Auditor Generals Report On National Government Funds 2021 2022

AUDITOR-GENERAL’S
REPORT ON
NATIONAL GOVERNMENT FUNDS
2021/2022
VISION
Making a diﬀerence in the lives and
livelihoods of the Kenyan people
MISSION
Audit services that impact on eﬀective and
sustainable service delivery
OUR CORE VALUES

Integrity • Credibility • Relevance •
Accountability • Independence
REPORT
OF
THE AUDITOR-GENERAL
FOR
THE NATIONAL GOVERNMENT FUNDS
FOR
THE FINANCIAL YEAR
2021/2022
Table of Contents
Vote Page
Foreword ........................................................................................................................ iv
Introduction ................................................................................................................... vii
1071 The National Treasury ...................................................................................................... 1
1. Equalisation Fund ...................................................................................................... 1
2. Contingencies Fund................................................................................................... 2
3. Petroleum Development Levy Fund (Holding Account) .............................................. 3
4. Rural Enterprise Fund................................................................................................ 3
5. Covid-19 Emergency Response Fund ....................................................................... 4
6. State Officers and Public Officers Car Loan Scheme Fund........................................ 5
7. Government Clearing Agency Fund ........................................................................... 6
8. Treasury Main Clearance Fund ................................................................................. 7
9. Kenya Local Loans Support Fund .............................................................................. 9
10. African Union and Other International Organizations Subscription Fund ..................10
11. Credit Guarantee Scheme ....................................................................................... 11
12. Public Service Superannuation Fund .......................................................................11
13. Provident Fund ........................................................................................................12
14. European Widows and Orphans Pension Fund .......................................................13
15. Asian Officers Family Pensions Fund ......................................................................14
16. Asiatic Widows and Orphans Pension Fund ............................................................15
1072 State Department for Planning ....................................................................................... 16
1. National Government Constituencies Development Fund .........................................16
2. Women Enterprise Fund ...........................................................................................16
3. National Government Affirmative Action Fund ..........................................................17
1021 State Department for Interior and Citizen Services ..........................................................20
1. National Humanitarian Fund .....................................................................................20
2. Government Press Fund...........................................................................................21
1023 State Department for Correctional Services ....................................................................23
1. Prison Industries Revolving Fund .............................................................................23
2. Prison Farms Revolving Fund...................................................................................25
1091 State Department for Infrastructure .................................................................................27
1. Mechanical and Transport Fund ...............................................................................27
2. Roads Annuity Fund .................................................................................................30
1092 State Department for Transport .......................................................................................32
1. Railway Development Levy Fund (Holding Account) ................................................32
1094 State Department for Housing and Urban Development ..................................................33
1. Civil Servants Housing Scheme Fund.......................................................................33
2. Kenya Slum Upgrading, Low Cost Housing and Infrastructure Trust Fund................37
1095 State Department for Public Works .................................................................................42
1. Stores and Services Fund ........................................................................................42
1112 Ministry of Lands and Physical Planning .........................................................................44
1. Land Settlement Fund ..............................................................................................44
1132 State Department for Sports ............................................................................................46
1. Sports, Arts and Social Development Fund ..............................................................46
1152 Ministry of Energy ........................................................................................................... 50
1. Petroleum Development Fund ..................................................................................50
2. Kenya Energy Sector Environment and Social Responsibility Programme Fund ......51
1162 State Department for Livestock .......................................................................................54
1. Veterinary Services Development Fund ....................................................................54
1169 State Department for Crop Development and Agricultural Research ...............................56
1. Commodities Fund………………………………………………………………………….57
2. Agricultural Information Resource Centre Revolving Fund........................................59

