Audit exposes massive financial irregularities in Nakuru County

A report by the Auditor General has revealed massive irregularities in the expenditure of funds by the Nakuru County Government.

The 2022/2023 Financial Year report revealed inaccuracies in the compensation of employees, irregular domestic travel and subsistence expenditure by the County Executive, irregular expenditure of legal fees, and delays in the implementation of projects.

The report questioned the County Government’s expenditure of over Sh6.9 billion on employees’ compensation.

Auditor General Nancy Gathungu revealed that the expenditure of Sh6,901,543,528 differed from the payroll amount of Sh5,752,880,855, resulting in an unexplained variance of Sh1,148,662,673.

The amount, as per the report, included a compulsory National Industrial Training Authority levy amounting to Sh28,374,600, misclassified under pension and other social security contributions. “In the circumstances, the accuracy and completeness of compensation of employees’ amount of Sh6, 901,543,528 could not be confirmed,” read the report.

Off-shelf payroll system

The County Government continues to pay salaries outside the Integrated Personnel Payroll Data (IPPD) System. Of the Sh6,901,543,527 paid in the financial year, Sh75,570,008 was outside the IPPD. This was contrary to Treasury Circular No. 13/2012 of August 28, 2019, which requires all allocations on personnel emoluments to be supported by IPPD.

The County Executive’s payroll for 199 employees was processed through an off-shelf payroll system. Further, the off-shelf payroll system does not capture essential employee information such as Kenya Revenue Authority personal identification number, date of birth, date of employment, gender, ethnic code, job group, or job scale.

Analysis of the payroll revealed that 28 county officers were retained beyond the mandatory retirement age of 60, and the Management did not explain what special skills the officers possessed to warrant their retention in service.

Two officers had similar bank accounts, and no explanation was provided, which resulted in irregular payments.

The County Executive, it was revealed, employed 478 permanent staff and 3,902 temporary staff in the financial year without recruitment plans. “It was, therefore, not clear the criteria used to identify the gaps and filling of vacancies. This was contrary to paragraph B.2 of the Human Resource Policies and Procedures Manual for the Public Service, which requires every public entity 301 to prepare Human Resource Plans to support the achievement of goals and objectives in their strategic plans. In the circumstance, management was in breach of the law,” read the report.

Legal fee anomalies

The report questioned a Sh116,085,352 paid to various external law firms as legal fees. Review of legal records concerning expenditure, the audit revealed various anomalies, including direct procurement of law firms.

According to the auditor, there was no documentary evidence to show prior approval for the use of the direct procurement method, the appointment of the evaluation committee, negotiation by the evaluation committee, market survey, a signed contract, and evidence of reports sent to the Public Procurement Regulatory Authority were provided for audit.

The legal fees charged by the external law firms, the auditor said, did not have itemized fee notes or justifications for the amounts charged and may not have been competitive.

Additionally, the County Government, as per the audit, procured drugs and non-pharmaceutical medical items worth Sh525,102,285 from private suppliers. This contravened Section 4 of the Kenya Medical Supplies Authority (KEMSA) Act, 2013, which requires counties to procure drugs and medical supplies from KEMSA.

The transfer of Sh50 million for the purchase of specialized materials and services to the school feeding programme fund was also termed irregular. The fund, it was revealed, has no enabling legislation supporting the transfer and how the funds would be utilized.

The Auditor noted several projects had been delayed. The projects include the construction of a Sh288, 577, and 459 office block in Milimani. and construction of the Sh886, 630,388 Treasury Headquarters.

The County Government also failed to remit Sh88,900,400 pension deductions.