. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.863,245.00, which includes a stale cheque for
Kshs.5,000.00 dated 7 August 2007. Non-replacement or failure to reverse the
cheque in the Cashbook has not been explained.

1757. The Statement further reflects receipts in the Bank Statement not
recorded in the Cashbook of Kshs.300,000.00, which have been outstanding
since June 2007. The Statement in addition reflects payments in the Bank
Statement not recorded in the Cashbook amounting to Kshs.24,642.50 which
have remained unentered in the Cashbook since July 2007. No reasons have
been given for this unsatisfactory state of affairs.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.40

1758. The Statement of Assets and Liabilities for Vote R.40 as at 30 June 2009
reflects various balances under Exchequer, Imprest, Advance, Inter-ministerial,
General Suspense, District Suspense, RD Cheques, Stale Cheques and
Clearance Accounts, which differ with those reflected in the June Ledger. No
reconciliation or explanation has been provided for the differences. Further, the
balances in the Statement have also not been supported with the respective
analyses, with the result that their completeness and accuracy could not be
ascertained.


1759. The Statement also reflects various other Account balances under
Imprest, Inter-ministerial, Clearance and District Suspense in the amounts of
Kshs.16,422,459.20 Cr, Kshs.8,959,568.00 Dr, Kshs.113,291,303.65 Cr and
Kshs.598,335,367.65 respectively, relating to 2007/2008 and earlier years and
which have not been cleared. No reason has been provided for failure to clear
the balances.



                                       320 
 
1760. The Statement further reflects the current year’s General Account of Vote
debit balance of Kshs.747,294,164.00, while the Appropriation Account for Vote
R.40 for the year shows a Net Surplus to be Surrendered to the Exchequer of
Kshs.207,537,740.75. The difference of Kshs.954,831,904.75 between the two
sets of records has not been reconciled or explained.

1761. The Statement shows a Paymaster General debit balance of
Kshs.560,769,949.50, while the Cashbook reflects an amount of
Kshs.295,996,810.75 against the Account, resulting in an unreconciled and
unexplained difference of Kshs.264,773,138.75.

1762. The Statement also shows an Advance Excess Appropriations-In-Aid
(A.I.A) payment of Kshs.1,100,000,000.00. No explanation has been provided
regarding what the balance represents. The Statement in addition shows nil
Excess Appropriations-In-Aid for 2008/2009, while the Appropriation Account for
Vote R.40 for the year reflects an amount of Kshs.1,029,412,026.85 against the
item. No reason has been provided for exclusion of the Excess A.I.A from the
Statement.

1763. The Statement further shows an unreconciled debit balance of
Kshs.110,534,535.60 which is a balancing figure in the Statement. It has not
however been clarified why the figure has not been investigated and cleared from
the books of account.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.40

1764. The Statement of Assets and Liabilities for Vote D.40 as at 30 June 2009
reflects an Exchequer Account credit balance of Kshs.317,383,700.00 for
2008/2009, while Exchequer records at the Treasury show a debit balance of
Kshs.1,103,000.00. The difference of Kshs.318,486,700.00 between the two
sets of records has not been reconciled or explained.

1765. The Statement also reflects a debit balance of Kshs.6,704,482.35 against
the District Suspense Account, while the Ledger for the month of June 2009
shows an amount of Kshs.5,309,620.35.           The resultant difference of
Kshs.1,394,862.00 has not been reconciled or explained.

1766. The Statement further reflects a General Account of Vote debit balance of
Kshs.496,121,680.85 for 2008/2009, which differs with the Net Surplus to be
Surrendered to the Exchequer of Kshs.1,364,926.80 shown in the Appropriation
Account for Vote D.40 for the year ended 30 June 2009. No explanation has
been provided for the anomaly.




                                      321 
 
STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1767. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects an Imprests Account balance of Kshs.90,878.00 due from two officers
and relating to 2007/2008. No explanation has been provided for the failure to
have the long outstanding Imprests surrendered or otherwise accounted for.

1768. The Statement also reflects a Retention Money Account credit balance of
Kshs.556,170.45, which includes an item with a debit balance of Kshs.12,602.05
on account of a local firm. No clarification has been made as to what the debit
balance represents in an account which under normal circumstances should
reflect a credit or nil balance.




             OFFICE OF THE VICE – PRESIDENT AND
              MINISTRY OF STATE FOR NATIONAL
                   HERITAGE AND CULTURE

APPROPRIATION ACCOUNT FOR VOTE D.41 FOR THE YEAR ENDED 30
JUNE 2009

    Under- Collection of Appropriations-In-Aid

1769. The Appropriation Account for Vote D.41 for the year ended 30 June 2009
reflects under-collection of Appropriations-In-Aid of Kshs.10,724,506.00,
representing    approximately     65%    of    the   estimated    receipts   of
Kshs.16,475,015.00. The under-collection occurred under Sub-Vote 413 –
National Museums of Kenya, Head 495 – Museum Headquarters and Regional
Museums, where out of receipts of Kshs.14,280,000.00 expected from various
International Organizations, only an amount of Kshs.3,555,494.00 was realized.

1770. According to an explanation provided by the Ministry, the under-collection
was caused by slow procurement process at the National Museums, resulting in
less funding from donors.


PENDING BILLS

1771. Records maintained at the Ministry’s Headquarters indicated that bills
totalling Kshs.10,708,307.10 relating to 2008/2009 and chargeable to both
Recurrent and Development Votes were not settled during the year but were
instead carried forward to 2009/2010. Out of the total, bills amounting to

                                       322 
 
Kshs.6,297,619.20 were chargeable against Recurrent Vote while the balance of
Kshs.4,410,687.90 related to those under Development Vote.

1772. Had the bills been settled and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.41 for the year would have
reflected an Excess Vote of Kshs.6,014,714.55 instead of the Net Surplus to be
Surrendered to the Exchequer of Kshs.282,904.65 now shown. Similarly, the
Appropriation Account for Vote D.41 as at 30 June 2009 would have reflected a
Net Surplus of Kshs.5,842,594.85 instead of the Kshs.10,253,282.75 now
recorded.

According to information availed by the Ministry, the bills were not settled during
the year due to inadequate budgetary provision.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.41

1773. The Statement of Assets and Liabilities for Vote R.41 as at 30 June 2009
reflects a debit balance of Kshs.25,216,992.05 under Paymaster General
Account while the Ledger for the month of June 2009 shows a figure of
Kshs.2,803,698.80. The resultant difference of Kshs.22,413,293.25 between the
two sets of records has not been reconciled or explained. The Cashbook as at
30 June 2009 on the other hand reflects a balance of Kshs.1,999,911.20,
similarly resulting in an unreconciled and unexplained difference of
Kshs.23,217,080.85 between the Statement and the Cashbook.

1774. The Statement also reflects under the District Suspense Account a
balance of Kshs.4,753,252.90. The balance has not however been properly
analysed, with the result that its completeness and accuracy could not be
ascertained. No reason has also been provided for failure to clear this long
outstanding balance.

1775. The Statement further reflects a balance of Kshs.1,930,333.45 under the
Imprest Account, which includes an amount of Kshs.945,336.95 relating to
2007/2008 and earlier years. No reason has however been provided for non-
clearance of the latter balance. In addition, the Imprest Register shows a figure
of Kshs.2,213,983.60, occasioning an unreconciled and unexplained difference
of Kshs.283,650.15 between the Statement and the Register.

1776. The Statement shows a balance of Kshs.2,509,217.10 under the
Advances Account which includes an amount of Kshs.1,759,616.59 relating to
2007/2008 and earlier years. No reason has however been provided for failure
to clear the long outstanding amount.




                                       323 
 
1777. The Statement similarly shows a Clearance Account balance of
Kshs.4,947,864.60, which includes a figure of Kshs.4,882,581.20 relating to
2007/2008 and earlier years. No reason has also been provided for failure to
clear the long outstanding amount of Kshs.4,882,581.20.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.41

1778. The Statement of Assets and Liabilities for Vote D.41 as at 30 June 2009
reflects debit balances of Kshs.43,527,060.00 and Kshs.8,840,833.15 Under
Exchequer and Excess Vote Accounts respectively and a credit balance of
Kshs.41,560,676.00 under Excess Appropriations-In-Aid (AIA), all relating to
2007/2008 and earlier years. These balances ought to have been cleared from
the books of account as at 30 June 2009.

1779. Although the Ministry has indicated that delay in clearance of the balances
was caused by transfer of various Departments from Ministry of Gender and
sports to Ministry of National Heritage and Culture, no reason has been provided
for failure to have the long outstanding balances cleared by 30 June 2009.

1780. The Statement also reflects a Paymaster General Account (PMG) balance
of Kshs.17,433,432.70, while the Ledger and the Cashbook show balances of
Kshs.16,683,432.70 and Kshs.19,332,292.20 as at 30 June 2009.           The
differences between the three sets of records have not been reconciled or
explained.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1781. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects balances of Kshs.24,779.35 and Kshs.3,346,765.05 under Agency
Account and Miscellaneous Deposits respectively while the Ledger for the month
of June 2009 shows figures of nil and Kshs.4,334,575.40 respectively. No
reconciliation or explanation has been provided the differences.




                                      324 
 
       MINISTRY OF YOUTH AFFAIRS AND SPORTS

APPROPRIATION ACCOUNT FOR VOTE R.42 FOR THE YEAR ENDED 30
JUNE 2009

Unauthorized Expenditure

1782. Examination of the Appropriation Account for Vote R.42 for the year ended
30 June 2009 and other related records revealed that the Ministry incurred
expenditure totalling Kshs.11,102,955.85 under Sub-Votes 420, 421 and 422.
However, no provision for such expenditure had been made in the Approved
Estimates for 2008/2009.       The expenditure was therefore ineligible and
unauthorized by Parliament.

Grants to Institutions, Youth Groups and Polytechnics

1783. The Appropriation Account also indicates that the Ministry disbursed
during the year grants totalling Kshs.691,145,549.90 to various organizations and
groups under Grants to Government Agencies & Other Levels of Government.
However, the beneficiary organizations and groups have not been identified.
Further, such organizations and groups had not submitted to the Ministry
expenditure returns as at 30 June 2009, showing how the grants were utilized.
Consequently, it has not been possible to confirm propriety of the expenditure of
Kshs.691,145,549.90.


APPROPRIATION ACCOUNT FOR VOTE D.42 FOR THE YEAR ENDED 30
JUNE 2009

Under-Expenditure and Under-Collection of Appropriations-In-Aid

1784. The Appropriation Account for Vote D.42 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.5,132,821,742.38 or approximately 65%
of the Approved Estimates of Kshs.7,830,243,617.00.          The Appropriation
Account     also   reflects   under-collection   of  Appropriations-In-Aid   of
Kshs.4,716,832,717.00, representing 100% of the estimated receipts. The
under-expenditure and under-collection of the Appropriations-In-Aid mainly
occurred under Sub-Votes 421 and 423 relating to National Youth Service and
Department of Sports respectively. The under-expenditure and under-collection
of Appropriations-In-Aid have been attributed to liquidity challenges and non-
release of funds by donors.




                                      325 
 
Unauthorised Expenditure

1785. Expenditure totalling Kshs.3,756,665.00 was incurred under Sub-Vote
422– Youth Development and Training, Heads 200, 689 and 904.
However, the expenditure does not appear to have been provided for in the
Approved Estimates for 2008/2009 and is therefore ineligible and unauthorized
by Parliament.


PENDING BILLS

1786. Records maintained at the Ministry’s Headquarters show that bills totalling
Kshs.113,946,642.43 and Kshs.12,643,847.00 chargeable against Votes R.42
and D.42 respectively were not settled during the year 2008/2009, but were
instead carried forward to 2009/2010.

1787. Had the bills been paid and the expenditure charged to the Accounts for
the year under review, the Appropriation Account for Vote R.42 for the period
would have reflected a reduced Net Surplus to be Surrendered to the Exchequer
of Kshs.17,409,909.78 instead of Kshs.131,356,552.21 now shown, while the
Appropriation Account for Vote D.42 would have shown a reduced Net Surplus of
Kshs.403,345,178.38 instead of the Kshs.415,989,025.38 now recorded.

According to the Ministry, failure to settle the bills was caused by late submission
of invoices by merchants.


OUTSTANDING IMPRESTS

1788. Records maintained at the Ministry’s Headquarters indicated that
Temporary Imprests totalling Kshs.635,150.50, which ought to have been
surrendered or otherwise accounted for on or before 30 June 2009 were
outstanding as at that date.

1789. Out of the total, imprests amounting to Kshs.364,684.50 were owed by
officers in Job Group ‘M’ and above, Kshs.258,966.00 by officers in Job Group ‘L’
and below, while the balance of Kshs.11,500.00 was due from officers whose
designations were not indicated and did not appear in the Ministry’s payroll. It
has not been clarified as to why the imprests had not been surrendered or
accounted for on the due dates.




                                        326 
 
UNACCOUNTED FOR EXPENDITURE AT THE WAJIR EAST DISTRICT
SPORTS OFFICE

1790. Examination of financial records maintained at the Wajir East District
Sports Office revealed that Authority to Incur Expenditure (A.I.E) Nos. A419172
dated 28 April 2009 for Kshs.781,940.00 and A445720 dated 19 April 2009 for
Kshs.218,060.00 both amounting to Kshs.1,000,000.00 were issued during the
year to the District Sports Office. However, the amount of Kshs.1,000,000.00
was not entered in the Vote Book or Cashbook as apparently none of these two
key books of account was maintained at the Office during the period.
Consequently, and in absence of the books, the propriety of expenditure of
Kshs.1,000,000.00 could not be ascertained.


DOUBTFUL EXPENDITURE ON KAZI KWA VIJANA PROJECTS AT THE
TANA RIVER DISTRICT YOUTH OFFICE

1791. Examination of records maintained at the Tana River District Youth Office
revealed that on 26 June 2009, an official at the Office was issued with an
imprest of Kshs.2,689,000.00 on account of the Kazi Kwa Vijana Programme, for
use in a tree planting exercise in the District. However, and according to records
available, an imprest of Kshs.2,550,000.00 was accounted for on 30 June 2009
as having been spent on wages of some four hundred (400) youths who had
participated in the exercise for twenty five and a half (25½) days.

1792. It has not however been clarified how the youths would have worked for
twenty five and a half (25½) days while the imprest in question was issued and
accounted for within only four (4) days as indicated above. Further, the signed
schedule attached in support of the expenditure of Kshs.2,550,000.00 does not
show the dates on which the exercise took place.

Indications therefore are that the amount of Kshs.2,550,000.00 may have been
misappropriated.


MECHANICAL TRANSPORT AND PLANT MAINTENANCE FUND

1793. The Income and Expenditure Account for the year ended 30 June 2009
reflects total income and expenditure of Kshs.19,816,953.00 and
Kshs.23,776,573.30 respectively, resulting in a loss of Kshs.3,959,620.30. The
expenditure of Kshs.23,776,953.00 however includes a Repairs and
Maintenance balance of Kshs.23,039,319.30, which has not been analysed or
explained.

In the absence of an analysis or explanation, the accuracy of the Income and
Expenditure Account for the year ended 30 June 2009 could not be ascertained.