1173 State Department for Co-operatives ................................................................................63
1. Co-operative Societies Liquidation Fund ..................................................................63
2. Management and Supervision Fund .........................................................................63
3. Coffee Cherry Advance Revolving Fund ...................................................................64
1184 Ministry of Labour............................................................................................................67
1. Occupational Safety and Health Fund ......................................................................67
1185 State Department for Social Security and Protection .......................................................68
1. The National Assistance Trust Fund .........................................................................68
2. Street Families Rehabilitation Trust Fund .................................................................69
1194 Ministry of Petroleum and Mining ....................................................................................70
1. Petroleum Development Levy Fund ..........................................................................70
ii
2. Petroleum Training Levy Fund ..................................................................................71
1212 State Department for Gender ..........................................................................................74
1. Uwezo Fund .............................................................................................................74
1213 State Department for Public Service................................................................................76
1. National Youth Service - Mechanical and Transport Fund ........................................76
1224 State Department for Youth Affairs ..................................................................................78
1. Youth Enterprise Development Fund ........................................................................78
1281 National Intelligence Service ...........................................................................................81
1. Intelligence Service Development Fund ....................................................................81
1311 Office of the Registrar of Political Parties ........................................................................82
1. Political Parties Fund ................................................................................................82
2041 Parliamentary Service Commission .................................................................................83
1. Parliamentary Catering Fund ....................................................................................83
iii
Foreword
This report, is a compilation of the audit reports of National Government Funds for the
year ended 30 June, 2022.
The Auditor-General is mandated by the Constitution of Kenya, under Article 229, to audit
and report on the use of public resources by all entities funded from public funds. These
entities include the National Government, County Governments, the Judiciary,
Parliament, Statutory Bodies/State Corporations, Commissions, Independent Offices,
Public Debt, Political Parties funded from public funds, other government agencies and
any other entity funded from public funds. In addition, Article 229(6) requires the Auditor-
General to confirm whether or not public resources have been applied lawfully and in an
effective way. The mandate of the Auditor-General is further expounded by the Public
Audit Act, 2015.
Article 229 (7) of the Constitution requires the Auditor-General to audit and submit reports
to Parliament or the relevant County Assembly within six (6) months after the end of the
financial year. However, Section 81(4) of the Public Finance Management Act, 2012,
reduces the timeline to three (3) months by giving entities leeway up to the end of
September to prepare and submit financial statements for audit. This reduces the duration
for audit and reporting from six (6) months given by the Constitution to three (3) months.
This has been adversely affecting the timelines for reporting, leading to backlogs and
affecting the efficiency and effectiveness for oversight by Parliament and the County
Assemblies.
Further, as previously reported, an effective mechanism for follow up on implementation

of audit recommendations is lacking and as such most audit queries recur in subsequent
audit reports due to lack of requisite action. Section 204(1)(g) of the Public Finance
Management Act, 2012 provides that the Cabinet Secretary for matters relating to finance
may apply sanctions to a national government entity that fails to address issues raised by
the Auditor-General, to the satisfaction of the Auditor-General.
However, despite numerous reports indicating lack of accountability and documents to

