Taxpayers Lose Sh5.7 Billion as Auditor General Exposes Donor Funds Mismanagement
Taxpayers in Kenya have lost a staggering Sh5.7 billion due to financial mismanagement of donor-funded projects by government agencies, according to a damning report released by Auditor General Nancy Gathungu.
Covering the fiscal year ending June 30, 2024, the report reveals a catalogue of procurement violations, delays, unauthorised expenditures, and inefficiencies across several ministries, departments, and state agencies. These irregularities have not only eroded public trust but also compromised service delivery and development outcomes.
One of the most alarming revelations is the payment of Sh4.4 billion in interest due to delayed project payments. Gathungu termed this an “unnecessary cost” that could have been avoided had agencies adhered to project timelines.
“Although the project periods were ending, some funds had not been absorbed, posing risks that the projects would end without implementing all planned activities and therefore not meeting their objectives,” she warned.
The audit also uncovered Sh1.3 billion in ineligible expenditures across ten projects. For instance, the National Treasury spent Sh475 million on the Africa Climate Summit, despite the financing agreement being signed after the event. This rendered the expense ineligible under donor guidelines.
Ministry of Health projects were among the worst performers. Delays in settling debts related to Covid-19 vaccine procurement resulted in Sh930 million in interest payments. Additionally, the ministry failed to disburse Sh100 million earmarked for Covid-19 response initiatives.
The transport sector also featured prominently in the report. The Kenya National Highways Authority (KeNHA) faces Sh856 million in interest for delayed tax payments on the Mombasa-Mariakani highway project. KeNHA must also pay contractors Sh657 million for the Isebania-Kisii-Ahero junction project and Sh615 million in interest under the World Bank-funded Kenya Transport Sector Support Project.
Further financial mismanagement was found in road projects under the Kenya Rural Roads Authority (KERRA), which accumulated Sh38 million in interest on the Gilgil project and Sh4.8 million for the Roads 2000 initiative. KERRA also failed to provide Sh167 million for road works in Gilgil, while the Agriculture department withheld Sh99 million in funds.
The Water Department was cited for not recovering Sh124 million wrongly paid to the Thwake Dam contractor. Additionally, 44 projects failed to utilise their allocated funds before closure, raising concerns about incomplete implementation.
Gathungu also flagged the illegal mixing of donor and agency funds in 16 projects, violating financial management rules and hampering efforts to track expenditures.
“Project funds were, therefore, commingled with the funds of the implementing agencies,” the report noted.
A total of 18 projects have stalled due to the national and county governments failing to provide counterpart funding. Sh3.5 billion in local contributions remains unremitted. Kenya Power alone withheld Sh1.1 billion for the Last Mile Connectivity project, while KeNHA and the NTSA failed to remit Sh663 million and Sh447 million respectively. Counties also fell short by Sh80 million for the agricultural value chain development initiative.
Alarmingly, 28 projects had already surpassed their closure dates without proper wind-up procedures, increasing the risk of further wastage and misappropriation.
The findings underscore a critical need for systemic reform in public financial management, especially in the handling of donor-funded projects. With pending bills standing at Sh64 billion, the situation demands urgent corrective measures to safeguard public resources and restore accountability in government operations.
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Taxpayers Lose Sh5.7 Billion as Auditor General Exposes Donor Funds Mismanagement