                                       327 
 
1794. The Balance Sheet as at 30 June 2009 reflects a Paymaster General
Account (PMG) balance of Kshs.72,669,395.35, while the Statement of Assets
and Liabilities for Deposits as at 30 June 2009 shows a figure of
Kshs.62,241,507.50 against the Account. The difference of Kshs.10,427,887.85
between the two sets of records has not been reconciled or explained.

1795. The Balance Sheet also reflects a Commercial Debtors balance of
Kshs.13,807,738.85 as at 30 June 2008. This balance does not however appear
to have changed during the year as the closing balance as at 30 June 2009
stood at an equivalent amount. No reason has been provided for failure to
recover any debts during the year.

1796. As similarly reported in 2007/2008, the Fund did not during the year
maintain basic accounting records such as Main Cashbook, Journals, Ledgers or
Bank Accounts to record its day to day operations and transactions. The only
book maintained appears to have been a Memorandum Cashbook which shows
receipts for onward transmission to the Ministry’s Headquarters. As a result, and
as in the previous year, the balances reflected in the Accounts were derived from
manual analyses and schedules.

In absence of the books of account as indicated above, it has not been possible
to confirm the accuracy of the figures reflected in the Accounts as at 30 June
2009.


MECHANICAL TRANSPORT AND PLANT RENEWALS FUND

1797. The Fund Balance Sheet as at 30 June 2009 reflects a Paymaster
General Account (PMG) balance of Kshs.21,120,229.75, made up of
Kshs.18,626,729.75 brought forward from 2007/2008, and the current year’s
figure of Kshs.2,493,500.00. However, the Statement of Assets and Liabilities for
Deposits and Funds as at 30 June 2009 reflects a balance of Kshs.813,772.05
against the Account. The difference of Kshs.20,306,457.70 between the two sets
of records has not been reconciled or explained.

1798. The Statement also reflects a figure of Kshs.34,335,711.85 in respect of
Domestic Debtors as at 30 June 2009. This figure represents an increase of
Kshs.5,499,561.00    (or    approximately     19%)     from    an amount    of
Kshs.28,836,150.85 in the previous year to Kshs.34,335,711.85 as at 30 June
2009. No debts therefore appear to have been collected during the year and no
reason has been given for the unsatisfactory state of affairs.

1799. The Balance Sheet shows an amount of Kshs.241,752,623.30
representing the values of motor vehicles and other machineries owned by the
Fund. No depreciation was however charged on these assets during the year, as

                                      328 
 
apparently there is no policy on such charge. As a result, it has not been
possible to ascertain the accuracy of the value of the motor-vehicles and other
machineries stated at Kshs.241,752,623.30 as at 30 June 2009.

1800. As was observed in the previous years’ reports, the balances reflected in
the Accounts were derived from manual schedules and analyses and not from
the Ministry’s Ledgers and other books of account. Further, the Fund does not
maintain basic accounting records such as Cashbooks, journals, ledgers and
bank accounts to record its daily operations and transactions.

1801. In absence of the records and other related books of accounts as
discussed in the preceding paragraphs, it has not been possible to confirm the
accuracy of the Fund Accounts for the year ended 30 June 2009.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R. 42

1802. The Statement of Assets and Liabilities for Vote R.42 as at 30 June 2009
reflects various long outstanding debit and credit balances of
Kshs.442,176,111.72 and Kshs.266,623,551.62 respectively, under Exchequer,
Advances, District Suspense, Imprest, GAV, Excess AIA, General Suspense and
Clearance Accounts, which have not been cleared from the books of account.
No reason has been provided for failure to have the balances cleared.

1803. The Statement also reflects a balance of Kshs.11,165,493.80 under the
Imprests Account, made up of Standing and Temporary Imprests of
Kshs.6,175,016.80 and Kshs.4,990,477.00 respectively. The Ministry’s Imprests
Register on the other hand shows a total outstanding balance of
Kshs.635,150.50 as at 30 June 2009. The difference of Kshs.10,530,343.30
between the two sets of records has not been reconciled or explained.

1804. The Statement further reflects a balance of Kshs. 2,950,144.65 under the
Advances Account which has not been analysed. In absence of an analysis, it
has not been possible to confirm completeness and accuracy of the balance.

1805. The Statement shows a credit balance of Kshs.49,009,155.92 under the
Paymaster General Account (PMG), while the Cashbook as at 30 June 2009
reflects a debit figure of Kshs.949,632.30. The difference of Kshs.48,059,523.62
between the two sets of records has not been reconciled or explained.

1806. The Statement also shows a balance of Kshs. 2,735,419.10 under
Clearance Account which has not been analysed. As a result, it has not been
possible to ascertain its completeness and accuracy.

1807. The total liabilities exceed the total assets by Kshs.23,776,921.55. The
difference has not been investigated or reconciled.

                                      329 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.42

1808. The Statement of Assets and Liabilities for Vote D.42 as at 30 June 2009
reflects an Imprests Account credit balance of Kshs.1,874,449.70, which has
not been explained as to what it represents in an Account which under normal
circumstances should show a debit or nil balance.

1809. The Statement also reflects a General Suspense Account credit balance
of Kshs.1,699,005.20, which has not been properly analysed and as a result, its
correctness could not be ascertained. Further, the amount of Kshs.1,699,005.20
includes a figure of Kshs.592,674.00 relating to 2007/2008 and which has not
been cleared from the books of account.

1810. The Statement further reflects a current balance of Kshs.201,419,456.35
under the Paymaster General Account, while the Cashbook as at 30 June 2009
shows a figure of Kshs.25,743.50.              The resultant difference of
Kshs.201,393,712.85 between the two sets of records has not been reconciled or
explained.

1811. The Statement of assets and liabilities is out of balance by a figure of
Kshs.52,196,275.75. The accuracy of the Statement as drawn is therefore in
doubt.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS AND FUNDS

1812. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects a credit balance of Kshs.44,466.00 under the Imprests Account brought
forward from the previous year, while the Ledger for the month of June 2009
shows a figure of Kshs.1,165,300.00. The difference of Kshs.1,120,834.00
between the two sets of records has not been reconciled or explained.

1813. The Statement also reflects balances of Kshs.35,635,299.55 and
Kshs.66,623,336.05 under the Welfare and General Deposits Accounts
respectively which have not been analysed. Consequently, it has not been
possible to confirm the completeness and accuracy of the balances.

1814. The Statement further reflects a Paymaster General Account balance of
Kshs.163,930,967.40, while the Cashbook as at 30 June 2009 shows a figure of
Kshs.158,258,829.70. The difference of Kshs.5,672,137.70 between the two
sets of records has not been reconciled or explained.

1815. The Statement shows a balance of Kshs.813,772.05 under the
Mechanical Transport Renewal Account, while the Mechanical Transport and
Plants Renewal Fund Account reflects a figure of Kshs.21,120,229.75 against the

                                     330 
 
same Account. Similarly, the Statement reflects a balance of Kshs.62,241,507.50
under the Maintenance Fund Account, while the Mechanical Transport
Maintenance Fund Account shows an amount of Kshs.72,669,395.35 against the
Account. No clarification has been provided for the discrepancies between these
records.



               MINISTRY OF HIGHER EDUCATION,
                 SCIENCE AND TECHNOLOGY

APPROPRIATION ACCOUNT FOR VOTE R.43 FOR THE YEAR ENDED 30
JUNE 2009

Inaccuracy of the Appropriation Account

1816. The Appropriation Account for Vote R.43 for the year ended 30 June 2009
reflects various expenditure balances under Sub-Vote 430, Heads 147, 726 and
831, which differ with the corresponding Ledger figures as at 30 June 2009. No
reconciliation or explanation has been provided for the differences.


APPROPRIATION ACCOUNT FOR VOTE D.43 FOR THE YEAR ENDED 30
JUNE 2009

Under-Collection of Appropriations-In-Aid

1817. The Appropriation Account for Vote D.43 for the year ended 30 June 2009
reflects nil collection of Appropriations-In-Aid during the year, against estimated
receipts of Kshs.113,400,000.00. The under-collection of Appropriations-In-Aid
was recorded under Sub-Vote 431-Head 652, Technical Training Institutes, Sub-
Vote 435 - Head 833, Egerton University and Sub-Vote 435 - Head 840, Jomo
Kenyatta University of Agriculture and Technology. According to the footnotes
to the Accounts, the under-collection is attributed to non-receipt of expenditure
returns from the institutions and delay in the commencement of a donor funded
project during the year.


PENDING BILLS

1818. Examination of records held at the Ministry’s Headquarters revealed that
bills totalling Kshs.945,200.00 chargeable to the Recurrent Vote R.43 were not
settled during the year 2008/2009, but were instead carried forward to
2009/2010.


                                       331 
 
1819. Had the bills been settled and the expenditure charged to the accounts
for 2008/2009, the Appropriation Account for Vote R.43 for the year would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.235,561,118.75 instead of Kshs.236,506,318.75 now shown.

According to information provided by the Ministry, the bills related to a supply
which had not been concluded by 30 June 2009.


OUTSTANDING IMPREST

1820. Examination of Imprest Records maintained at the Ministry’s Headquarters
indicated that Temporary and Standing Imprests totalling Kshs.6,473,389.45 and
Kshs.10,000.00 respectively, which ought to have been surrendered or otherwise
accounted for, on or before 30 June 2009 were still outstanding as at that date.

1821. Out of the total of Kshs.6,483,389.45, imprests amounting to
Kshs.5,901,419.45 were owed by officers on Job Group ‘M’ and above, while the
balance of Kshs.571,970.00 was due from officers on Job Group ‘L’ and below.
The Standing Imprest of Kshs.10,000.00 was due from two members of
secretarial staff at Job Group ‘H’.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.43

1822. The Statement of Assets and Liabilities for Vote R.43 as at 30 June 2009
reflects various debit and credit balances totalling Kshs.108,665,464.75 and
Kshs.178,117,736.70 respectively, relating to 2007/2008 and earlier years.

No reason has been provided for failure to clear the long outstanding balances
from the books of account.

1823. The Statement also reflects various opening balances under Exchequer,
Advances, Standing Imprests, General Suspense, Agency/District, Clearance,
District Suspense Agency – Inter-Ministerial GAV and PMG Accounts for the year
under review, which are at variance with those appearing in the audited
Statement for 2007/2008. The differences have not been clarified.

1824. The Statement further reflects a Paymaster General Account balance of
Kshs.129,136,102.40,        while the Cashbook shows a figure of
Kshs.22,961,487.60 as at 30 June 2009. The difference of Kshs.106,174,614.80
between the two sets of records has not been reconciled or explained.

1825. The Statement shows a General Account of Vote balance of
Kshs.236,546,318.75 for 2008/2009, while the Appropriation Account for Vote
R.43 for the year ended 30 June 2009 reflects a figure of Kshs.236,506,318.75

                                      332 
 
under Net Surplus to be Surrendered to the Exchequer.         The difference of
Kshs.40,000.00 has not been reconciled or explained.

1826. The Statement also shows a balance of Kshs.2,000,000.00 under Agency
Inter-Ministerial Account which has not been analysed, with the result that the
completeness and accuracy of the figure could not be ascertained.

1827. The Statement further shows an amount of Kshs.3,331,748.05 under the
Temporary Imprest Account, while the Imprest Register as at the same date
reflects a figure of Kshs.6,469,789.45. The analysis for the balance on the other
hand shows an amount of Kshs.2,129,503.00. The differences between the
three sets of records have not been reconciled or explained.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.43

1828. The Statement of Assets and Liabilities for Vote D.43 as at 30 June 2009
reflects a Paymaster General credit balance of Kshs.17,427,887.80 for the
current year, while the Cashbook as at the same date shows a figure of
Kshs.16,060,168.10. The difference of Kshs.33,488,055.90 between the two
sets of records has not been reconciled or explained.

1829. The General Account of Vote balance of Kshs.45,845,692.85 brought
forward from 2007/2008 differs with the figure of Kshs.25,845,692.55 reflected in
the audited Statements of Assets and Liabilities for 2007/2008, by
Kshs.20,000,000.30.    As in the previous instance, no reconciliation or
explanation has been provided for the difference.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1830. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects Paymaster General and Retention Accounts opening balances of
Kshs.761,301.25 and Kshs.1,025,542.95 respectively, while the audited
Statement for 2007/2008 shows amounts of Kshs.836,915.95 and
Kshs.685,870.55 respectively, as at 30 June 2008. No clarification has been
provided for the discrepancies between the opening and closing balances.

1831. The Statement also reflects a Paymaster General Account balance
Kshs.16,479,795.65, while the Cashbook as at 30 June 2009 shows a figure of
Kshs.17,535,549.20. The difference of Kshs.1,055,753.55 has not been
reconciled or explained.

1832. The Statement further shows a Retention Money Account balance of
Kshs.17,535,549.20 which has not been properly analysed. In consequence, its
completeness and accuracy could not be confirmed.

                                      333 
 
                       MINISTRY OF HOUSING

APPROPRIATION ACCOUNT FOR VOTE R.44 FOR THE YEAR ENDED 30
JUNE 2009

Under-expenditure and Under-collection of Appropriations-In-Aid

1833. The Appropriation Account for Vote R.44 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.281,903,609.05 or approximately 16%
of the estimated provision of Kshs.1,715,631,200.00. The Appropriation
Account also reflects a deficiency in the collection of Appropriations-In-Aid of
Kshs.188,382,196.60, representing about 21% of the estimated receipts of
Kshs.886,000,000.00.      The under-expenditure and under-collection of
Appropriations-In-Aid occurred mainly under Sub-Vote 442 – Housing
Development, where amounts of Kshs.275,672,944.55 and Kshs.190,657,089.85
respectively were recorded.

1834. The explanations provided in the footnotes to the Account for the under-
expenditure include; misposting of District data, closure of procurement module
in the IFIMIS thus stopping processing of payment vouchers and suspension of
the sale of Government houses.

Capital Grants to Government Agencies

1835. The Appropriation Account also reflects Capital Grants totalling
Kshs.505,384,130.70 paid to the Civil Servants Housing Scheme during the year.
However, records maintained in respect of the Scheme show a sum of
Kshs.196,730,676.15 as having been received.              The difference of
Kshs.308,653,454.55 between the two sets of records has not been reconciled.


APPROPRIATION ACCOUNT FOR VOTE D.44 FOR THE YEAR ENDED 30
JUNE 2009

Under-collection of Appropriations-In-Aid

1836. The Appropriation Account for Vote D.44 for the year ended 30 June
2009 reflects a deficiency in the collection of Appropriations-In-Aid of
Kshs.25,000,000.00, representing 100% of the estimated receipts. According to
the footnote provided in the Account, the deficiency was caused by non-release
of exchequer by Treasury during the year.




                                      334 
 
Misallocation of Expenditure

1837. Expenditure totalling Kshs.30,172,141.00 incurred on Purchase of Motor
Vehicles, Maraba Road Improvement Project and Kiandutu Slums/Kianjau
Project was misallocated and irregularly charged against Other Operating
Expenses and Purchase of Buildings. Apart from failure to comply with the
Printed Estimates as approved by Parliament, the charge was also contrary to
Section 15.12 of the Government Financial Regulations and Procedures which
stipulate inter alia that no expenditure for which no provision has been included
in the estimates may be incurred.