support the legality and effectiveness in the use of public resources, failure to apply the
requisite sanctions and consequences has resulted to some Accounting Officers not
adequately accounting for the management and use of public resources with impunity.
Lack of action and sanctions has also led to fiscal indiscipline including misallocations,
wastage of resources, lack of value for money in implementation of projects and loss of
public funds, thereby impacting negatively on development programmes. This in turn
threatens economic growth and sustainability of service delivery to citizens. There are
instances where some Accounting Officers are in breach of Section 62 of the Public Audit
Act, 2015 by failing to adequately prepare for audit which is exhibited by numerous
inaccuracies in financial statements presented for audit, lack of requisite supporting
documents, several revisions of financial statements and, in some cases, reluctance to
cooperate with the auditors during the audit process.
iv
The Office of the Auditor-General has been continuously improving on the effectiveness
and quality of the audit process to ensure that the results of audit and the
recommendations thereof are credible, relevant, reliable and value adding. This is geared
towards influencing improved decision making and positive impact on the lives and
livelihoods of citizens and other stakeholders. Provision of quality and effective audit
services and confirmation of the lawfulness and effectiveness in programme
implementation requires comprehensive scrutiny and evaluation of supporting
documents. Most critical is the physical confirmation of the existence and utilization of
projects or programmes implemented throughout the country. To achieve this requires an
independent and well-resourced audit Office with guaranteed adequate funding to enable
efficient, effective and timely execution of the audit cycle as well as retention of optimal
staffing levels to ensure continuous, quality and sustainable audit operations.
The Office continues to seek financial independence and support from Parliament and
The Executive through The National Treasury for enhancement of resources to enable it
build technical capacity, expand its presence in the counties, widen the scope and
comprehensiveness of audit and motivate staff. We continue to devolve our services
closer to the people through establishment of regional offices and construction of office
premises to accommodate our staff in order to address the audit needs at the grassroot
level. During the year under review, we established the Upper North Regional Office in
Isiolo and the North Western Regional Office in Kitale. We have so far constructed
regional offices in Garissa, Kakamega and Eldoret, while construction works in Embu is
almost complete. Plans for construction of our Headquarters in Nairobi, which is currently
at the design stage, has been delayed by lack of funding. However, the Office continues
to make appeals to Parliament and The National Treasury for adequate funds to enable
us perform our functions and achieve our mandate in enhancing accountability across
government, both at the national and county levels, and in all other entities funded from
public funds.
The audit scope has been expanding over the years due to the expansion of government
programs to ensure sustainable development and delivery of continuous and quality
services to the citizens. This has led to growth in the national budget and formation of
additional entities that I am required to audit and report on. All the over nine thousand
(9,000) Public Secondary Schools were from 30 June, 2022 required to prepare and
submit financial statements to the Auditor-General for audit and quite a number have
complied. In addition, I am required to audit and report on financial statements for all the
three hundred and fifty-eight (358) Level 4 hospitals and fourteen (14) Level 5 hospitals
separately. In the current financial year, I am also required to audit a total of two hundred
and eighteen (218) Technical and Vocational Education and Training (TVET) Institutions
and the number could increase as we are currently undertaking an evaluation exercise
with the State Department for Technical, Vocational Education and Training to identify all
institutions funded by the Exchequer including the Community Vocational Training
Institutions that are estimated to be over one thousand and two hundred (1,200)
Institutions. In addition, new projects and funds have been created that require timely
oversight.
v
1.0 Introduction
1.1 Constitutional Mandate of the Auditor-General
The Auditor-General is mandated by the Constitution of Kenya, under Article 229, to audit
and report on the use of public resources by all entities funded from public funds. These
entities include; the National Government, County Governments, the Judiciary,
Parliament, Statutory Bodies/State Corporations, Commissions, Independent Offices,
Public Debt, Political Parties funded from public funds, other government agencies and
any other entity funded from public funds. The mandate of the Auditor-General is further
expounded by the Public Audit Act, 2015.
The Constitution requires the Auditor-General to audit and submit the audit reports of the
public entities to Parliament and the relevant County Assemblies by 31 December, every
year. In carrying out the mandate, the Auditor-General, is also required, under Article
229 (6) to assess and confirm whether the public entities have utilised the public
resources entrusted to them lawfully and in an effective way.
Further, the objects and authority of the Auditor-General, as outlined in Article 249 of the
Constitution, are: to protect the sovereignty of the people; to secure the observance by
all State Organs of democratic values and principles; and, to promote constitutionalism.
The Auditor-General has also been given powers by the Constitution, under Article 252,
to conduct investigations, conciliations, mediations and negotiations and to issue
summons to witnesses for the purpose of investigations.
1.2 Responsibilities of Management and those Charged with Governance
Management is responsible for the preparation and fair presentation of the financial
statements in accordance with the International Public Sector Accounting Standards
(IPSAS), as prescribed by the Public Sector Accounting Standards Board (PSASB), and
for the submission of the financial statements to the Auditor-General in accordance with
the provisions of Section 47 of the Public Audit Act, 2015.
Management is also responsible for maintaining an effective internal control environment

necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and for the assessment of the effectiveness
of internal control, risk management and governance.
Further, Management is required to ensure that the activities, financial transactions and
information reflected in the financial statements, are in compliance with the law and other
relevant or applicable authorities, and that public resources are applied in an effective
way.
Those charged with governance are responsible for overseeing the financial reporting
process, reviewing the effectiveness of how each Management monitors compliance with
relevant legislative and regulatory requirements, ensuring that effective processes and
vii
systems are in place to address key roles and responsibilities in relation to governance
and risk management, and ensuring the adequacy and effectiveness of the control
environment.
1.3 Auditor-General’s Responsibility
My responsibility is to conduct an audit of the financial statements in accordance with
the International Standards of Supreme Audit Institutions (ISSAIs), and to issue an
auditor’s report. The audit report includes my opinion as provided by Section 48 of the
Public Audit Act, 2015, and the report is submitted to Parliament in compliance with
Article 229(7) of the Constitution.
In addition, Article 229(6) of the Constitution requires me to express a conclusion on
whether or not, in all material respects, the activities, financial transactions and
information reflected in the financial statements are in compliance with the law and other
authorities that govern them, and that public resources are applied in an effective way. I
also consider the entities’ control environment in order to give an assurance on the
effectiveness of internal controls, risk management and governance processes and
systems, in accordance with the provisions of Section 7(1)(a) of the Public Audit Act,
2015.
I am independent in accordance with Article 249(2) of the Constitution of Kenya and

