BY THE AUDITOR GENERAL & THE SENATE PUBLIC ACCOUNTS COMMITTEE -(Source-Auditor Generals Report)
1.0 Budgetary Control and Performance
During the year 2013/2014, the County Executive had an approved budget of Kshs.2.78 billion comprised of Kshs.1.74 billion for recurrent and Kshs.1.04 billion for development.
The annual revenue for the County Government was projected at Kshs.2.78 billion comprising of Kshs.2.4 billion from the national equitable share, Kshs.360 million from local revenue sources and Kshs.5.9 million as balance brought forward from the previous year 2012/2013. Records made available for audit indicated that the County received Kshs.2.2 billion as the national equitable share and collected Kshs.125 million from local sources. The County Executive spent Kshs.1.784 Billion.
👉The under absorption of funds allocated and under performance in local revenue collection was not explained.
2.0 Internal Control Systems
👉The finance department had only seven officers, a number that was considered inadequate considering that they serve both the Executive and the County Assembly.
👉Further, there is no internal audit department in place. In addition, the following weaknesses were noted in the processing of payments:-
☆a) Payment vouchers were not numbered
☆b) The payment vouchers did not have a vote book certificate although they were recorded in the IFMIS system
☆c) Payment vouchers were not examined
3.0 Foreign Travelling and Accommodation Allowances
👉The County Executive had budgeted to spend Kshs.13,797,605 on foreign travels but spent Kshs.12,682,150. This resulted to an under expenditure of Kshs.1,115,455 or (8%) of the budgeted amount.
👉Either, no documents were produced for audit to show the countries visited, nature of the visits and the number of officers involved.
👉In the circumstances, the propriety of the expenditure could not be confirmed.
4.0 Unaccounted for Consultancy Services Expenditure
The County Executive incurred an expenditure of Kshs.2,805,500 on 9 April 2014 in respect of legal fees paid to a legal firm.
👉However, the payment voucher, legal fee notes and procurement documents were not made available for audit review.
👉It was, therefore, not possible to ascertain whether any legal services were provided by the firm.
5.0 Seminar /Workshops and Training Sponsorship
👉The County Executive paid tuition fees for six officers totaling Kshs.1,208,800 without complying with the relevant regulations that govern sponsorship.
👉Further, there was no training policy or committee that would have established the training needs of the employees of the County Government.
👉Under the circumstances, it was not possible to ascertain the propriety of the training expenditure of Kshs.1,208,800 as at 30 June 2014.
6.1 Under collection of Revenue
The County Government had targeted to raise Kshs.360,000,000 from local sources in the financial year 2013/2014. However, only Kshs.125 million which was 31.3 per cent of the annual local revenue target was realized. The failure to meet the set target was attributed to reduced tourist numbers leading to a collection of Kshs.84,772,849 from the parks against a budget of Kshs.210,000,000.
👉No efforts appear to have been made to enhance local revenue collection.
6.2 Un-receipted / Unbanked Game Fees Revenue
As previously reported during the special audit covering the period between March 2013 and June 2013, the Kenya Association of Tours Operators(KATO) was appointed as selling agents for Buffalo Springs and Shaba National Reserves entry tickets through a contract signed with the defunct County Council of Isiolo in February,1995. KATO was to stock tickets, vet the tours operators to whom tickets were sold, submit to the Council an analysis of ticket sales on a weekly basis. KATO was to be paid a commission at the rate of four (4) percent of the face value of all the tickets.
The agreement which was valid for twenty four (24) months up to 2 February, 1997 has never been renewed.
👉But KATO has continued to collect the park revenue ever since without any legal contract.
Further, during the period under review, KATO retained Kshs.2,763,327 being 4% of the collected revenue Kshs.66,319,853 as the commission
👉This resulted to an under banking and under reporting of County Government Revenue and Expenditure by Kshs.2,763,327.21. KATO are required to remit all the revenue collected and be paid their commission and not to retain it.
6.3 Failure to recognize Payroll Processing Revenue
👉The County Executive charged payroll processing fee to various banks for check off deductions but these charges were not receipted as county revenue.
👉During the period under audit, Kshs.39,744 had been deducted. Although the payroll processing fee had been recognized as revenue as from 1 April to 30 June 2014, the Kshs.39,744 collected earlier had not been receipted as at the time of audit.