Meals Allowances

1838. An expenditure of Kshs.855,200.00 incurred on meal allowances paid
during the year to various officers, was charged to Other Operating Expenses
and Routine Maintenance - Other Assets. However, the specific duties for which
the allowances were paid had not been clarified as at 30 June 2009. Further,
supporting records for the allowances were not seen with the result that the
propriety of the expenditure could not be ascertained.


PENDING BILLS

1839. Records maintained at the Ministry’s Headquarters indicated that bills
totalling to Kshs.7,704,036.00 relating to 2008/2009 and chargeable to the
Recurrent Vote were not settled during the year, but were instead carried forward
to 2009/2010.

1840. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Recurrent Appropriation Account for the year would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.85,817,376.45 instead of Kshs.93,521,412.45 now shown.


OUTSTANDING IMPRESTS

1841. Records held at the Ministry’s Headquarters indicated that Temporary
Imprests totalling Kshs.1,450,616.90 which ought to have been surrendered or
otherwise accounted for, on or before 30 June 2009 were still outstanding as at
that date. Out of the total, an amount of Kshs.455,802.05 was due from officers
on Job Group “M” and above, while the balance of Kshs.994,814.85 was due
from officers on Job Group “L” and below.

According to information available , the imprests were not accounted for as at 30
June 2009 as some officers failed to surrender the relevant documents in time.



                                      335 
 
UNCOLLECTED REVENUE AT THE NYANDARUA NORTH DISTRICT
SURVEYOR’S OFFICE

1842. Examination of revenue records at the Nyandarua North District
Surveyor’s Office revealed that house rent totalling Kshs.4,757,000.00 was
uncollected and outstanding from various tenants as at 30 June 2009. It has not
however been explained why the Surveyor’s Office has not been collecting the
rent.


PURCHASE OF SHELL AND BP HOUSE - NAIROBI

1843. In April 2008, the Government decided to acquire Shell and BP House in
Nairobi to accommodate the Office of the Prime Minister and other Ministries.

1844. According to information available, and following a series of consultative
meetings between various Ministries including; Finance, Housing, Lands and the
then Roads and Public Works, it was established in a Suitability Report on the
Proposed Purchase of Shell and BP House by the Government, that; the building
structure was sound and in good condition; its structural integrity was
satisfactory; and, the internal fixtures and fittings required upgrading to fit the
new office status.

1845. Following protracted negotiations spearheaded by the Ministry of Housing
on behalf of the Government and Kenya Shell Limited on behalf of the vendor, a
purchase price of Kshs.700,000,000.00 was agreed upon. Additional records
show that the Government was to acquire the House on an “as is” basis, for all
leases and on vacant possession of the area of the building occupied by the
vendor. The price of Kshs.700,000,000.00 also excluded movable fixtures.

1846. The Agreement for Sale and Purchase of the House between the
Government and the vendor was thus signed on 29 January 2009, with both the
Permanent Secretary to the Treasury and the Permanent Secretary of Housing
signing on behalf of the Government.

1847. Although expenditure records seen indicate that the full sum of
Kshs.700,000,000.00 was settled by the Ministry of Housing in two installments
of Kshs.70,000,000.00 and Kshs.630,000,000.00 on 30 January 2009 and on 19
February 2009 respectively, the following aspects appear to have placed the
Government at a disadvantageous position with regard to the acquisition of the
building:

    •   Some of existing leases will expire in year 2014 which implies that the
        Government will not be able to access, improve and use the facilities
        covered by such leases until 2014.



                                       336 
 
    •   The Government may have to continue renting space until 2014 for some
        of the Ministries and Departments which had been identified for
        accommodation at House.

    •   The assumption by the Government of the responsibility for and
        obligations of the existing leases including dealing with tenants may
        require additional budgetary and other resources from the Ministry.


KENYA SLUM UPGRADING, LOW COST HOUSING AND INFRASTRUCTURE
TRUST FUND

1848. As similarly observed in the previous year, the Net Fixed Assets balance
of Kshs.821,030,666.00 reflected in the Fund’s Balance Sheet as at 30 June
2009 includes unvalued parcels of land in Langata and Mavoko areas. The
parcels of land have also not been supported with ownership documents
although indications are that the matter is under communication between the
Ministry and the Director of Survey, Ministry of Lands.

1849. The Cash and Bank balance of Kshs.423,705,472.00 includes deposits of
Kshs.77,189,946.00 and Kshs.3,001,296.00 held in Accounts maintained at the
Central Bank of Kenya and Co-operative Bank of Kenya respectively, but for
which no Certificates of Bank Balances as at 30 June 2009 were availed for audit
review. The balance of Kshs.423,705,472.00 further includes an amount of
Kshs.343,514,230.00 in respect of Investment/Call Account, against which only
a confirmation of Kshs.340,371,445.05 was received. The resultant shortfall of
Kshs.3,142,784.95 has not been reconciled.

1850. The Accounts Receivable balance of Kshs.14,066,738.00 differs with the
Other Income (investment interest accrued) figure of Kshs.14,223,515.00 shown
in the Income and Expenditure Account. As in the previous instance, the
difference of Kshs.156,777.00 between the two sets of records has not been
reconciled or explained.

1851. The Balance Sheet also reflects a Deposits balance of
Kshs.132,989,946.00       which     includes Retention     Monies    totalling
Kshs.71,141,324.00. However, no analysis has been provided for the amount of
Kshs.71,141,324.00. In absence of an analysis, the completeness and accuracy
of the balance could not be ascertained.

1852. The Balance Sheet further reflects a General Reserves balance of
Kshs.847,371,237.00, while the Statement of Changes in Fund Balances shows
a figure of Kshs.835,259,101.00 against the Account. The difference of
Kshs.12,112,136.00 has not been reconciled or explained.




                                      337 
 
CIVIL SERVANTS HOUSING SCHEME FUND

Balance Sheet

1853. The Balance Sheet as at 30 June 2009 reflects a Net Fixed Assets
balance of Kshs.7,810,295.00, which excludes an amount of Kshs.1,922,400.00
in respect of additional Fixed Assets (safes) acquired during the year. No reason
has been given for omitting the amount in the Balance Sheet.

1854. The Fund’s expenditure records indicate that during the year, an amount
of Kshs.3,471,968.00 was spent on computer software development. However,
this software development had not been capitalized in the Balance Sheet as at
30 June 2009. As a result, the total assets balance of Kshs.3,523,508,527.00
has been understated by a figure of Kshs.3,471,968.00.

1855. The Cash and Bank Balance of Kshs.1,041,788,595.00 as at 30 June
2009 includes amounts totalling Kshs.400,000,000.00 indicated in the notes to
the Accounts as being held by the Housing Finance Company (HFCK) and the
Savings and Loans (S&L) in mortgage accounts. However, the actual amount
held by each of the two institutions could not be ascertained due to lack of
Certificates of Bank Balances as at 30 June 2009. Further, no Board of Survey
on the Cash and Bank balance was conducted on 30 June 2009 as required
under Section 5.9.9.2 of the Government Financial Regulations and Procedures.

1856. The Debtors/Account Receivable balance of Kshs.588,025.00 as at 30
June 2009 relates to temporary imprests, which have been outstanding since
2005/2006. No reason has been provided for failure to surrender or otherwise
account for the long outstanding imprests.

1857. The Balance Sheet also reflects a Work In Progress balance of
Kshs.726,957,500.00, while the certificates of work done show a value of
Kshs.998,457,045.16. The resultant difference of Kshs.271,499,546.16 between
the two sets of records has not been reconciled or explained.

1858. The Capital Reserve balance brought forward of Kshs.647,091,129.00 in
the Balance Sheet differs with the closing figure of Kshs.499,641,825.00 shown
in the audited Accounts for 2007/2008. The difference of Kshs.147,449,304.00
has not been reconciled or explained. In addition, the Reserve balance of
Kshs.63,544,260.00 relating to 2008/2009 has not been analysed with the result
that its completeness and accuracy could not be ascertained.

1859. The Accounts Payable Account reflects a brought forward balance of
Kshs.172,579,064.00, while the audited Accounts for 2007/2008 show a closing
figure of Kshs.320,028,368.00 against the Account. As in the previous instances,
the difference of Kshs.147,449,304.00 has not been reconciled or explained.



                                      338 
 
Income and Expenditure Account

1860. The mortgage interest balance of Kshs.49,263,612.00 as at 30 June 2009
has not been supported with the relevant documents with the result that its
validity and accuracy could not be ascertained.

1861. The General Office Expenses figure of Kshs.3,045,118.90 does not
include accrued expenses amounting to Kshs.490,700.00, relating to security
services. No reason has been provided for the omission.

1862. The depreciation charge of Kshs.3,717,256.00 omitted in the Accounts for
2007/2008 has again been excluded in the Accounts for 2008/2009. In addition,
a depreciation charge of Kshs.240,300.00 in respect of fixed assets acquired
during the year has similarly been omitted in the Accounts. Consequently, the
surplus of Kshs.45,518,205.00 reflected in the Income and Expenditure Account
has been overstated by Kshs.3,957,556.00.

1863. The Supplies and Accessories for Computers figure of Kshs.1,379,647.00
differs with June ledger balance of Kshs.199,178.00. The difference of
Kshs.1,180,469.00 has not been reconciled or explained.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

1864. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Cashbook not yet recorded in the Bank
Statement (unrepresented cheques) totalling Kshs.139,095,760.85, which
include stale cheques amounting to Kshs.13,886,680.45. No reason has been
provided for failure to investigate and replace the cheques or credit them back to
the Cashbook.

1865. The Statement also reflects payments in the Bank Statement not yet
recorded in the Cashbook totalling Kshs.9,029,272.50. The amount includes an
amount of Kshs.883,054.50 relating to 2007/2008. It has not however been
explained why the Cashbook had not been updated with the payments as at 30
June 2009.

1866. The Statement further shows receipts of Kshs.28,060,420.50 in the
Cashbook not recorded in the Bank Statement, which include amounts totalling
Kshs.2,954,649.25, relating to year 2008. No reason has been provided for
failure to bank the substantial collections.




                                       339 
 
Development Cashbook

1867. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects payments in the Cashbook not yet recorded in the Bank
Statement totalling Kshs.198,783,991.45, which include stale cheques of
Kshs.5,143,307.00 and Kshs.3,434,485.25 relating to 2007/2008 and 2008/2009
respectively. No reason has been given for failure to replace the cheques or
credit them back to the Cashbook.

1868. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook of Kshs.6,867,036.40 relating to August 2008. It has not
however been clarified why the receipts had not been recorded in the Cashbook
as at 30 June 2009.

1869. The Statement further shows payments in the Bank Statement not
recorded in the Cashbook totalling Kshs.2,152,014.85. This total includes
payments amounting to Kshs.1,311,262.10 relating to the period between
September and October 2008. No reason has been provided for failure to
update the Cashbook with the payments.

1870. The Statement in addition shows receipts in the Cashbook not recorded in
the Bank Statement totalling Kshs.103,580,526.15, which include collections of
Kshs.1,271,200.00 that have not been identified or explained.

Deposits Cashbook

1871. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement (unpresented cheques) totalling Kshs.1,584,488.80 which include
stale cheques of Kshs.72,265.50, Kshs.1,302,049.00 and Kshs.98,839.30
relating to 2006/2007, 2007/2008 and 2008/2009 respectively. No reason has
been provided for failure to investigate and replace the cheques or credit them
back to the Cashbook.

1872. The Statement also reflects receipts of Kshs.1,846,531.65    in the
Cashbook not recorded in the Bank Statement, out of which an amount of
Kshs.1,789,972.65 represents Cashbook adjustments. These adjustments have
not however been explained.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R. 44

1873. The Statement of Assets and Liabilities for Vote R.44 as at 30 June 2009
reflects an Exchequer Account credit balance of Kshs.547,900.00 for the year
under review, while records maintained at the Exchequer Section in Treasury
show a debit figure of Kshs.31,200.00 against the Account. No reconciliation or

                                     340 
 
explanation has been provided for the difference of Kshs.579,100.00 between
the two sets of records.

1874. The Statement also reflects a Temporary Imprests Account debit balance
of Kshs.209,220.00, which differs with the amount of Kshs.1,450,616.90 reflected
in the Imprests Register maintained at the Ministry’s Headquarters. The resultant
difference of Kshs.1,241,396.90 has not been reconciled or explained.

1875. The Statement further reflects a District Suspense Account debit balance
of Kshs.89,900,667.01, which includes an amount of Kshs.80,855,264.57 relating
to 2007/2008 and earlier years. No reason has been provided for non-clearance
of the long outstanding balance of Kshs.80,855,264.57.

1876. The Statement shows a General Account of Vote debit balance of
Kshs.69,760,008.87 for 2008/2009, while the Appropriation Account for the year
reflects a Net Surplus to be Surrendered to the Exchequer of
Kshs.93,521,412.45. This discrepancy has not been explained.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D. 44

1877. The Statement of Assets and Liabilities for Vote D.44 as at 30 June 2009
reflects brought forward balances of Kshs.60,000,000.00, Kshs.65,176,047.75
and Kshs.128,077,183.65 under Exchequer, Paymaster General and General
Account of Vote Accounts respectively, which were cleared during the year.

However, no documentary evidence has been produced to support clearance of
the balances, raising doubts on the validity and correctness of the transactions.

1878. The Statement also reflects a District Suspense Account of
Kshs.2,901,135.90, brought forward from 2007/2008. Non-clearance of this long
outstanding amount has not been explained.




                       MINISTRY OF TOURISM

APPROPRIATION ACCOUNT FOR VOTE D.46 FOR THE YEAR ENDED 30
JUNE 2009

Under-collection of Appropriations-In-Aid

1879. The Appropriation Account for Vote D.46 for the year ended 30 June 2009
reflects nil collections of Appropriations-In-Aid against estimated receipts of
Kshs.8,000,000.00. The reason provided in the footnotes to the Account

                                      341 
 
indicates that the under-collection was caused by failure by a donor to release
funds during the year.


PENDING BILLS

1880. Examination of records maintained at the Ministry’s Headquarters
indicated that bills totalling Kshs.28,826,136.39 were not settled during
2008/2009 but were instead carried forward to 2009/2010. Out of the total, bills
amounting to Kshs.18,552,137.91 related to the Recurrent Vote while the
balance of Kshs.10,273,998.48 was in respect of those under the Development
Vote.

1881. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Recurrent Appropriation Account for the year would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.12,896,214.04 instead of Kshs.31,448,351.95 now shown, while the
Development Appropriation Account for the same period would have reflected a
reduced Net Surplus of Kshs.5,739,001.52 instead of Kshs.16,013,000.00 now
recorded.


OUTSTANDING IMPRESTS

1882. Examination of Imprest Records maintained at the Ministry’s Headquarters
revealed that Temporary Imprests totalling Kshs.3,081,950.00, which ought to
have been surrendered or otherwise accounted for, on or before 30 June 2009
were still outstanding as at that date.

