The Nairobi County Governor, Johnson Sakaja, faces intense scrutiny following revelations of financial irregularities highlighted by the Auditor General, Nancy Gathungu.
The report has raised serious concerns about the financial management of the county administration, placing Governor Sakaja at the centre of accountability questions.
In her comprehensive audit report of the financial statements for the fiscal year ending June 30, 2023, Gathungu has identified eight key areas of concern.
These discrepancies, ranging from misclassification of expenditure to unsupported payments, challenge the accuracy and completeness of Nairobi County's financial records.
"I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary for the purpose of the audit," stated Gathungu in her report.
"In my opinion, the financial statements do not present fairly the financial position of the County Executive of Nairobi City as of 30 June, 2023, and of its financial performance and its cash flows for the year then ended," asserted Gathungu.
Governor Sakaja now faces the daunting task of providing explanations to the Public Accounts Committee regarding the discrepancies outlined in the report.
Here are the key areas of concern raised by the Auditor General:
1) Variances Between Financial Statements and Trial Balance:
Discrepancies between the Integrated Financial Management Information System (IFMIS) trial balance and financial statements cast doubt on the accuracy and completeness of the financial records.
2) Variances Between Financial Statements and Ledger:
Variances totalling millions of Kenyan Shillings between reported amounts in financial statements and ledger balances further question the reliability of the financial data.
3) Inaccuracies in Pending Accounts Payable:
Significant variances in pending accounts payables balance raise concerns about the accuracy and completeness of financial records, with unexplained discrepancies running into billions of shillings.
Gathungu could not verify the accuracy and completeness of pending account payables balance of Ksh98 billion.
4) Misclassification of Expenditure:
Misclassification of expenditure items, contrary to approved account codes, indicates deficiencies in financial management practices, with misclassified expenditure constituting a significant portion of audited items.
5) Inaccuracies in Cash and Cash Equivalents:
Anomalies in bank balances, including inaccurate opening balances and unexplained discrepancies, highlight deficiencies in cash management and reconciliation processes.
6) Unsupported Payments for Nairobi Metropolitan Services (NMS) Contracts:
The lack of documentation to confirm outstanding payments related to Nairobi Metropolitan Services projects raises questions about the appropriateness of payments made by the County.
“...no documentation was provided to confirm the outstanding payments under NMS were transferred to the County and approved for payment appropriately. Further, the County transferred Ksh3.7 million to NMS during the financial year under review. In the circumstances, the accuracy and completeness of acquisition of assets amount of Ksh620.6 million could not be confirmed,” stated the report.
7) Unsupported Utilities, Supplies, and Services Payments:
Transactions recorded as paid but untraceable in bank statements, coupled with unsupported payment vouchers, suggest inadequate documentation and controls over expenditure on utilities and services.
The report shows Gathungu could not confirm the accuracy and completeness of the payments under utilities amounting to Kshs.163.7 million.
8) Unsupported Payments for Goods and Services:
Payments made to suppliers for goods and services without proper documentation and verification indicate potential irregularities in procurement and payment processes.
Gathungu stated, “Review of bank statements shows that various suppliers were paid a total amount of Kshs.60,866,140 for the supply and delivery of goods which included flood lights and drainage materials. However, these payments could not be traced to the ledgers while the payment vouchers were not provided for audit.”
The Auditor General's report comes at a time when Nairobi County continues to lead in revenue generation among devolved government units, collecting Ksh8.16 billion compared to Ksh36.8 billion generated by all 47 counties, according to a report by the National Treasury on financial statements in the 2022/23 fiscal year.
Governor Sakaja's administration now faces mounting pressure to address the concerns raised by the Auditor General and restore public confidence in the county's financial affairs.