👉No explanation was given for failure to recognize the fees as revenue.
6.4 Unremitted liquor licensing Fees
Examination of receipt books and records maintained at the Isiolo Deputy County Commissioner’s office revealed that liquor licensing revenue amounting to Kshs.2,361,000 was collected from businesses operating within Isiolo County between July 2013 and June 2014.
👉However, the amount was remitted directly to NACADA as revenue collected in respect of licensing and implementing the Alcoholic Drinks Control Act, 2010.
👉The licenses were issued by the National Government instead of the County Government contrary to the Constitution as this is a devolved function as the per Section 4(c) Part 2 of the Fourth Schedule.
6.5 Long Outstanding Un-surrendered Receipt Books
Examination of Counterfoil
👉Receipts Book Registers (CRB’s) made available for audit revealed that receipt books with a value of Kshs.1,951,000 issued to revenue collectors had not been surrendered as at 30 June 2014.
👉It was also noted that the County continued using the receipt books printed by the defunct Isiolo County Council some of which were printed as far back as April, 2006.
6.6 Cost Sharing Revenue
👉During the year under review, the County Executive of Isiolo had not taken over the collection of the cost sharing revenue at the Isiolo District Hospital.
Revenue totaling Kshs.25,943,982 was collected at the Hospital and spent through the cost sharing system at the District Treasury.
👉Since Health is a devolved function, all revenue collected at the hospital should be banked into the County Revenue Fund Account.
6.7 Uncollected Revenue
👉Examination of credit sales register at the Isiolo District Hospital disclosed that the hospital credit sales were not collected promptly leading to revenue under collections which amounted to Kshs.593,805 as at 30 June 2014.
👉No explanations have been provided for this anomaly.
7.0 Cash and Bank Balances
The County Executive operated five bank accounts; one maintained at the Kenya Commercial Bank, one at the Consolidated Bank, Isiolo branch and three others at the Central Bank of Kenya.
👉No monthly reconciliation statements were prepared for the three accounts maintained at the Central Bank of Kenya (CBK).
👉No explanation was given for failure to prepare reconciliation statements for the three accounts maintained at the CBK.
8.0 Non Establishment of Emergency Fund
👉During the year under review, the County Government did not create an Emergency Fund as required by the Public Finance Management Act, 2012. The purpose of an Emergency Fund is to enable payments of urgent and unforeseen expenditure which there is no specific provision in the current budget.
9.0 Human Resources
9.1 Non-Reimbursement of Salaries paid by the National Government.
The County Executive was required to re-imburse from its allocated funds, salaries for 735 officers’ in the devolved functions paid by the National Government. Although the National Treasury circular ref: CONF/MOF.51/08`C’/(72) dated 4 April 2014 indicated the balance due as Kshs.251,659,813 the list made available for audit by the County Treasury revealed an outstanding reimbursement of Kshs.362,501,029, as at 30 June 2014, thereby creating a reconciled difference of Kshs.110,841,215 between the amount demanded by the National Treasury and the amount calculated by the County Government.
Further, the County Executive only made one payment dated 22 April 2014 of Kshs.121,315,311 which had not been acknowledged by the recipient ministries.
9.2 Non Remittance of Staff Deductions to the National Government
During the period between January and June 2014, the Isiolo County Executive deducted rent totaling Kshs.849,325 from officers occupying Government houses.
👉There was no evidence that the National Government had surrendered its buildings or its revenue to the County Government of Isiolo to justify the current situation.
👉The amounts deducted were not remitted to the National Government or receipted as part of the County Government revenue and therefore the accountability of the funds could not be ascertained.
9.3 Operations without an Approved Staff Establishment
The County Executive recruited County Chief Officers as required by the County Government Act, 2012 and as per the approved budget.
👉However, the County Executive did not prepare or approve its personnel establishment and hence managed its human resource without an approved establishment.
👉Consequently, the adequacy, appropriateness, existence and the necessity to fill the vacancies or the possibility of staff progression could not be ascertained.
9.4 Inappropriate Management of Personnel Records
👉Audit of the County human resource records revealed that the County Executive had not established a personnel registry or opened personal files for all seconded staff.