1883. Out of the total, Imprests amounting to Kshs.1,055,710.00 were owed by
officers on Job Group ‘M’ and above, while the balance of Kshs.2,026,240.00
was held by officers on Job Group ‘L’ and below.

1884. It was also observed that two officers were issued with additional imprests
amounting to Kshs.1,126,710.00, before having surrendered or accounted for
balances previously issued.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.46

1885. The Statement of Assets and Liabilities for Vote R.46 as at 30 June 2009
reflects various debit balances totalling Kshs.18,563,241.75 and credit balances
amounting to Kshs.16,206,350.14, brought forward from the audited Statement
for 2007/2008. Although the balances are indicated as having been cleared
during the year under review, no documentary evidence has been produced to
support the clearance.

                                      342 
 
1886. The Statement also reflects a Temporary Imprests Account balance of
Kshs.5,706,708.00, which differs with the amounts of Kshs.5,680,708.00 and
Kshs.5,187,496.00 appearing in the Ledger and Imprest Schedule respectively.
No reconciliation or explanation has been provided for the differences between
the three sets of records.

1887. The Statement further reflects a Paymaster General Account debit
balance of Kshs.25,301,135.10, while the Ledger shows a credit figure of
Kshs.1,512,265,606.60. The reconciled Cashbook as at 30 June 2009 on the
other hand reflects an amount of Kshs.69,790.65 against the Account. As in the
previous instance, the difference between the three sets of records has not been
reconciled or explained.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.46

1888. The Statement of Assets and Liabilities for Vote D.46 as at 30 June 2009
reflects a Paymaster General Account (PMG) credit balance of
Kshs.40,503,910.40, while the June Ledger shows a credit figure of
Kshs.460,121,375.00. The Cashbook as at 30 June 2009 on the other hand
reflects an amount of Kshs.7,867,612.60. The differences between the three
sets of records have not been reconciled or explained. Further, the PMG
balance of Kshs.40,503,910.40, representing an overdraft does not appear to
have been authorized by the Treasury.

1889. The Statement also reflects a District Suspense Account balance of
Kshs.10,926,535.40, while the June Ledger shows a figure of Kshs.4,299,000.00
against the Account. The difference of Kshs.6,627,535.40 between the two sets
of records has not been reconciled or explained.

1890. The Statement further shows an unusual credit balance of
Kshs.409,625.00 under the Temporary Imprests Account. No reason has been
given for the credit amount in an Account which under normal circumstance
should show a debit or nil balance.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1891. The Statement of Assets and Liabilities for Deposits 46 as at 30 June
2009 reflects a Paymaster General Account balance of Kshs.4,492,870.90, while
the Cashbook as at the same time shows an amount of Kshs.6,053,950.10. The
resultant difference of Kshs.1,561,079.20 between the two sets of records has
not been reconciled or explained.




                                      343 
 
1892. The Statement also shows a Temporary Imprests Account balance of
Kshs.863,946.00 relating to 2007/2008 and earlier years. No reason has been
provided for failure to recover the long outstanding Imprests.



                OFFICE OF THE PRIME MINISTER

APPROPRIATION ACCOUNT FOR VOTE D.48 FOR THE YEAR ENDED 30
JUNE 2009

Excess Vote

1893. The Appropriation Account for Vote D.48 for the year ended 30 June 2009
reflects gross total expenditure of Kshs.208,719,199.62 against approved
estimates of Kshs.77,340,000.00, resulting in an Excess Vote of
Kshs.131,379,199.62. The Excess Vote appears to have been caused by an
over-expenditure of Kshs.164,061,328.42 recorded under Sub-head 0016 – Civil
Service Reform Secretariat, Item 2210700 - Training Expenses.

Apart from the fact that the amount of Kshs.131,379,199.62 represents
unauthorized expenditure, it has also not been clarified how the expenditure was
financed.


PENDING BILLS

1894. Records maintained at the Office of the Prime Minister indicated that bills
totalling Kshs.18,047,916.60 and Kshs.1,207,194.00 chargeable to Recurrent
and Development Votes respectively were not settled during the year 2008/2009,
but were instead carried forward to 2009/2010.

1895. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Recurrent Appropriation Account for the year would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.13,759,923.60 instead of Kshs.31,807,840.20 now shown. Similarly, the
Development Appropriation Account for the same period would have reflected a
an increased Excess Vote of Kshs.132,586,393.62 instead of 131,379,199.62
now recorded.

According to the Office, the bills were not settled during the year due to
interrupted operations of the IFMIS.




                                      344 
 
OUTSTANDING IMPRESTS

1896. Examination of Imprest Records maintained at the Office of the Prime
Minister indicated that Temporary Imprests totalling Kshs.2,101,300.00 which
ought to have been surrendered or otherwise accounted for, on or before 30
June 2009 were still outstanding as at that date.

1897. Out of the total, imprests amounting to Kshs.1,348,500.00 were owed by
officers in Job Group ‘M’ and above, Kshs.201,700.00 by officers in Job Group ‘L’
and below, Kshs.75,400.00 by non-civil servants, while the balance of
Kshs.475,700.00 was owed by officers in other Ministries. Apart from the fact
that it has not been explained how non-civil servants were issued with imprests,
it has also not been clarified why imprests owing from serving officers had not
been recovered from their salaries as at 30 June 2009.

1898. It was further observed that various officers were issued with additional
imprests amounting to Kshs.544,700.00 before having surrendered or accounted
for balances previously issued.


BANK RECONCILIATION STATEMENT

1899. The Bank Reconciliation Statement for the Recurrent Cash Book as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.135,377,655.25, which includes stale cheques
amounting to Kshs.494,019.40. No reason has been provided for failure to
replace the cheques or having them credited back to the Cashbook by 30 June
2009.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.48

1900. The Statement of Assets and Liabilities for Vote R.48 as at 30 June 2009
reflects a Paymaster General Account balance of Kshs.54,376,095.30, while the
Cashbook as at the same date shows a figure of Kshs.15,124,643.95. The
resultant difference of Kshs.39,251,451.35 between the two sets of records has
not been reconciled or explained.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.48

1901. The Statement of Assets and Liabilities for Vote D.48 as at 30 June 2009
reflects a Paymaster General Account balance of Kshs.11,782,128.80, while the
Cashbook as at 30 June 2009 shows a figure of Kshs.13,065,753.80.




                                      345 
 
As in the previous instance, the resultant difference of Kshs.1,283,625.00
between the two sets of records has not been reconciled or explained.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

1902. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects a Miscellaneous Deposits balance of Kshs.2,716,900.30, while the
Deposits Cashbook shows a figure of Kshs.5,113,741.60 against the Account.
The difference of Kshs.2,396,841.30 between the two sets of records has not
been reconciled or explained.

1903. Further, the balance of Kshs.5,113,741.60 has not been properly analysed
with the result that it has not been possible to establish the origin of the deposits
or what the amount represents.



     MINISTRY OF PUBLIC HEALTH AND SANITATION

APPROPRIATION ACCOUNT FOR VOTE R.49 FOR THE YEAR ENDED 30
JUNE 2009

Accuracy of the Account

1904. The Appropriation Account for Vote R.49 for the year ended 30 June 2009
reflects    under     Sub-Votes     490    and   491     expenditure    totalling
Kshs.1,453,759,683.75 incurred during the year against various Heads. The
Ministry’s Ledger for the month of June 2009 and against which the Appropriation
Account      was    drawn     however     shows    balances     amounting      to
Kshs.1,454,232,016.92 in respect of the Heads.

The difference of Kshs.472,333.17 between the Appropriation Account and the
Ledger has not been reconciled or explained.

Excluded Expenditure

1905. Expenditure amounting to Kshs.296,666.77 incurred under Head 322 –
Division of Mental Health and recorded in the Ledger for the month of June 2009
had not been provided for in the Approved Estimates for 2008/2009. Apart from
the fact that the expenditure has been excluded in the Appropriation Account, it
had also not been authorized by Parliament.




                                        346 
 
Expenditure on Personal Emoluments and Other Allowances

1906. Examination of the payroll and other related personnel expenses for
2008/2009 at the Ministry’s Headquarters revealed that Basic Salaries, Personal
Allowance – Paid as Part of Salary and Personal Allowance – Paid as
Reimbursements totalling Kshs.2,434,976,955.00 were paid out during the year.
However, the Appropriation Account for the year ended 30 June 2009 reflects an
amount of Kshs.2,420,290,043.68 against the three items. The difference of
Kshs.14,686,911.32 between the two sets of records has not been reconciled or
explained.

Misallocation of Expenditure

1907. Expenditure totalling Kshs.47,373,060.30 incurred under the Development
Vote for 2008/2009 was irregularly charged against the Recurrent Vote, under
Sub-Vote 491 Head 510 – Kenya Expanded Programme on Immunization, Item
2211000 – Specialized Materials and Supplies.

Proper clarification has not been made for the irregular charging of Development
expenditure against the Recurrent Vote.


APPROPRIATION ACCOUNT FOR VOTE D.49 FOR THE YEAR ENDED 30
JUNE 2009

Excess Vote

1908. The Appropriation Account for Vote D.49 for the year ended 30 June 2009
reflects actual net expenditure of Kshs.2,894,554,610.55 against an approved
net provision of Kshs.2,550,339,470.00, resulting in an Excess Vote of
Kshs.344,215,140.55. The Excess Vote appears to have been caused by a
deficiency in the collection of Appropriations-In-Aid, where out of estimated
receipts of Kshs.1,634,236,937.00, only collections of Kshs.83,711,001.70 or
approximately 5% of the estimated amount were realized.

Excluded Appropriations-In-Aid

1909. Records maintained at the Ministry’s Headquarters indicate that revenue
totalling Kshs.1,817,409,431.55 received from five (5) Development Partners in
respect of seven (7) projects was not captured and accounted for in the
Appropriation Account.

Rural Health Project III

1910. The Rural Health Project III financial statements as at 30 June 2009 reflect
Government counterpart funds of Kshs.75,499,995.00, while both the Ministry’s

                                       347 
 
Ledger and the Project’s Cashbook show a balance of Kshs.80,792,870.00
against the item. The difference of Kshs.5,292,875.00 between the two sets of
records has not been reconciled or explained.

1911. The statements further reflect advances totalling Kshs.2,709,218.00
issued to ten (10) officers during the year. However, these advances had not
been surrendered or otherwise accounted for as at 30 June 2009. No reason
has been provided for failure to recover the advances.

Global Fund to fight HIV/AIDS

1912. The Appropriation Account also reflects expenditure totalling
Kshs.242,514,063.60 under Sub-Vote 491 – Preventive Medicine and Promotive
Health, Head 778 – Special Global Fund, which relates to the Global Fund to
Fight HIV/AIDS Programme, Grant Numbers KEN-202-G03-H-00 and KEN – 708
– G09 – H. However and out of the above total, an amount of
Kshs.78,399,590.00 has not been supported with payment vouchers and other
related records.

Consequently, the propriety of the latter expenditure could not be ascertained.

Global Fund to fight Malaria

1913. The Appropriation Account further reflects expenditure totalling
Kshs.2,625,927,070.35 under Sub-vote 491, Head 780-Special Global Fund –
Malaria Control. The expenditure however includes an amount of
Kshs.102,822,302.70 incurred under the Global Fund to Fight Malaria
Programme under Grant Numbers KEN-202-G05-M-00 and KEN-405-G06-M,
and which amount, as in the previous instance, has not been supported with the
relevant documentary evidence. In the circumstances, the propriety of the
expenditure of Kshs.102,822,302.70 could not be confirmed.

GAVI Alliance Health Systems Management Project

1914. Examination of records relating to the GAVI Alliance Health Systems
Management project revealed the following observations:-

Limitation of scope

1915. The Project’s Cashbook, Bank Statements and Bank Reconciliations were
not availed for audit review. Consequently, the completeness and accuracy of
the balance carried forward of Kshs.71,332,931.25 as at 30 June 2009 could not
be confirmed.




                                       348 
 
Excluded Expenditure

1916. The Project’s total expenditure balance of Kshs.289,516,663.35 for the
year excludes an amount of Kshs.4,927,942.15 incurred on salaries amongst
other items during the year. No reason has been provided for failure to include
the amount in the Account.

Unsupported Expenditure

1917. Expenditure totalling Kshs.289,516,663.35 reflected in the Project’s
records includes an amount of Kshs.29,485,927.35, mainly relating to salaries
paid during the year, through Kenya Commercial Bank. The payroll and other
relevant records for the latter expenditure have not been made available for audit
review, with the result that the propriety of the expenditure could not be
ascertained.

Expenditure for Previous Year

1918. Expenditure amounting to Kshs.1,190,787.40 incurred in 2007/2008 and
accounted for in the Accounts for that year has again been included in the
Accounts for 2008/2009. Consequently, the total expenditure of
Kshs.289,516,663.35 recorded against the project in 2008/2009 has been
overstated by an amount of Kshs.1,190,787.40.

Authority to Incur Expenditure-Returns

1919. Various Authorities to Incur Expenditure (AIEs) issued during the year to
Rarieda, Trans Nzoia West and Makueni Districts in the amounts of
Kshs.2,687,608.65, Kshs.2,693,354.40 and Kshs.2,994,610.00 respectively,
have not been supported with the respective expenditure returns. In the
circumstances, it has not been possible to ascertain the propriety of the total
expenditure of Kshs.8,375,573.05 incurred against the AIEs.

Un-remitted Statutory Deductions

1920. Examination of payroll records at the Project’s secretariat revealed that
statutory deductions amounting to Kshs.3,165,142.00 relating to NHIF, NSSF
and PAYE were not, during the year, remitted to the respective agencies as
required by law.

Irregular Procurement

1921. The Project Management purchased 2,760 unisex bicycles from the
second lowest bidder at a unit price of Kshs.6,150.00, while the lowest bidder for
the bicycles had quoted a unit price of Kshs.4,872.50. In consequence, a saving
of Kshs.3,525,900.00 was not realized from the procurement. Further, an audit

                                       349 
 
verification carried out in December 2009 revealed that the bicycles had not been
delivered although payment had been effected.

Global Fund to Fight Tuberculosis

1922. The Project’s financial statements for the year ended 30 June 2009 reflect
operating costs totalling Kshs.75,989,395.55 incurred on various Project activities
during the year. However, and except for an amount of Kshs.9,630,390.20
incurred on refurbishment work at Kenyatta National Hospital, the balance of
Kshs.66,359,005.35 has not been supported with the relevant expenditure
records, with the result that it has not been possible to ascertain its propriety.

Kenya Italy Debt for Development Programme (KIDDP) Project

Ineligible Expenditure

1923. Included in the Project’s expenditure figure of Kshs.4,916,829.00 for the
year, is an amount of Kshs.303,929.00 incurred on travelling and other activities,
which are not related to the Project. The expenditure of Kshs.303,929.00 was
therefore unauthorized and ineligible.

Low Absorption of Funds

1924. Out of the total Project’s receipts of Kshs.27,624,700.00 during the year,
the Management was only able to utilize an amount of Kshs.4,916,829.00 This
represents an absorption rate of approximately 18% which is considered as low.