ISSAI 130 on the Code of Ethics. I have fulfilled other ethical responsibilities in
accordance with the ISSAI and in accordance with other ethical requirements applicable
to performing audits of public entities in the Republic of Kenya.
1.4 Reporting Structure
The reporting structure of my report address the reporting requirements of Article 229(6)
of the Constitution of Kenya, which requires that an audit report shall confirm whether or
not public resources have been applied lawfully and in an effective way. Section 7(1) (a)
of the Public Audit Act, 2015 also requires that I provide assurance on the effectiveness
of internal controls, risk management and overall governance.
In addition, the International Standards of Supreme Audit Institutions (ISSAIs), require the
incorporation of Key Audit Matters in the report on the financial statements, which are
those matters that I determine in my professional judgment, are of most significance in
the audit of the financial statements as a whole, for the year under review.
In order to address these requirements, my audit reports contain the following:
i. Report on Financial Statements, in which I give an audit opinion on whether the

financial statements present fairly, in all material respects the financial position and
performance of the entity.
ii. Report on Lawfulness and Effectiveness in Use of Public Resources, in which
I give a conclusion on whether or not public resources have been applied lawfully
and in an effective way.
viii
iii. Report on Effectiveness of Internal Controls, Risk Management and
Governance, in which I give a conclusion on whether internal controls, risk
management and overall governance were effective.
iv. Report on Other Legal and Regulatory Requirements is included where

applicable, especially for the entities that are registered under the Companies Act,
2015 and any other enabling legislation or authorities that require such disclosure.
1.5 Audit Opinions
I have expressed different types of audit opinions based on the following criteria:
a) Unmodified Opinion
The books of accounts and underlying records agree with the financial statements and
no material misstatements were found. The financial statements present fairly, in all
material respects, the operations of the entity. The financial statements with Unmodified
Opinion are listed in Appendix A.
b) Qualified Opinion
Financial transactions were recorded and are to a large extent in agreement with the
underlying records, except for cases where I noted material misstatements or omissions
in the financial statements. The issues though material, are not widespread or persistent.
The financial statements with Qualified Opinion are listed in Appendix B.
c) Adverse Opinion
The financial statements exhibit significant misstatements with the underlying accounting
records. There exists significant disagreement(s) between the financial statements and
the underlying books of accounts and/or standards. These problems are widespread,
persistent and require considerable interventions by the management to rectify. The
financial statements with Adverse Opinion are listed in Appendix C.
d) Disclaimer of Opinion
The financial statements exhibit serious and significant misstatements that may arise from
inadequate information, limitation of scope, inadequacy or lack of proper records such
that I was not able to form an opinion on the financial operations. The financial statements
with Disclaimer of Opinion are listed in Appendix D.
The key findings noted during the audit of the financial statements for the year ended
30 June, 2022 are highlighted in the ensuing pages.
ix
THE NATIONAL TREASURY – VOTE 1071
EQUALISATION FUND
REPORT ON THE FINANCIAL STATEMENTS