👉All personnel records both open and confidential were kept in an open office with unlimited access by any staff. Further, there was no copy of the Last pay Certificates for employees who were seconded and are in the County Executive payroll.
9.5 Unpaid and Unbudgeted for Staff Salaries
Following the implementation of a new Collective Bargaining Agreement that was effected on 1 September 2012 by the defunct County Council, there arose salary arrears and unremitted pension deductions that could not be paid as a result of not being budgeted for during the financial year 2012/2013.
👉The staff salary arrears and pension deductions outstanding schedule made available for audit review revealed that the Isiolo County Government was yet to pay salaries arrears amounting to Kshs.50,211,728.
9.6 Irregular Payment of Locum Allowances
👉Examination of expenditure incurred by Isiolo District Hospital revealed that an amount totaling Kshs.770,000 was paid to various staff in form of Locum allowances to health workers for working overtime without an approval of the County Executive or the hospital management committee.
9.7 Doubtful Appointment
👉Records held in the human resource department indicated that one officer, the County Economic Advisor was formerly employed by the Teachers Service Commission (TSC), before his current appointment.
👉However, no records were maintained to show whether he resigned as an employee of the TSC upon his appointment as an Economic Advisor.
10.0 IT Environment
The County Executive of Isiolo adopted the use of IFMIS and GPAY in November 2013 and the earlier manual transactions were journalized in the IFMIS system.
👉However, it was observed that direct banking from KATO was not captured in the LAIFOM system creating differences between collections in the LAIFOM system and banking.
👉In addition, there was no evidence of back up of all the transactions in IT systems, LAIFOM, GPAY, IFMIS or IPPD.
11.0 Non-Current Assets
👉The County Executive did not maintain a fixed assets register. They still rely on the fixed asset register that was used by the defunct Isiolo County Council. The value of the fixed assets of the defunct local authority as at 28 February 2013 amounted to Kshs.14,155,106,914 as per the audited accounts.
👉Further, it was observed that assets acquired by the County Executive valued at Kshs.220,322,700 had not been recorded in the fixed assets register.
12.0 Creditors and Payables
👉The County Executive did not maintain any record of creditors such as creditor’s ledger or register.
👉Further, as previously reported, the statement of assets and liabilities as at 28 February 2013 prepared by the defunct Isiolo County Council reflected creditors totaling Kshs.165,878,929. However, as at 30 June 2013, the creditor’s balances had increased to Kshs.195,229,710 as per schedule made available for audit.
13.0 Non Establishment of Audit Committee
👉The County Executive did not establish an internal audit committee as required by the Public Finance Management Act, 2012. The audit committee would have performed various roles which include;
👉Understanding and assessing the overall risks the County is facing.
👉Reviewing the adequacy of internal controls that management has put in place regarding financial control, accounting systems and reporting.
👉Reviewing the entity’s compliance with all relevant legislation and statutory requirements.
14.0 Failure to take Over Assets and Liabilities of the Defunct County Council
👉As previously reported, during the special audit covering the period between March 2013 and June 2013, the County Government of Isiolo had not officially taken over the assets and liabilities of the defunct County Council of Isiolo as at the time of audit. The value of the assets and liabilities of the defunct local authority as at 28 February 2013 amounted to Kshs.14,155,106,914.00 and Kshs.151,880,458.00 respectively as per the audited accounts.
👉Failure to take over the assets and liabilities was contrary to instructions issued by the former Ministry of Local of Government vide circular No. MLG/1333/TY/52 of 18 February, 2013.
The receivables/ debtors balances as at 30 June 2014 were Kshs.38,804,166 as per LAIFOM schedule made available for audit review. The amount was in respect of outstanding plot rates and rent.
It was however observed that:-
👉The County Executive did not age its debtors during the year under review.
👉There were no demand notes issued to debtors.
👉The County Executive does not have a policy for debtors.
16.0 Un-vouched Expenditure
👉Expenditure totaling Kshs.166,046,039 incurred by the County Executive was not examined as the records relating to the expenditure were collected by the Ethics and Anti- Corruption Commission for investigations on 20 and 21 August 2014 and 18 and 26 September 2014.
👉The records had not been returned as at the time of audit in February 2014. It was however not explained why copies were not retained for record purposes.