PENDING BILLS

1925. Records maintained at the Ministry’s Headquarters indicated that bills
totalling Kshs.748,620.00 chargeable to Vote R.49 were not settled during the
year 2008/2009, but were instead carried forward to 2009/2010.

1926. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Recurrent Appropriation Account for the period would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.427,514,738.17 instead of Kshs.428,263,358.17 now shown.

According to the Ministry, the bills were not settled during the year due to slow
processing of payment through IFMIS




                                       350 
 
OUTSTANDING IMPRESTS

1927. Examination of Imprest Records maintained at the Ministry’s Headquarters
revealed that Temporary and Standing Imprests totalling Kshs.10,354,803.60
and Kshs.298,209,213.00 respectively, which ought to have been surrendered or
otherwise accounted for on or before 30 June 2009 were still outstanding as at
that date.

1928. Out of the Temporary Imprest of Kshs.10,354,803.60 indicated above, an
amount of Kshs.2,876,798.00 was owed by officers on Job Group ‘M’ and above,
Kshs.7,386,804.60 by officers on Job Group ‘L’ and below, while the balance of
Kshs.91,201.00 was due from politicians.

1929. With regard to the Standing Imprests, an amount of Kshs.297,850,213.00
was due against the Rural Health Project III, Malaria Control Programme and the
Promotive Health Services, while the balance of Kshs.359,000.00 was owing
from other AIE holders.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.49

1930. The Statement of Assets and Liabilities for Vote R.49 as at 30 June 2009
excludes opening balances of Kshs.81,741,270.00, Kshs.31,714,850.00 and
Kshs.113,456,120.00 brought forward from the audited Statement for 2007/2008,
under Exchequer Account, Paymaster General Account and General Account of
Vote respectively.

No clarification has been provided for excluding the balances in the Statement.

1931. The Statement reflects a Temporary Imprests debit balance of
Kshs.72,645,622.35, while the Trial Balance for the month of June 2009 shows a
figure of Kshs.72,845,790.90 against the Account.            The difference of
Kshs.200,168.55 between the two sets of records has not been reconciled or
explained.

1932. The Statement also reflects a District Suspense Account debit balance of
Kshs.127,314,050.90, which has not been analysed.           As a result, its
completeness and accuracy could not be ascertained.

1933. The Statement further reflects an Agency Account debit balance of
Kshs.407,124.50, which differs with Trial Balance credit balance of
Kshs.30,000.00. As in the previous instance, the difference of Kshs.437,124.50
has not been reconciled or explained. The balance of Kshs.407,124.00 has also
not been analysed, consequent upon which its completeness and accuracy could
not be confirmed.



                                       351 
 
1934. The Statement in addition reflects a Standing Imprest debit balance of
Kshs.727,664.00, while the Trial Balance shows a figure of Kshs.432,604.00.
Again, the difference of Kshs.295,060.00 has not been reconciled or explained.

1935. The    Statement    shows     a    Clearance   Account   balance    of
Kshs.261,093,670.13, while the Trial Balance shows an amount of
Kshs.261,005,586.50 against the Account.         The resultant difference of
Kshs.88,083.63 has not been reconciled or explained.

1936. The Statement also shows balances of Kshs.141,910.00 and
Kshs.93,248.05 against General Suspense Account and Salary Advance
respectively, which have not been analysed.

In absence of the analyses, the completeness and accuracy of the balances
could not be ascertained.

1937. The Statement further shows a credit balance of Kshs.495,006,903.17
against the General Account of Vote, which differs with the Trial Balance figure of
Kshs.490,369,107.00,       by    Kshs.4,637,796.17.        The      balance      of
Kshs.495,006,903.17 is also at variance with the Net Surplus to be Surrendered
to the Exchequer of Kshs.428,263,356.97 appearing in the Appropriation Account
for Vote R.49 for the year ended 30 June 2009. The differences have not been
reconciled or explained.

1938. The Statement in addition shows a Paymaster General Account debit
balance of Kshs.568,126,586.75, while the Cashbook as at 30 June 2009 reflects
a figure of Kshs.480,911,734.20. As in the previous instances, the difference of
Kshs.87,214,852.55 has not been reconciled or explained.

1939. Finally, the Statement does not show the comparative figures for
2007/2008 and no reason has been given for the anomaly.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.49

1940. The Statement of Assets and Liabilities for Vote D.49 as at 30 June 2009
excludes closing balances of Kshs.355,378,377.00, Kshs.4,384,386.00 and
Kshs.359,762,763.00 under Exchequer, Paymaster General and General
Account of Vote respectively, appearing in the audited Statement for 2007/2008.

No reason has been provided for excluding the balances in the Statement.

1941. The Statement also reflects an Agency Account debit balance of
Kshs.27,624,700.00, which has not been supported with an analysis. It has
therefore not been possible to ascertain the completeness and accuracy of the
balance.

                                       352 
 
1942. The Statement further reflects an under-collection of Appropriations-In-Aid
debit balance of Kshs.1,550,525,935.30, which does not appear in the Trial
Balance as at 30 June 2009. The source of this figure and the purpose for its
inclusion in the Statement has not been explained.

1943. The Statement in addition reflects a Temporary Imprest credit balance of
Kshs.425,506,235.75, while the Trial Balance as at 30 June 2009 shows a credit
figure of Kshs.636,597,980.95. The difference of Kshs.211,091,745.20 between
the two sets of records has not been reconciled or explained. Further, the credit
balance which is unusual in an Imprest Account has not been explained.

1944. The Standing Imprest similarly reflects a credit balance of
Kshs.33,532,321.35, which has not been explained. The balance has also not
been analysed, consequent upon which it has not been possible to ascertain its
validity and correctness.

1945. The Statement shows a Clearance Account credit amount of
Kshs.121,400.00, while the Trial Balance reflects nil balance. The difference of
Kshs.121,400.00 has not been reconciled or explained.

1946. The Statement also shows an Exchequer Account credit balance of
Kshs.729,416,517.35, which differs with the Treasury’s figure of
Kshs.968,023,569.00, by Kshs.238,607,051.65. The difference has similarly not
been reconciled or explained.

1947. The Statement further shows a Paymaster General Account credit balance
of Kshs.733,789,301.40, while the Trial Balance and the Cashbook as at 30 June
2009 reflect amounts of Kshs.743,793,869.15 (Cr) and Kshs.16,518,381.00 (Dr)
respectively. As in the previous instances, the differences between the three
sets of records have not been reconciled or explained.




           MINISTRY OF FORESTRY AND WILDLIFE

APPROPRIATION ACCOUNT FOR VOTE R.55 FOR THE YEAR ENDED 30
JUNE 2009

Nugatory Expenditure

1948. During the year under review, the Ministry paid compensation claims
totalling Kshs.46,238,037.00 to various District Commissioners for settlement of
claims arising from death or injury of person, resulting from wildlife-human

                                      353 
 
APPROPRIATION ACCOUNT FOR VOTE D.55 FOR THE YEAR ENDED 30
JUNE 2009

Under-Expenditure and Under-Collection of Appropriations-In-Aid

1949. The Appropriation Account for Vote D.55 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.232,373,334.80 representing
approximately 12% of the approved estimates of Kshs.1,882,503,660.00. The
Account    also   reflects  a    deficiency    in    Appropriations-In-Aid  of
Kshs.131,510,391.00 or about 48% of the estimated receipts of
Kshs.274,050,000.00.

1950. The under-expenditure and under-collection of Appropriations-In-Aid have
been mainly attributed to inadequate exchequer issues and non-release of funds
by the Treasury and various Development Partners.

Grants to Kenya Wildlife Service

1951. The Appropriation Account also reflects under Sub-Vote 551, Head 531 –
Kenya Wildlife Service (KWS) gross expenditure of Kshs.679,078,705.00,
incurred during the year in respect of Capital Grants to Government Agencies,
Construction of Roads and Civil Works. Out of the total, an amount of
Kshs.439,281,096.00 was earmarked and spent on construction of roads at
KWS.

1952. However, an audit inspection carried out at KWS did not reveal evidence
of the roads which were constructed and no records were seen to indicate how
the amount of Kshs.439,281,096.00 was spent.


PENDING BILLS

1953. Records maintained at the Ministry’s Headquarters indicated that bills
totalling Kshs.1,900,000.00 chargeable to the Development Vote were not
settled during the year 2008/2009 but were instead carried forward to
2009/2010. Had the bills been paid and the expenditure charged to the
account for 2008/2009, the Appropriation Account for Vote D.55 for the year
would have reflected a reduced Net Surplus of Kshs.241, 510,052.80 instead of
Kshs.243, 410,052.80 now recorded.




                                     354 
 
1954. According to the Ministry, the bills were not paid in time due to austerity
measures instituted by Treasury during the year.


OUTSTANDING IMPRESTS

1955. Examination of Imprests Records maintained at the Ministry’s
Headquarters indicated that Temporary Imprests totalling Kshs.2,070,711.80
which ought to have been surrendered or otherwise accounted for, on or before
30 June 2009 were still outstanding as at that date. Out of the total, Imprests
amounting to Kshs.131,610.00 were due from officers on Job Group ‘M’ and
above, Kshs.1,779,001.80 from officers on Job Group ‘L’ and below, while the
balance of Kshs.160,100.00 was owed by officers from Ministries of Finance,
Sports and Youth Affairs and the Kenya Wildlife Services.       It was further
observed that some officers were issued with additional imprests before having
surrendered or accounted for the amounts previously issued.

1956. A review of the position in May 2010 showed that imprests amounting to
Kshs.1,821,246.80 had been explained or accounted for leaving a balance of
Kshs.249,465.00 outstanding.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

1957. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects an amount of Kshs.73,552,759.35 in respect of payments in
the Cashbook not recorded in the Bank Statement, which include stale cheques
totalling Kshs.93,738.00. The Ministry has not explained why the cheques had
not been replaced or credited back to the Cashbook as at 30 June 2009.

1958. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook totalling Kshs.2,041,442.25, out of which an amount of
Kshs.1,521,888.65 relates to a transaction dated 20 November 2008. No reason
has been provided as to why these long outstanding receipts have not been
recorded in the Cashbook.

Development Cashbook

1959. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects receipts in the Bank Statement not recorded in the
Cashbook totalling Kshs.80,189,327.45, consisting of four (4) direct credits
entered in February and June 2009. No details have however been provided as
to what these direct credits represent.



                                      355 
 
1960. The Statement also reflects payments in the Bank Statement not recorded
in the Cashbook amounting to Kshs.108,327,345.75, comprising of five (5) debits
entered in March and June 2009. However, reasons for failure to investigate and
clear these debits from the Statement as at 30 June 2009 have not been
provided.

1961. Further, the Statement shows under receipts in the Cashbook not
recorded in the Bank Statement a figure of Kshs.102,195,524.35 described as
relating to bankings, exchequer, errors and or overcasts. Explanatory details for
this figure have not been made available for audit review, with the result that it
has not been possible to establish what it represents.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.55

1962. The Statement of Assets and Liabilities for Vote R.55 as at 30 June 2009
reflects a Temporary Imprests debit balance of Kshs.5,671,510.05, out of which
an amount of Kshs.4,779,499.15 relates to 2007/2008 and earlier years. No
reason has been provided for failure to surrender or otherwise account for the
Imprests on the due dates. The balance of Kshs.5,671,510.05 also differs with
the Ledger figure of Kshs.5,716,460.10, by Kshs.44,950.05 and no reconciliation
or explanation has been provided for the difference.

1963. The Statement also reflects an Exchequer Account balance of
Kshs.52,627,640.00 for 2007/2008, which has been outstanding for a
considerably long period of time. The Statement in addition reflects an
Exchequer Account balance of Kshs.60,850,268.25 for 2008/2009 while records
maintained at the Exchequer Section, Treasury show a figure of Kshs.829,240.00
against the Account. Although according to information available the difference
of Kshs.60,021,628.25 between the two sets of records has been attributed to
direct recovery of Exchequer over-issues for 2007/2008 as communicated to the
Central Bank of Kenya vide the Treasury Letter Ref. No.AG17/011 Vol.5(153) of
22 June 2009, no reason has been provided for failure to adjust the Ministry’s
records as appropriate.

1964. The Statement further reflects a Paymaster General (PMG) Account debit
balance of Kshs.2,091,293.15, while the Cashbook as at 30 June 2009 shows a
figure of Kshs.6,155,660.25. The PMG balance also differs with the Ledger and
Trial Balance credit balance of Kshs.7,719,588.90.      No reconciliation or
explanation has been provided for these differences.

1965. The Statement also shows a credit balance of Kshs.212,737.80
representing extra funds received from Ministry of Environment and Mineral
Resources. The balance however differs with the Ledger and Trial Balance
credit balance of Kshs.50,468,433.50, by a figure of Kshs.50,255,695.70. No
reconciliation or explanation has been provided for the difference.

                                       356 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.55

1966. The Statement of Assets and Liabilities for Vote D.55 as at 30 June 2009
reflects an Exchequer Account under-issue of Kshs.489,056,585.00 for
2007/2008, which have not been cleared from the books of account. The
Statement also reflects an under-issue of Kshs.182,576,740.00 for 2008/2009,
while records at the Treasury show a figure of Kshs.9,518,660.00 against the
Account. Although the resultant difference of Kshs.173,058,080.00 has been
attributed to the over-issues recovered directly by the Treasury vide a letter Ref.
No. AG 17/011 Vol. 5 (154) of 26 June 2009 to the Central Bank of Kenya, it has
not however been explained why the exchequer records had not been adjusted
accordingly.

1967. The Statement further reflect a KFS 2007/2008 Account balance of
Kshs.155,883,429.00, relating to Standing Imprests issued to various Project
Co-ordinators under the Kenya Forest Service in 2007/2008. However, no
reason has been provided for failure by the Co-ordinators to surrender or account
for the imprests on or before 30 June 2009.

1968. The Statement shows a Paymaster General’s Account debit balance of
Kshs.21,174,003.10, while the Cashbook as at 30 June 2009 reflects an amount
of Kshs.5,486,146.40. The Ledger for the month of June on the other hand
shows a figure of Kshs.134,709,426.30 against the Account.

The differences between the three sets of records have not been reconciled or
explained.

1969. The Statement also shows a credit balance of Kshs.16,221,878.77 as
Extra Receipts from the Ministry of Environment and Mineral Resources, while
both the Ledger and Trial Balance for the month of June 2009 show a credit
balance of Kshs.102,887,799.40. The difference of Kshs.86,665,920.63 has not
been explained or reconciled.




                                       357 
 
          MINISTRY OF FISHERIES DEVELOPMENT

APPROPRIATION ACCOUNT FOR VOTE R.56 FOR THE YEAR ENDED 30
JUNE 2009

Under- Expenditure and Under-Collection of Appropriations-In-Aid

1970. The Appropriation Account for Vote R.56 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.102,476,898.80 or approximately 11%
of the approved estimates of Kshs.891,775,710.00. The Appropriation Account
also reflects under-collection of Appropriations-In-Aid of Kshs.94,442,711.00,
representing about 49% of the estimated receipts of Kshs.190,623,910.00.

