How Treasury ministry abused supreme law provision to tap billions for deals

CS Treasury Njuguna Ndungu. [File, Standard]

The National Treasury may have abused its powers to spend public funds before getting parliamentary approval to significantly increase allocations to the Petroleum ministry, giving it access to funds that may have been used to finance the controversial Sh17 billion diesel cargo.

The ministry received a substantial budgetary increase in the middle of implementation of the 2022/23 budget without parliamentary approval that is now raising eyebrows.

Claims are now emerging that the increased allocation was used to acquire the controversial diesel cargo, which is being claimed by little-known Ann Njeri of Ann's Import and Exports as well as Galana Oil, one of the largest oil importers, which is also involved in the government-to-government oil import deal.

In the initial budget that had been approved by the National Assembly before the start of the 2022-23 financial year, the ministry had been allocated Sh5.9 billion.

It, however, ended up spending Sh43 billion drawn from the Consolidated Fund and another Sh20 billion that had been raised by the ministry's internal operations without approval by MPs, with the ministry calling up Article 223 of the Constitution to access the funds.

The Article gives the government leeway to spend on emergencies without having to first seek parliamentary approval but later get the approval through a Supplementary Budget.

The Article foresees situations where a need might arise that had not been considered during budget-making. It further requires Parliament's approval to be sought within two months after the first withdrawal of the money.

According to budget documents, some of the money was used to pay "subsidies to private financial enterprises".

The Controller of Budget authorised withdrawal of Sh42.74 billion by the ministry under Article 223, of which Sh26.14 billion was for petroleum pump stabilisation and another Sh16.6 billion "to cater for the compensation of oil importers".

Busia Senator Okiya Omtatah claims that the funds were used in the importation of the Sh17 billion oil cargo, whose saga has unsettled different ministries as well as oil industry players.

"Parliament approved Sh5.9 billion for the ministry, out of which Sh5.2 billion was to be raised through the ministry's operations. The balance of Sh732 million was to be sourced from the Consolidated Fund as provided for in the recurrent budget for the year ending June 30, 2023," said Mr Omtatah

"In total, some Sh42 billion, instead of the Sh732 million, was unconstitutionally withdrawn from the Consolidated Fund without the authority of Parliament and spent on subsidies to private financial enterprises.

"The beneficiary enterprises are not named."

Omtatah further noted that the Sh5.9 billion the ministry had been allocated in the initial budget was "fraudulently changed to a fictitious figure of Sh20 billion in the Supplementary Budget that was approved in Parliament".

"The fictitious figure of Sh20.36 billion was then used to request for an increase in the supplementary budget by Sh43.46 billion, which raised the total amount to Sh63.09 billion," said the senator.

Unconstitutionally withdrawn

"Further, the Supplementary Budget's 396.15 per cent increase in the AIA (Appropriations-in-Aid - or money internally generated by the ministry) by Sh15.4 billion from Sh5.2 billion to Sh20.6 billion, was also contrary to Article 223(5) of the Constitution, which limits such increase to 10 per cent."

"This means that Sh63.3 billion (being, Sh42.7 billion from the Consolidated Fund plus Sh20.6 billion in AIA) was unconstitutionally withdrawn from public coffers purportedly to subsidise some unnamed private financial institutions."

Raila Odinga agreed with the findings that Omtatah made while perusing budget documents, claiming clear relations between the money that the ministry spent before receiving approval from Parliament and the Sh17 billion cargo.

Mr Odinga noted that Ann's Import and Export company could be among the financial enterprises captured in the budget documents and received some payment during the 2022-23 financial year.

"I concur with the senator's suspicion that Njeri is the 'private financial enterprises' funded by the Sh17,224,718,632 illegally from the Consolidated Fund and received by the Ministry of Petroleum," he said in a statement yesterday.

He further called on the Cabinet secretaries for Treasury and Energy and Petroleum to resign, arguing that they have committed major offences.

"The CS for Energy and Petroleum Chirichir and National Treasury CS Njuguna Ndungu have certainly committed criminal offences, abused office and gone against the Constitution.

"They stole money from the Consolidated Fund, in addition to spending monies way above what Parliament approved. They must not only resign, they must also be prosecuted," he said.

While Article 223 of the Constitution gives the government leeway to spend and seek Parliament's approval later, it also has requirements that this should not exceed 10 percent of the original budget.

The Controller of Budget noted that what was presented to the office for approval in its entirety complied with this rule.

"Article 223 of the Constitution allows additional funding during the budget implementation before approval by Parliament to be ratified at a future date.

"In the 2022-23 financial year, the Controller of Budget authorised withdrawals of Sh82.27 billion. This amount was 2.7 per cent of net budget estimates and, therefore, within the 10 per cent ceiling set out in the Article 223 of the Constitution of Kenya," said OCOB in its latest report auditing national government's spending over the 2022-23 financial year.

However, Controller of Budget Margaret Nyakango, in statements made in March in Parliament, said she had been forced to approve questionable expenditures by the government just days before last year's August 9 elections.

There has been a growing concerns about the government invoking Article 223 of the Constitution, something that has piqued lenders such as the International Monetary Fund (IMF).

IMF, which has since 2021 been offering Kenya budgetary support to boost post Covid-19 recovery efforts as well as reduce debt vulnerabilities, made a requirement for the audit of funds that have been spent under Article 223.

Special audit

The Auditor General is undertaking a special audit that will shed light on the claims of reckless spending under that section of the Constitution.

Other than the case for the Petroleum ministry, other instances where the Treasury has been criticised for the spending under Article 223 of the Constitution include the Sh6 billion used to buy out Helios Investments at Telkom Kenya as well as Sh4 billion on the maize flour subsidy.

The current administration has also spent funds without parliamentary approval, including Sh10 billion to operationalise the Hustler Fund and another Sh4 billion for the fertiliser subsidy.

For weeks now, the Sh17 billion diesel cargo has taken several dramatic twists. Ms Njeri claimed she had been abducted and her life threatened when she went to the Directorate of Criminal Investigations to report that the cargo had been hijacked.

It is then she claims was seized by unknown people and held for 120 hours only to be released at night in Nyayo Embakasi estate in Nairobi.

She is expected to appear before the National Assembly Committee on Energy this week to shed more light on the deal.