Unmodified Opinion
1. There were no material issues noted during the audit of the financial statements of the
Fund.
REPORT ON LAWFULNESS AND EFFECTIVENESS IN USE OF PUBLIC
RESOURCES
Basis for Conclusion
2. Non-Compliance with the Constitution
Article 204(1) of the Constitution of Kenya requires one half per cent (0.5%) of all the
revenue collected by the National Government each year, calculated on the basis of the
most recent audited accounts of revenue received as approved by the National Assembly,
be paid into the Equalisation Fund.
As reported in the previous year, review of the financial statements for the Equalisation
Fund for the year ended 30 June, 2022 revealed that only an amount of
Kshs.12,400,000,000 out of the expected Kshs.44,517,739,850 of the total entitlement
from the financial years 2011/2012 to 2021/2022 had been transferred to the Equalisation
Fund Account as tabulated below:
Amount of Amount
Approved Audited Equalisation Fund Transferred to
Financial Revenues Entitlement the Fund
Year Base Year (Kshs.) (Kshs.) (Kshs.)
2011/2012 2008/2009 468,151,970,000 2,340,759,850
2012/2013 2009/2010 529,300,000,000 2,646,500,000
2013/2014 2009/2010 529,300,000,000 2,646,500,000
2014/2015 2012/2013 776,900,000,000 3,884,500,000 6,400,000,000
2015/2016 2012/2013 776,900,000,000 3,884,500,000
2016/2017 2012/2013 776,900,000,000 3,884,500,000 6,000,000,000
2017/2018 2012/2013 776,900,000,000 3,884,500,000
2018/2019 2012/2013 776,900,000,000 3,884,500,000
2019/2020 2012/2013 776,900,000,000 3,884,500,000
2020/2021 2016/2017 1,357,698,000,000 6,788,490,000
2021/2022 2016/2017 1,357,698,000,000 6,788,490,000
Total 8,903,547,970,000 44,517,739,850 12,400,000,000
The National Treasury had not remitted the outstanding balance of Kshs.32,117,739,850
to the Fund as at 30 June, 2022. Further, it is not clear if the Fund will receive the accrued
1
share of revenue tabulated above. Lack of disbursements casts doubt on realisation of
the Fund’s intended objective of providing basic services to the marginalized areas.
However, Management had indicated that the Equalisation Fund Appropriation Bill, 2022
was prepared and submitted to the National Assembly to authorise the disbursements of
funds due to the Equalisation Fund including the allocation for the 2021/2022 and
2022/2023 financial years, but the Bill had not been passed at the time of the audit.
In the circumstances, The National Treasury was in breach of the law.

REPORT ON EFFECTIVENESS OF INTERNAL CONTROLS, RISK MANAGEMENT
AND GOVERNANCE
Conclusion
3. There were no material issues relating to effectiveness of internal controls, risk
management and governance.
CONTINGENCIES FUND

Unmodified Opinion
Fund.

RESOURCES
Conclusion
5. There were no material issues relating to lawfulness and effectiveness in use of public
resources.
AND GOVERNANCE
Conclusion

2
PETROLEUM DEVELOPMENT LEVY FUND (HOLDING ACCOUNT)

Unmodified Opinion
Fund.
RESOURCES
Conclusion
resources.
AND GOVERNANCE
Conclusion

RURAL ENTERPRISE FUND

Basis for Adverse Opinion
10. Unbanked Cash
As previously reported, the statement of financial position reflects cash and cash
equivalents balance of Kshs.3,348,895 which relates to balances brought forward from
2012/2013 and prior years. The balances comprise of cash with District Commissioners
on account of loans repaid, interest on loans and balances held in miscellaneous deposit
accounts of Kshs.1,951,921, Kshs.108,840 and Kshs.1,288,135 respectively. However,
evidence to confirm actual existence of the balance of Kshs.3,348,895 was not provided.
Further, the balance of Kshs.1,951,921 relating to District Commissioners (Loans Repaid)
included advances amounting to Kshs.207,344 issued from the Fund to five (5) officers
working at the District Commissioner’s Office, Kisumu in the year 1997/1998. The
advances had not been surrendered as at 30 June, 2022.
In the circumstances, the accuracy and existence of the reported cash and cash
equivalents balance of Kshs.3,348,895 could not be confirmed.
11. Unreconciled Balances
As was reported in previous years, the statement of financial position for deposits as at
30 June, 2013 reflected a debit balance of Kshs.1,828,388 in respect of the Fund while
3
the Fund account for the same year reflected a balance of Kshs.397,908,774. The
significant difference of Kshs.399,737,162 between the two sets of records had not been
reconciled or explained as at 30 June, 2022.
Emphasis of Matter
12. Delay in Winding Up the Fund
I draw your attention to Part 6.3 of the financial statements which discloses that an order
for the winding up of the Rural Enterprise Fund was issued by the Minister for Finance,
through Legal Notice No.97 of 29 June, 2012 issued vide Kenya Gazette Supplement
No. 119 dated 14 September, 2012.
As previously reported, The National Treasury had formed a task force on the winding up
of dormant funds which included the Rural Enterprise Fund. Further, The National
Treasury, in consultation with the Attorney General developed a Cabinet Memorandum
on winding up of the dormant funds. This effort resulted to Revocation Orders which were
approved by the Cabinet. However, no evidence was provided to confirm whether the
Repeal Act had been passed by the National Assembly.
My opinion is not modified in respect of this matter.