1971. According to the footnotes to the Account, the under-expenditure has
been attributed to inability to fill vacant posts during the year, deferment of
recruitment of fisheries officers, and late submission of ex-gratia cases while the
under-collection of Appropriations-In-Aid was related to low collection from
foreign fishing vessels along the Indian Ocean.


APPROPRIATION ACCOUNT FOR VOTE D.56 FOR THE YEAR ENDED 30
JUNE 2009

Under-Expenditure

1972. The Appropriation Account for Vote D.56 for the year ended 30 June 2009
reflects gross under-expenditure of Kshs.80,387,335.00 or about 47% of the
approved provision of Kshs.170,626,000.00. According to information available,
the under-expenditure was caused by inadequate exchequer issues for various
projects and slow procurement processes during the year.

Failure to Provide Footnotes for Material Variances

1973. Contrary to the requirements of Section 11.7 of the Government Financial
Regulations and Procedures, the Ministry did not provide footnotes to the
Appropriation Account for material variances between approved estimates and
actual expenditure on five (5) items; including 3110200, 3110500, 3111400,
3110500 and 2630200 under Heads 534, 539 and 645. No reason has been
provided for failure to provide the footnotes.


PENDING BILLS

1974. Records held at the Ministry’s Headquarters indicated that bills totalling
Kshs.32,933,039.00 chargeable to the Recurrent Vote were not settled in

                                       358 
 
2008/2009 but were instead carried forward to 2009/2010. According to
information available at the Headquarters, the Ministry was unable to settle the
bills due to recovery of exchequer over-issues for 2007/2008 by the Treasury.

1975. Had the bills been paid and the expenditure charged to the Accounts for
2008/2009, the Appropriation Account for the period would have reflected an
Excess Vote of Kshs.24,898,851.20 instead of the Net Surplus to be Surrendered
to the Exchequer of Kshs.8,034,187.80 now shown.


OUTSTANDING IMPRESTS

1976. Records at the Ministry’s Headquarters indicated that Temporary Imprests
totalling Kshs.1,479,696.00, which ought to have been surrendered or otherwise
accounted for, on or before 30 June 2009 were still outstanding as at the date.
Out of the total, imprests amounting to Kshs.390,625.00 were due from officers
on Job Group ‘M’ and above, Kshs.372,011.00 from officers on Job Group ‘L’
and below, Kshs.496,560.00 from politicians, Kshs.47,000.00 from officers in
other Ministries and Departments, while the balance of Kshs.173,500.00 was
owed by officers whose employer and payroll details have not been identified.
It was further observed that additional imprests were issued to various officers
before they had surrendered balances previously issued.

A review of the position in April 2010 showed that imprests totalling
Kshs.690,985.00 had been recovered leaving a balance of Kshs.788,711.00
outstanding.


ABANDONED PROJECT – LAMU DISTRICT FISHERIES DEVELOPMENT
OFFICE

1977. Examination of Projects records maintained at the Lamu District Fisheries
Office revealed that on 8 May 2007, tenders were invited for the construction of
an ice production unit and a cold storage facility at Kizingitini area in Lamu. The
District Tender Committee subsequently awarded the contract in three (3)
components under Civil Works, Electrical Services and Mechanical Works at
contract prices of Kshs.6,149,447.70, Kshs.2,258,216.50 and Kshs.9,108,598.00
respectively. The contracts were awarded to three (3) firms based in Lamu
District.

1978. According to information available, the Civil and Electrical components
had as at 30 June 2008 been completed following which the two contractors
were paid their respective amounts. However, the Mechanical components had
not been completed as at the above date due to apparent supply of sub-standard
second-hand machines by the contractor. Additional communication indicates
that the Provincial Works Officer rejected the machines on account of failure to

                                       359 
 
1979. The contractor was later granted an extension of six (6) months to deliver
acceptable machines. According to records seen, no machines were however
delivered even after the extension was granted and as a result, the contract was
terminated on 18 February 2009.

1980. In the circumstances therefore, it is clear that the Government has not
obtained any value for money in the expenditure of Kshs.8,407,664.20 so far
incurred on the project. Besides, additional information shows that a further
amount estimated at Kshs.14,500,000.00 over and above the sum of
Kshs.8,407,664.20 already expended will be required to complete the project.


BANK RECONCILIATION STATEMENT

Recurrent Cashbook

1981. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.60,483,406.80, which include stale cheques of
Kshs.10,145,140.05. Although according to information available investigations
on the cheques are ongoing, no results on such investigations have so far been
seen.

1982. The Statement also reflects payments in the Bank Statement not recorded
in the Cashbook amounting to Kshs.16,748,650.20. As in the previous instance,
investigations on the payments had not been concluded by the Ministry as at 30
June 2009.

1983. The Statement further reflects receipts in the Cashbook not recorded in
the Bank Statement totalling Kshs.46,964,830.00. The reasons for failure to
bank the receipts some of which relate to December 2008 have not been
provided.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.56

1984. The Statement of Assets and Liabilities for Vote R.56 as at 30 June 2009
reflects an Exchequer Account debit balance of Kshs.4,208,950.00 relating to
2007/2008. This balance ought to have been cleared from the books of account
as at 30 June 2009.




                                      360 
 
1985. The Statement also reflects a General Account of Vote debit balance of
Kshs.17,204,972.00, which includes a figure of Kshs.329,162.00 relating to
2008/2009 that has not been explained. In addition, the Statement shows a
General Account of Vote credit balance of Kshs.7,839,778.80 in respect of
2008/2009, which differs with the Net Surplus of Kshs.8,034,187.80 reflected in
the Appropriation Account Vote R.56 for the year ended 30 June 2009.

The difference of Kshs.194,409 between the two sets of records has not been
reconciled or explained.

1986. The Statement also shows an Advances Account debit balance of
Kshs.765,371.70, while the related analysis reflects a figure of Kshs.739,023.70.
No reconciliation or explanation has been provided for the resultant difference of
Kshs.26,348.00.

1987. The Statement further shows a Paymaster General Account (PMG) debit
balance of Kshs.10,170,892.65, which differs with the Cashbook balance of
Kshs.804,248.80 as at the same date. No reconciliation or explanation has been
provided for the difference of Kshs.9,366,643.85 between the two sets of
records.

1988. The Statement in addition shows a Temporary Imprests Account debit
balance of Kshs.2,011,218.00, which has not been analysed. Consequently, its
validity, completeness and accuracy could not be ascertained. Further, no
reason has been provided for failure to have the imprest surrendered or
otherwise recovered from the holders’ salaries.

1989. The Statement also reflects a credit balance of Kshs.26,573,425.55 under
the District Suspense Account, for which no analysis has been provided. It has
therefore not been possible to establish what the balance represents.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.56

1990. The Statement of Assets and Liabilities for Vote D.56 as at 30 June 2009
reflects a Paymaster General Account debit balance of Kshs.5,749,745.30, while
the Cashbook as at 30 June 2009 shows a figure of Kshs.3,500,020.00. The
difference of Kshs.2,249,725.30 between the two sets of records has not been
reconciled or explained.

1991. The Statement also reflects an Exchequer Account debit balance of
Kshs.183,167,060.00 relating to the 2007/2008 financial year. This balance
ought to have been cleared from the Ministry’s books of account by 30 June
2009.




                                       361 
 
1992. The Statement further reflects a District Suspense Account credit balance
of Kshs 54,800,834.60 which has not been analyzed. Consequently, its
completeness and accuracy could not be ascertained.



           MINISTRY OF NAIROBI METROPOLITAN
                     DEVELOPMENT

APPROPRIATION ACCOUNT FOR VOTE D.57 FOR THE YEAR ENDED 30
JUNE 2009


1993. The Appropriation Account for Vote D.57 for the year ended 30 June 2009
reflects total actual expenditure of Kshs.1,143,768,446.25 against approved
estimates of Kshs.1,690,384,000.00, resulting in an under-expenditure of
Kshs.546,615,553.75 or about 32% of the estimated provision. The Appropriation
Account     also   reflects  under-collection  of    Appropriations-In-Aid  of
Kshs.40,384,000.00, representing 100% of the estimated receipts.

1994. According to the footnotes to the Account, the under-expenditure and
under-collection of Appropriations-In-Aid were caused by; austerity measures
instituted by Treasury and delay in the procurement of various goods and
services during the year.




           MINISTRY OF DEVELOPMENT OF
       NORTHERN KENYA AND OTHER ARID LANDS

APPROPRIATION ACCOUNT FOR VOTE R.58 FOR THE YEAR ENDED 30
JUNE 2009

1995. The Appropriation Account for Vote R.58 for the year ended 30 June 2009
reflects net total expenditure of Kshs.201,109,246.20 against approved net
estimates of Kshs.195,617,220.00, resulting in an Excess Vote of
Kshs.5,492,026.20. According to information provided by the Ministry, the
Excess Vote was caused by an unrectified error in which an expenditure of
Kshs.10,982,603.10 was captured in the Account for the year under review.




                                     362 
 
OUTSTANDING IMPREST

1996. Examination of Imprest Records maintained at the Ministry’s Headquarters
revealed that imprests totalling Kshs.1,483,127.50 which ought to have been
surrendered or otherwise accounted for, on or before 30 June 2009 were still
outstanding as at that date.

1997. Out of the total, imprests amounting to Kshs.663,745.50 were owed by
officers on Job Group ‘M’ and above, while the balance of Kshs.819,382.00 was
due from officers on Job Group ‘L’ and below.

1998. A review of the position in May 2010 showed that imprests amounting to
Kshs.1,325,181.50 had been accounted for, leaving a balance of
Kshs.157,946.00 outstanding.


BANK RECONCILIATION STATEMENT

1999. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement totalling Kshs.29,111,546.85, which include stale cheques amounting
to Kshs.121,476.30. According to information available, the cheques will be
reversed in the Cashbook once they are surrendered by the respective payees.

2000. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook of Kshs.5,855,757.30, which include an amount of
Kshs.5,709,814.75, described as either “VR IC” or “VR OD”. It has not however
been clarified what the entries or abbreviations represent.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.58

2001. The Statement of Assets and Liabilities for Vote R.58 as at 30 June 2009
reflects a Paymaster General Account credit balance of Kshs.344,068.30, while
the Cashbook as at 30 June 2009 shows a debit figure of Kshs.2,972,522.25.
The resultant difference of Kshs.3,316,590.55 between the two sets of records
had not been reconciled or explained as at 30 June 2009.

2002. The Statement also reflects total assets of Kshs.7,393,289.70 against total
liabilities of Kshs.7,392,095.60. The Statement is therefore out of balance by a
figure of Kshs.1,194.10.




                                      363 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.58

2003. The Statement of Assets and Liabilities for Vote D.58 as at 30 June 2009
reflects an Exchequer Account debit balance of Kshs.330,978,937.00, which
includes an amount of Kshs.200,624,661.00 relating to 2007/2008. The Ministry
has not however clarified why the long outstanding balance of
Kshs.200,624,661.00 had not been cleared from the books of account as at 30
June 2009.

2004. The Statement also reflects a Suspense Account debit balance of
Kshs.2,170,651,897.48, which has not been analysed with the result that its
completeness and accuracy could not be ascertained. The balance also includes
an amount of Kshs.164,075,583.48 relating to 2007/2008. No reason has been
provided for failure to clear this long outstanding amount.

2005. The Statement further reflects a Paymaster General Account debit
balance of Kshs.17,992.40, while the Cashbook and the Ledger as at 30 June
2009 show amounts of Kshs.29,707,40 (Dr) and Kshs.1,904,716,282.35 (Cr)
respectively. No reconciliation or explanation has been provided for the
differences between the three sets of records.

2006. The total Assets of Kshs.2,501,854,445.03 as at 30 June 2009 exceed
total Liabilities of Kshs.547,120,170.03 as at the same date, by an unreconciled
and unexplained figure of Kshs.1,954,734,275.00.



                   MINISTRY OF PUBLIC WORKS

APPROPRIATION ACCOUNT FOR VOTE D.59 FOR THE YEAR ENDED 30
JUNE 2009

2007. The Appropriation Account for Vote D.59 for the year ended 30 June 2009
reflects nil collections of Appropriations-In-Aid during the year, against estimated
receipts of Kshs.80,000,000.00. The explanation provided in the footnotes to the
Account for the under-collection of Appropriations-In-Aid indicates that the under-
collection was caused by non-submission of expenditure returns by a donor.


PENDING BILLS

2008. Records held at the Ministry’s Headquarters indicated that bills totalling
Kshs.468,634,376.74 relating to Recurrent, Development and Deposits Votes
were not settled in 2008/2009 but were instead carried forward to 2009/2010.
Out of the total, bills amounting to Kshs.14,698,127.90, Kshs.412,808,768.84

                                        364 
 
and Kshs.41,127,480.00 related to Recurrent, Development and Deposits Votes
respectively.

2009. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Recurrent Appropriation Account for the year would have
reflected a reduced Net Surplus of Kshs.53,864,405.90 instead of
Kshs.68,562,533.80 now shown, while the Development Appropriation Account
for the same period would have shown an Excess Vote of Kshs.412,002,901.59
instead of the Net Surplus of Kshs.805,867.25 now recorded.

2010. According to the Ministry, failure to settle the bills was caused by liquidity
problems.


OUTSTANDING IMPRESTS

2011. Examination of Temporary Imprest records maintained at the Ministry’s
Headquarters revealed that Imprests totalling Kshs.2,473,904.95, which ought to
have been surrendered or otherwise accounted for, on or before 30 June 2009
were outstanding as at that date. Out of the total, imprests amounting to
Kshs.816,320.00 were outstanding against officers in Job Group ‘M’ and above,
while the balance of Kshs.1,657,584.95 was due from officers in Job Group ‘L’
and below.

2012. It was further observed that various officers were issued with additional
imprests before having surrendered or accounted for amounts previously issued.


REFURBISHMENT OF EXHIBITION HALL AT THE KENYA BUILDING
RESEARCH CENTRE

Award of Contract

2013. Examination of financial records at the Ministry’s Headquarters indicated
that in May 2006, a contract for developing an exhibition centre at Kenya Building
Research Centre was awarded to a construction company based in Nairobi, at
the tender sum of Kshs. 17,478,710.00. However, and due to budgetary
constraints during the year, the sum was scaled down to Kshs.14,563,450.00,
after omitting the civil works component. The works commenced on 21 August
2006 and were to be completed on 2 December 2006, (that is, within a period of
sixteen (16) weeks).

2014. According to further information available, the works involved re-roofing
and general refurbishment to the existing hall, erection and completion of outdoor
spaces and associated electrical and mechanical works.



                                        365 
 
Extension of Time

2015. Although the project was expected to be complete by 2 December 2006
as indicated above, the contractor requested for an extension of time, citing delay
due to changes in structural redesign to support the roof and other additions to
the civil works. This particular redesignation had earlier been omitted from the
contract due to lack of funds. Despite the fact that the Project Manager
recommended that the contractor be granted an extension of twenty four (24)
weeks, no approval in this regard has however been seen.