RESOURCES
Conclusion
resources.

AND GOVERNANCE
Conclusion
COVID-19 EMERGENCY RESPONSE FUND

Unmodified Opinion
15. There were no material issues noted during the audit of the financial statements of
the Fund.
4
RESOURCES
Conclusion
resources.

AND GOVERNANCE
Conclusion
STATE OFFICERS AND PUBLIC OFFICERS CAR LOAN SCHEME FUND

Basis for Qualified Opinion
18. Unsupported Cash and Cash Equivalents Balance

The statement of financial position and as disclosed in Note 10 to the financial statements,
reflects cash and cash equivalents balance of Kshs.655,415,103 which includes a
balance of Kshs.139,395,452 in respect of lien. However, the Management did not
provide a cash book, bank statements, bank reconciliation statements, bank confirmation
certificate or schedules to support the balance.
In the circumstances, the accuracy and completeness of the cash and cash equivalents balance
of Kshs.655,415,103 could not be confirmed.
Emphasis of Matter
19. Low Uptake of Loans by State Officers and Public Officers
I draw your attention to Part I(a) on the background information in the financial statements
which discloses that the State Officers and Public Officers Motor Car Loan Scheme Fund
was established in 2015 through Legal Notice No.195 of 25 September, 2015 and
pursuant to guidelines provided by Salaries and Remuneration Commission on Car Loan
benefit for State Officers and Other Public Officers in December, 2014. The Fund has
however experienced low response from state officers and public officers which
compelled Management to invest in Treasury Bills so that the allocated funds do not lie
idle. The loans disbursement performance remains relatively low at 5.04% (2021 - 3.81%)
in comparison to the total current assets of Kshs.3,694,323,469 held in the Fund’s
accounts as at 30 June, 2022. The objective and purpose for which the Fund was
established may not be achieved.
5
Other Matter
20. Budgetary Control and Performance
The statement of comparison of budget and actual amounts reflects final revenue budget
and actual on comparable basis of Kshs.167,000,000 and Kshs.83,242,753 respectively
resulting to an under-collection of Kshs.83,757,247 or 50% of the budget. Similarly, the
statement reflects final expenditure budget and actual on comparable basis of
Kshs.3,572,105,000 and Kshs.3,086,670,681 respectively resulting to an
under-expenditure of Kshs.485,434,319 or 13% of the budget.
The undercollection and underperformance affected the planned activities of the Fund
and may have impacted negatively on service delivery to the public.
RESOURCES
Conclusion
21. There were no material issues relating to lawfulness and effectiveness in use of
public resources.
REPORT ON EFFECTIVENESS OF INTERNAL CONTROLS, RISK MANAGEMENT AND
GOVERNANCE
Conclusion
GOVERNMENT CLEARING AGENCY FUND

Basis for Disclaimer of Opinion
23. Unsupported Fund Balances
As previously reported, the statement of financial position reflects balances of
Kshs.300,931,776 and Kshs.52,973,896 in respect of the accounts receivables and
accounts payables respectively. The balances relate to opening balances brought forward
from 2020/2021 and earlier years. However, the amounts were not supported by ledger,
trial balance or any verifiable documents from which the receivables and payables were
drawn.
In the circumstances, the accuracy and completeness of accounts receivables and
accounts payables balances of Kshs.300,931,776 and Kshs.52,973,896, respectively
could not be confirmed.
As previously reported, the Fund has been dormant for over ten (10) years. The National
Treasury formed a task force on the winding up of dormant funds which included the
6
Government Clearance Agency Fund. Further, The National Treasury, in consultation
with the Attorney General, developed a Cabinet Memorandum on winding up of the
dormant funds. This effort resulted to Revocation Orders which were approved by the
Cabinet. However, there was no evidence provided to indicate that the Repeal Act had
been passed by the National Assembly. Management has, therefore, continued to
prepare financial statements for a dormant fund over the years.
In the circumstances, delay in the winding up process have resulted to wastefulness in

the use of public resources as well as bearing the burden of redundancy in the
maintenance of records.
RESOURCES
Conclusion
25. Because of the significance of the matters described in the Basis for Disclaimer of
Opinion section of my report, I have not been able to obtain sufficient appropriate
audit evidence to provide a basis for my audit conclusion.
AND GOVERNANCE
Conclusion
TREASURY MAIN CLEARANCE FUND