Audit Inspection

2016. An audit inspection exercise carried out on 10 February 2009 revealed the
following unsatisfactory and unexplained matters:-

•       The windows fitted appeared to be of a poor quality, rendering the Centre
        susceptible to unintended intrusions;

•       The quality of workmanship in the fixing of gutters was wanting, resulting
        in leakages through such gutters;

•       One of the washroom had malfunctioning doors while in other sections of
        the Centre, manhole covers were missing;

•       The Centre did not have water and electricity connections apparently
        because the meters were yet to be transferred from the contractor’s name
        to that of the Research Centre; and,

•       The facility had not yet been put to use, resulting in accumulation of dust
        and fast deterioration.

Other Observations

2017. The following other observations on the project were made:-

    •   Although the Contract Register indicates that the total expenditure on the
        project as of February 2009 stood at Kshs.18,794,553.68, the actual
        payments processed through the Integrated Financial Management
        Information System (IFMIS) amounted to Kshs.12,178,910.15, resulting in
        a difference of Kshs.6,615,643.53. No reconciliation or explanation has
        been provided for the difference;

•       Payment vouchers and other supporting documents for an expenditure of
        Kshs.4,533,645.17 incurred on the project against vouchers nos.003254,
        004894, 004898 and 004895 of October and November 2007 were not


                                        366 
 
        produced for audit review. In the circumstances, propriety of the
        expenditure could not be confirmed;

•       According to the contract agreement, usable materials salvaged during
        demolitions including roofs, concrete tiles, galvanized corrugated iron
        sheets, asbestos sheets together with trusses, doors, windows and other
        items removed from the demolished building, remained the property of
        the Government and were to be deposited at the Provincial Works
        Officer’s yard in Industrial area. An audit inspection exercise carried out
        on 19 February 2009 however revealed that these materials had not been
        transported to the Works Office following removal as instructed and no
        evidence has been seen indicating how they were disposed of;

•       An amount of Kshs.170,000.00 contributed by the contractor towards
        continuous professional development and training of the Ministrys’ staff
        was not supported with the relevant expenditure records, and as a result
        its propriety could not be ascertained; and,

    •   The Ministry had not as at 30 June 2009 raised a claim for liquidated
        damages totalling Kshs.2,685,714.00 at the rate of Kshs.50,000.00 per
        week against the contractor for delayed completion of the project; that is,
        from 2 December 2006 to 12 December 2007, as stipulated under clause
        24 and Condition 27.1 of the contract. No reason has been given for
        failure to raise the claim.


ERECTION AND COMPLETION OF A HOSTEL BLOCK – MOW SPORTS
CLUB

Tender Process and Award

Main Contract

2018. The main contract for erection and completion of a hostel block at the
MOW Sports Club in South ‘C’ Nairobi was awarded vide letter Ref. No.
A.30.05/F/(QD 13/0199G/(0125) dated 10 June 2005 to a local construction firm
at the tender sum of Kshs. 23,567,398.50

2019. According to records available, the works involved construction of a stalled
type E hostel block as a club house, consisting of a lounge, kitchen, bar, meeting
room, manager’s office, reception and sixteen (16) self-contained rooms. The
works commenced on 6 July 2005 and were scheduled to run for a period of forty
(40) weeks. The expected completion date was therefore 13 April 2006.




                                        367 
 
Electrical Works

2020. The sub-contract for electrical works was awarded through a letter ref. No.
QD13/0199G/0155 dated 5 July 2005 to an electrical and hardware agency at a
contract price of Kshs. 1,485,635.00.

Plumbing, Drainage and Fire Fighting Equipment

2021. The sub-contract for plumbing, drainage and fire fighting equipment was
awarded to a plumbing firm at a contract price of Kshs. 2,111,880.00 through a
letter ref. QD13/0199G/0181 dated 21 July 2005.

Drainage Work

2022. The drainage work was carried out under a separate contract awarded
through selective tendering to yet another firm at a sum of Kshs. 3,500,000.00.
The award was communicated through letter Ref. No. A 30.05 VOL. 36 dated 22
February 2008. According to records available, the work involved; construction
of a sewer line, installation of a 22,500 litres septic tank and soakage area,
supply of materials, bedding works, laying and joining of paving slabs around the
hostel and construction of a shallow storm drain around the hostel. The works
for this contract were to be completed in twelve (12) weeks from 30 April 2008 to
31 July 2008.

Site Inspection

2023. A physical inspection of the project carried out in the month of January
2009 however revealed that:-

      The hostel block had weak structural defects as exemplified by various
      cracks on the walls;

      The drainage works had not been completed and electricity had not been
      installed;

      The invert level of one of the manholes at the hostel was lower than the
      existing sewerage, consequently making it difficult to connect with
      sewerage.

      The Certificates of practical completion and handing over were issued to
      the main contractor on 26 August and 2 December 2008 respectively, an
      indication that significant delay in the completion of the project occurred.




                                      368 
 
Other Expenditure Records

Training Expenditure

2024. Interim Payment Certificate No. 5 dated 13 August 2006 shows that the
contractor had contributed a sum of Kshs. 300,000.00 for training purposes.
However, no records have been seen indicating the officers who were trained,
the venue for such training and the periods the training took place.


KENYA MAIZE FLOUR PROCESSING FACTORY PROJECT – BOMET
DISTRICT

Project Background

2025. The Kenya Maize Flour Processing Factory Project was conceptualized in
October 2004 through Exchange of Notes between the Government of the
People’s Republic of China and the Government of Kenya.

According to information available, the Project was to be financed through a
grant from the Chinese Government, while Kenya Government was to provide
land, water, electricity and access roads.

Award of Contract

2026. The contract for building the factory and related facilities was signed
between Ministry of Roads and Public Works and a Chinese construction
company on 28 April 2007. Records available show that contract price of the
Project was agreed at Kshs.120,000,000.00.

Scope of Works and Contract Period

2027. The scope of work included construction of the main workshop
(accommodating electrical control room, material storehouse, machine
maintenance room and a laboratory); raw material warehouse; final product
warehouse; water tank; pump house; office building; washing room; drying yard;
fence and the guard’s room. The workshop, warehouses and other works were
to be made of steel framework structure, gable steel frame and masonry
structure respectively.

2028. The works commenced on 22 November 2007 and were scheduled to run
for a period of nine (9) months. The period was to be adjusted in case of
variation in quantities, force majeure and other issues subject to the agreement.




                                      369 
 
Audit Findings

Government of Kenya Expenditure

2029. Payment vouchers and other related records indicate that the Government
of Kenya incurred expenditure totalling Kshs.9,547,901.00 on the Project in the
2007/2008 and 2008/2009. The expenditure of Kshs.9,547,901.00 does not
however include the cost of land measuring 6400 sq. metres on which the Project
stands and which according to additional information was a donation from the
local community.

Non-Submission of Expenditure Returns

2030. As mentioned elsewhere in this report, the factory was financed through a
grant by the Chinese Government. However, and although expenditure returns
were necessary and required from the financier, no such returns were seen, with
the result that the total expenditure incurred on the factory as at 30 June 2009
could not be determined.

Additional Budgetary Provision

2031. Although according to records available the Project was completed in
October 2008, the printed Estimates of Development Expenditure for 2009/2010
reflects a provision of Kshs.57,458,000.00 against Item 5120200 – Foreign
Borrowing (Direct payment – China) under Head 400 – Architectural Department,
Vote 59 – Ministry of Public Works. According to records available, the provision
of Kshs.57,458,000.00 representing approximately 47% of the projects contract
price of Kshs.120,000,000.00 was earmarked for training of personnel.

Environmental Impact Assessment Report

2032. The National Environmental Management Authority wrote to Ministry of
Public Works through a letter Ref.No.NEMA/DEO – BMT/EIA –AUDIT/VOl.1/19
of 2 September 2008, expressing concern that an Environmental Impact
Assessment Report had not been obtained despite the fact that the Report was
a requirement before the factory could start operating. No information has been
seen indicating how this matter was resolved.

Idle Facility

2033. Although according to information available and as indicated in the
preceding paragraphs the Project was completed in October 2008, the factory
has not however started operating and apparently no board has been appointed
to oversee management of the facility.



                                      370 
 
STORES AND SERVICES FUND

Statement of Assets and Liabilities

2034. The Statement of Assets and Liabilities for Stores and Services Funds as
at 30 June 2009 reflects a Suspense Account brought forward debit balance of
Kshs.482,983,865.60 which has not been analysed, with the result that it has not
been possible to confirm its completeness or accuracy.

2035. The Statement also reflects a Paymaster General (PMG) Account
overdraft balance of Kshs.838,548,265.30, representing a decrease of
Kshs.22,665,794.20 from the previous year’s figure of Kshs.861,214,059.50. No
records were however provided to show movement of the balance of
Kshs.836,548,265.30 during the year. In addition, the overdraft does not appear
to have been authorized by the Treasury.

2036. Although   the   Statement      shows    an    overdraft    balance of
Kshs.838,548,265.30 as at 30 June 2009, the Cashbook as at the same date
reflects a figure of Kshs.25,343,763.00, occasioning a difference of
Kshs.863,892,028.75. The difference has not been reconciled or explained.

2037. The creditors balance of Kshs.41,127,480.00 reflected in the Statement
relates to pending bills as at 30 June 2009. No reason has however been given
for failure to settle the bills, some of which have been outstanding for more than
five years.

2038. The Pre-Payment claims credit balance of Kshs.11,710,217.82 appearing
in the Statement has been omitted from the Trial Balance as at 30 June 2009
and no reason has been given for the anomaly. Further, it has not been
explained why the Supplies Branch was unable to fulfill its obligations during the
year with respect to advances by Government Ministries and Departments, as
indicated in Note (5) to the Statement.

2039. The Closing Stock balance of Kshs.232,049,467.50 includes dormant and
unserviceable stock valued at Kshs.81,209,975.98. In addition, stock taking
sheets as at 30 June 2009 contains undercast errors adding up to
Kshs.6,365,801.60. In the circumstances, it has not been possible to confirm
that the stock balance as at 30 June 2009 is fairly stated.

2040. The credit balance of Kshs.38,130,620.88 against the Mark-up Suspense
Account increased by Kshs.2,580,202.28 from the previous year’s figure of
Kshs.35,550,418.60.       However, and as in the previous instances, no
documentary evidence including an analysis were availed to support the balance
of Kshs.38,130,620.88. Consequently, it has not been possible to confirm the
validity and accuracy of the balance of Kshs.38,130,620.88.

                                       371 
 
2041. The debit balance of Kshs.70,179,641.57 against debtors increased by
Kshs.420,618.22 from the previous year’s amount of Kshs.69,759,023.35. The
increase was attributed to fuel dispensed on credit to various Ministries and
Departments. The Trial Balance as at 30 June 2009 however reflects a figure of
Kshs.51,145,177.64 against the Account, resulting in an unreconciled and
unexplained difference of Kshs.19,034,563.93 between the two sets of records.

2042. The Stores and Services Fund – Unallocated Stores as at 30 June 2009
reflects a balance of Kshs.52,008,341.90 under losses, which has not been
properly supported with the relevant records. As a result, the validity and
correctness of the figure of Kshs.52,008,341.90 could not be ascertained.


BANK RECONCILIATION STATEMENTS

Recurrent Cashbook

2043. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments of Kshs.139,129,510.00 in the Cashbook not
recorded in the Bank Statement, which differ with payments totalling
Kshs.155,660,755.80 shown in the Schedule attached to the Statement. No
reconciliation or explanation has been given for the difference of
Kshs.16,531,245.80. The figure of Kshs.139,129,510.00 also includes stale
cheques amounting to Kshs.19,731,112.60. It has not been clarified why these
particular cheques have not been replaced or reversed in the Cashbook.

2044. The Statement also reflects receipts in the Bank Statement not recorded
in the Cashbook of Kshs.953,739.95 and payments in the Bank Statement not
recorded in the Cashbook of Kshs.15,887,348.30. No analyses have however
been provided to support these two balances.

Development Cashbook

2045. The Bank Reconciliation Statement for the Development Cashbook as at
30 June 2009 reflects payments in the Cashbook not recorded in the Bank
Statement (unpresented cheques) amounting to Kshs. 49,114,935.05, which
include an amount of Kshs. 2,998.70 referred to as an “Overcast” in the
Cashbook. No reason has however been provided as to why the “Overcast” had
not been identified and corrected as at 30 June 2009.

2046. The Statement further reflects receipts in the Bank Statement not
recorded in the Cashbook of Kshs.17,257,415.10, and payments in the Bank
Statement not yet recorded in the Cashbook of Kshs.51,851,865.95. No
analyses and other related records have been provided to support the two
balances.

                                     372 
 
Deposits Cashbook

2047. The Bank Reconciliation Statement for the Deposits Cashbook as at 30
June 2009 reflects receipts in the Cashbook not recorded in the Bank Statement
of Kshs.8,810,284.30. As in the previous instances, the amount has not been
supported with analysis and other related records.


STATEMENT OF ASSETS AND LIABILITIES VOTE R. 59

2048. The Statement of Assets and Liabilities for Vote R.59 as at 30 June 2009
reflects a Paymaster General Account debit balance of Kshs. 193,800,550.00,
while the Cashbook shows an amount of Kshs.193,742,907.25 as at same date.
The resultant difference of Kshs. 57,642.75 between the two sets of records has
not been reconciled or explained.

2049. The Statement also reflects a Temporary Imprests Account debit balance
of Kshs.2,367,991.95, which however differs with the Imprests Register figure of
Kshs.2,473,904.95, by Kshs.105,913.00. The difference has not been reconciled
or explained.

2050. The Statement further reflects nil balance as at 30 June 2009 in respect of
the Exchequer Account. However, no documentary evidence has been provided
to show how the amount of Kshs.83,864,991.90 brought forward from 2007/2008
was cleared during 2008/2009.

2051. The Statement shows a credit balance of Kshs. 275,837,991.95 under the
General Account of Vote, which includes an amount of Kshs.172,802,169.75 for
2008/2009. This particular amount however differs with the Net Surplus to be
Surrendered to the Exchequer of Kshs.68,562,533.80, reflected in the
Appropriation Account for Vote R.59 for the year ended 30 June 2009. The
resultant difference of Kshs. 104,239,635.95 between the two sets of records has
not been reconciled or explained.

2052. The Statement also shows a debit balance of Kshs.18,859,676.40 in
respect of Appropriations-In-Aid brought forward from 2007/2008. The balance
has not however been analysed to indicate what it represents. Consequently, its
validity and accuracy could not be confirmed.


STATEMENT OF ASSETS AND LIABILITIES VOTE D.59

2053. The Statement of Assets and Liabilities for Vote D.59 as at 30 June 2009
reflects a General Account of Vote credit balance of Kshs.974,808.85, while the
Appropriation Account for Vote D.59 for the year ended 30 June 2009 shows a

                                      373 
 
Net Surplus to be Surrendered to the Exchequer of Kshs.805,867.25. The
resultant difference of Kshs.168,941.60 between the two sets of records has not
been reconciled or explained.

2054. The Statement also reflects a Temporary Imprests Account debit balance
of Kshs.116,500.00, which has not been analysed with the result that its
completeness and accuracy could not be ascertained.

2055. The Statement further reflects an Exchequer credit balance of
Kshs.135,027,347.00 and a General Account of Vote debit balance of
Kshs.134,062,979.75, which have not been analysed. Consequently, it has not
been possible to confirm their completeness and accuracy.


STATEMENT OF ASSETS AND LIABILITIES FOR DEPOSITS

2056. The Statement of Assets and Liabilities for Deposits as at 30 June 2009
reflects a Paymaster General Account debit balance of Kshs.309,252,096.25,
while the Trial Balance as at the same date shows a figure of
Kshs.309,352,091.95. The difference of Kshs.99,995.70 between the two sets of
records has not been reconciled or explained.

2057. The Statement also reflects two credit balances of Kshs.78,943,408.00
and Kshs.230,308,688.25 against Retention and Departmental Representative
(DR) Accounts respectively. However, no analyses have been provided in
support of these balances, with the result that their validity and accuracy could
not be confirmed. Further, the balances are not reflected in the Ledger for the
month of June 2009 and no reason has been given for the anomaly.

2058. An extract from the Deposits Cashbook for 2007/2008 and 2008/2009
shows that amounts of Kshs.11,862,624.70 and Kshs.16,620,547.90
respectively, both totalling Kshs.28,483,172.60 were received and spent through
the Departmental Representative Account within the Ministry.           However,
expenditure records and other supporting evidence showing the purposes for
which the expenditure was incurred were not availed for audit review.
Consequently, the propriety of the expenditure could not be confirmed.




                                      374 
 
               MINISTRY OF INDUSTRIALIZATION

APPROPRIATION ACCOUNT FOR VOTE R.60 FOR THE YEAR ENDED 30
JUNE 2009

Unsupported Expenditure

2059. The Appropriation Account for Vote R.60 for the year ended 30 June 2009
reflects expenditure totalling to Kshs.9,434,885.60 under Sub-Vote 600, Head
227 – Headquarters and Administrative Services, out of which an amount of
Kshs.7,149,188.95 has not been supported with payment vouchers and other
related records. Similarly not supported with records is an expenditure of
Kshs.48,735,106.95 recorded under Sub-Vote 602 Head 792.

In absence of the vouchers and other records, the propriety of the expenditure of
Kshs.55,884,295.90 could not be ascertained.

Excluded Expenditure

2060. The Recurrent Cashbook as at 30 June 2009 reflects expenditure of
Kshs.2,339,335.65 and Kshs.6,793,199.05 under Sub-Vote 600 Head 227 Items
2210600 and 3110700 respectively, which appears to have been excluded in the
Appropriation Account. No reason has been provided for the omission which has
resulted in the understatement by equivalent amounts, of the total expenditure
balance of Kshs.1,080,190,003.51 recorded against Vote R.60.


APPROPRIATION ACCOUNT FOR VOTE D.60 FOR THE YEAR ENDED 30
JUNE 2009

Under-Expenditure

2061. The Appropriation Account for Vote D.60 for the year ended 30 June 2009
reflects under-expenditure of Kshs.98,783,258.05, representing approximately
12% of the approved estimates of Kshs.819,560,000.00. The under-expenditure
occurred mainly under Sub-Vote 602 – Industrial Training Services, where out of
a provision of Kshs.550,334,000.00 during the year, an amount of
Kshs.451,560,813.95 was expended.

According to the footnotes to the Account, the under-expenditure was attributed
to failure by donors to release project funds during the period.




                                      375 
 
Unvouched Expenditure

2062. The Appropriation Account also reflects expenditure totalling
Kshs.48,735,106.95 against three (3) items under Sub-Vote 602, Head 792,
which has not been supported with payment vouchers and other related records.
Consequently, the propriety of the expenditure could not be ascertained.


PENDING BILLS

2063. Examination of records maintained at the Ministry’s Headquarters
indicated that bills totalling Kshs.3,856,298.75 were not settled during the year
2008/2009 but were instead carried forward to 2009/2010.

2064. Had the bills been paid and the expenditure charged to the accounts for
2008/2009, the Appropriation Account for Vote R.60 for the year would have
reflected a reduced Net Surplus to be Surrendered to the Exchequer of
Kshs.8,136,632.74 instead of Kshs.11,992,931.49 now shown.

According to information available, the bills were not settled during the year due
to lack of adequate funds.


OUTSTANDING IMPRESTS

2065. Examination of Imprest Records maintained at the Ministry’s Headquarters
indicated that Temporary and Standing Imprests totalling Kshs.2,042,861.40 and
Kshs.206,055.00 respectively, which ought to have been surrendered or
otherwise accounted for, on or before 30 June 2009 were still outstanding as at
that date.

2066. Out of the outstanding Temporary Imprests of Kshs.2,042,861.40, an
amount of Kshs.594,415.90 was owed by officers on Job Group ‘L’ and above,
while the balance of Kshs.1,448,445.50 was due from officers on Job Group ‘K’
and below.

2067. The outstanding Standing Imprests balance of Kshs.206,055.00
comprised Kshs.24,000.00 owed by officers on Job Group ‘L’ and above and
Kshs.182,055.00 by officers on Job Group ‘K’ and below.

2068. It was further observed that some officers were issued with additional
imprests before having surrendered or accounted for amounts previously issued.

2069. A review of the position in May 2010 showed that imprests totalling
Kshs.2,062,911.40 had been surrendered or accounted for leaving a balance of
Kshs.186,005.00 outstanding.

                                       376 
 
COMPENSATION CLAIM

2070. The Ministry of Trade and Industry entered into contract Ref.No. 6487D -
Kenya Industrial Training Institute (KITI) Phase IV Nakuru, with a local
construction Company on 6 January 1993, for various works at the Institute at a
tender sum of Kshs.119,241,338.00. This sum was later revised upwards to
Kshs.132,390,777.10.

2071. According to records available, the contract entailed construction of an
administration block, changing rooms, shops, a library, classrooms,
auditorium/exhibition, clinic, central storage and women’s hostels. The works
were to commence on 15 January 1993 for a contract period of one hundred and
fifty six (156) weeks.

2072. In a letter Ref. No.CONF.51/03/A of 26 September 2008 to the Attorney
General, Treasury however indicated that the contract was mutually wound up in
2001, by which time 80% of the work had been completed. Further, and
according to the letter, a final certificate No.22 for Kshs.19,940,049.10 prepared
on 11 August 2004 was signed by both the employer and a representative of the
contractor on 16 December 2004 and thereafter by the contractor himself, on 19
April 2005. However, and according to further information available, the
contractor later disowned the certificate, alleging that his authorized
representative had been misled into signing the final account, believing that it
was an interim payment. He nevertheless did not explain why he himself
countersigned the certificate in April 2005.

2073. Additional information show that while the final certificate No.22 for
Kshs.19,940,046.10 was still pending, the contractor raised a complaint with the
Chairman of the Architectural Association of Kenya, requesting for an arbitration
as a result of the Ministry’s alleged delay in issuing the final certificate to the
contractor. The Association, and on the basis of the request, then proceeded to
appoint a private Quantity Surveyor, as an arbitrator through a letter Ref. No.
FGM/arbitration/2004/Aug of 13 September 2004.

2074. Records available indicate that the contractor in his statement of the case
to the arbitrator requested for an award against the Ministry of Trade and
Industry for breach of contract, in particular by failing to; issue the final account
and certificate; settle certified payments within the specified periods in the
agreement; address issues raised by the contractor; and grossly underestimating
the bills due to the contractor. The contractor, therefore, sought compensation
claims totalling Kshs.198,561,829.82, in addition to the contractual sum of
Kshs.122,450,728.00 which had already been paid to him. No records have
been seen to confirm whether or not the Ministry was represented during the
arbitration process.



                                        377 
 
2075. On 20 February 2006, the arbitrator awarded in respect of the claims a
compensation of Kshs.68,675,464.80, with interest at 18% p.a. to the contractor,
together with an arbitration fee of Kshs.928,725.00. It was however observed
that the client Ministry through the Department’s Representative (Ministry of
Roads and Public Works) had sought legal direction from the Attorney General
through letter Ref. No.QD/23/6487D/0204 of 3 August 2005 on the then ongoing
arbitration, noting that the issues before arbitration had been fully addressed in
the final account. However, no further communication in this regard has been
seen.

2076. Following the arbitration award, the contractor’s lawyers filed the award in
court under Misc. Civil Application No.1432 of 2007 seeking enforcement of the
award, which the court so granted. The sealed decree certificate of judgement
against the Government was issued on 7 November 2007 and the judgement
entered on 20 November 2007, upon which it was ordered that the Ministry of
Trade and Industry immediately pays the contractor an amount of
Kshs.91,028,328.59, representing award and interest of Kshs.68,675,464.80 and
Kshs.22,352,863.79 respectively.

2077. Further records available show that the Ministry of Industrialization on 28
May 2009 deposited a sum of Kshs.90,088,477.70 with the Attorney General who
on 29 May 2009 paid an equivalent amount to the contractor’s lawyers.
Additional information indicates that a further amount of Kshs.22,968,706.80
was paid on 9 September 2009 through P.V. No. 0022 of 9 September 2009 and
cheque No.008068 to same lawyers as balance of interest, thus raising the total
compensation paid to the contractor to Kshs.113,057,184.50.

2078. Although the Permanent Secretary/Treasury in a letter Ref.CONF.51/03/A
dated 26 September 2008 to the Attorney General had requested him to provide
legal advice and assistance in urgently seeking court agreement for the
Government to file an appeal in court, to challenge the legality of the arbitrator’s
un-contractual action on which the award was based, the process as far as I
have been able to establish, had not been concluded as at 30 June 2009.

2079. The Pending Bills Closing Committee on its part had recommended
amongst other aspects that;

    •   The Government files an appeal against the arbitration award;

    •   The Ministry investigates why the final account was re-opened while there
        had been no evidence of fraud or dishonesty to enable the arbitrator re-
        open the account; and,

    •   Actions of Government officials in the administration of the contract be
              investigated.


                                        378 
 
There is no evidence however to indicate that the recommendations had been
acted upon as of September 2009.


PANAFRICAN PAPER MILLS (EA) LIMITED

2080. An examination of records maintained at the Ministry’s Headquarters
during the year indicates that Panafrican Paper Mills (EA) Ltd. (PPM) in which
Government has a shareholding of 41% through the Permanent Secretary
Treasury (33.88%), Industrial & Commercial Development Corporation (5.55%)
and Development Bank of Kenya (1.57%), halted operations on 30 January
2009, following disconnection of electricity by the Kenya Power and Lighting
Company Ltd. over an unpaid and accumulated bill of Kshs.209,000,000.00. The
company had also experienced successive years of poor performance.

2081. According to records seen, PPM was subsequently placed under
receivership by short-term lenders on 20 March 2009. Additional information
available shows that the short-term lenders included four (4) local financial
institutions while the appointed Receiver/Manager was a local firm of
accountants.

2082. Although other records available indicate that the Government swiftly
moved over and appointed a Technical and Financial Evaluation Working Group
in April 2009 to look into the matter, and make recommendations with a view to
safeguarding public interest in PPM, clear details on progress in this regard have
been scanty and apparently non-conclusive.

2083. Consequently, and in absence of such details, it has not been possible to
ascertain that the Government’s interest standing at 41% as indicated above, in
addition to unpaid royalties estimated at Kshs.680,000,000.00 as at 30 June
2009 are intact and secure.


STATEMENT OF OBLIGATIONS GUARANTEED BY THE GOVERNMENT OF
KENYA

Differences between the Statement and Treasury Records

2084. The Statement submitted for audit reflects an outstanding contingent
liability of Kshs.3,241,257,861.60 (JPY 4,018,520,000.00) in respect of a loan
lent by the Japan Bank for International Corporation (JIBC) to the East African
Portland Cement for plant rehabilitation, while records maintained at the Debt
Management Office at the Treasury show a figure of Kshs.3,830,577,472.80
against the loan. The resultant difference of Kshs.589,319,611.20 between the
two sets of records has not been reconciled or explained.



                                       379 
 
BANK RECONCILIATION STATEMENT

2085. The Bank Reconciliation Statement for the Recurrent Cashbook as at 30
June 2009 reflects payments of Kshs.30,986,239.20 in the Cashbook not
recorded in the Bank Statement, which include stale cheques amounting
Kshs.369,573.40. No reason has been provided for failure to replace or credit
back the cheques in the Cashbook.


STATEMENT OF ASSETS AND LIABILITIES FOR VOTE R.60

2086. The Statement of Assets and Liabilities for Vote R.60 as at 30 June 2009
reflects various balances under Paymaster-General, General Account of Vote,
Advances and Suspense Accounts, brought forward from 2007/2008 and which
were cleared during the year under review.

2087. However, no documentary evidence was provided to support clearance of
the balances. Consequently, and in absence of the evidence, the validity of the
transactions and the accuracy of the closing balances as at 30 June 2009 could
not be confirmed.

2088. The Statement also reflects a Paymaster General Account credit balance
of Kshs.11,992,931.49, while the Cashbook as at 30 June 2009 shows a balance
of Kshs.11,997,330.10. The resultant difference of Kshs.4,398.61 between the
two sets of records has not been reconciled or explained.

2089. The Statement further reflects a General Account of Vote balance of
Kshs.13,787,304.99, which differs with the Net Surplus to be Surrendered to the
Exchequer of Kshs.11,992,931.49 shown in the Appropriation Account for Vote
R.60 for 2008/2009. As in the previous instance, the difference of
Kshs.1,794,373.50 has not been reconciled or explained.

2090. The Statement shows an amount of Kshs.388,077.00 under the General
Suspense Account which has not been analysed.         Consequently, the
completeness and accuracy of the balance of Kshs.388,077.00 could not be
confirmed.

2091. The Statement also shows an Exchequer Account balance of
Kshs.97,420,190.00, which includes an amount of Kshs.1,269,627.95 relating to
2007/2008 and earlier years. No reason has been given for failure to clear the
long outstanding balance of Kshs.1,269,627.95.       Further, the amount of
Kshs.96,150,562.05 for 2008/2009 differs by Kshs.93,570,752.05 with the figure
of Kshs.2,579,810.00 shown in the Exchequer records held at the Treasury. The
difference has not been reconciled or explained.



                                     380 
 
STATEMENT OF ASSETS AND LIABILITIES FOR VOTE D.60

2092. The Statement of Assets and Liabilities for Vote D.60 as at 30 June 2009
reflects various debit and credit balances totalling Kshs.68,091,219.70 and
Kshs.129,172,495.10 respectively, relating to 2007/2008. No reason has been
provided for failure to clear the long outstanding balances from the books of
account.

2093. The Statement also reflects an Exchequer Account balance of
Kshs.9,698,400.00, while records maintained at the Exchequer Section, Treasury
show a figure of Kshs.85,234,400.00. The difference of Kshs.75,536,000.00
between the two sets of records has not been reconciled or explained.


STAFF

I wish to sincerely thank the entire staff of the Kenya National Audit Office
for the great effort and hard work they have put in during the year.




A.S.M. Gatumbu
CONTROLLER AND AUDITOR GENERAL

Nairobi

19 May 2010




                                     381 
 

				
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