27. Long Outstanding and Unsupported Balances
The statement of financial position reflects balances of Kshs.12,503,607,446 and
Kshs.12,490,478,941 in respect of accounts receivables -debtors and accounts payables
- creditors respectively. As previously reported, the balances have been outstanding for
a long period of time and were not supported. Further, Management stated that the
amount related to old balances that were carried forward for many years and that it had
submitted a draft revocation order to the National Assembly to wind up the Fund.
However, the orders had not been acted upon by the National Assembly at the time of
audit.
In the circumstances, the recoverability of the long outstanding accounts receivables -
debtors and the discharge of the creditors could not be confirmed.
7
28. Unsupported Deficit Balance Brought Forward
The statement of financial position reflects a net financial position (closing fund balance)
of Kshs.13,128,505 which consists of a fund balance and deficit brought forward of
Kshs.14,000,000 and Kshs.871,495 respectively. However, as previously reported the
balances were not supported by any reconciliation statement.
In the circumstances, the accuracy of the closing fund balance of Kshs.13,128,505 as at
30 June, 2022 could not be confirmed.
Emphasis of Matter
29. Delay in Winding Up of the Fund
As reported previously, the Fund has been dormant for eleven (11) years. The National
Treasury formed a Task Force on the winding up of dormant funds which included the
Treasury Main Clearance Fund. Thereafter, The National Treasury sought and got legal
opinion and recommendations from the Attorney General on the winding up of the Fund.
A Cabinet Memorandum on winding up of the dormant funds was forwarded to the
Attorney General in September, 2019 who advised that draft Revocation Orders be
prepared on the same.
The Revocation Orders were prepared and submitted to the Cabinet for consideration
and approval. On 2 March, 2021, the Head of Public Service communicated to the Cabinet
approval for Revocation Order of the dormant funds. The Revocation Orders were
submitted to the Attorney General’s Office for onward transmission to the National
Assembly for approval of the winding up of the dormant funds on 12 April, 2021. However,
there was no evidence provided to confirm that the Revocation Orders had been passed
by the National Assembly and the process of winding up of the Fund had not been
completed by the time of the audit.

RESOURCES
Conclusion
resources.

AND GOVERNANCE
Conclusion
8
KENYA LOCAL LOANS SUPPORT FUND
32. Unsupported Balances in the Financial Statements
As previously reported, the statement of assets and liabilities reflects Kshs.9,045,400,
Kshs.6,364,973 and Kshs.71,595,406 in respect of the bank balance, investments at cost
and accounts receivables - accrued interest respectively. However, the amounts were not
supported with ledgers, trial balance and schedule of details or any verifiable documents
from which the interest was receivable.
In the circumstances, the accuracy and validity of the balances as at 30 June, 2022 could
not be confirmed.
As reported previously, the Fund has been dormant since June, 2006. Review of records
revealed that The National Treasury had formed a task force on the winding up of dormant
funds which included the Kenya Local Loans Support Fund. Further, The National
Treasury, in consultation with the Attorney General developed a Cabinet Memorandum
on winding up of the dormant funds. This effort resulted to Revocation Orders which were
approved by the Cabinet. However, there was no evidence provided to confirm that the
Repeal Act had been passed by the National Assembly. Management has over the years
continued to prepare financial statements using opening balances.
In the circumstances, delay in the winding up process have resulted to wastefulness in

the use of public resources as well as bearing the burden of redundancy in the preparation
of financial statements.
RESOURCES
Conclusion

AND GOVERNANCE
Conclusion
9
AFRICAN UNION AND OTHER INTERNATIONAL ORGANIZATIONS
SUBSCRIPTION FUND

Unmodified Opinion
the Fund.
Emphasis of Matter
37. Multiple Laws Guiding Operations of the Fund
As previously reported, I draw your attention to overview on the Fund financial statements
which indicates that the Fund was established under a Gazette Notice No. 10 of 2017, in
exercise of Section 24 of the Public Finance Management Act, 2012. The Public Finance
Management (African Union and Other International Organizations Subscription Fund)
Regulations, 2017 established the African Union and Other International Organizations
Subscription Fund through which Kenya’s contributions to African Union and Other
International Organizations across all Government agencies were to be paid. Until 2017,
the Government through The National Treasury had been paying subscriptions to
International Organizations through Vote R53 – Consolidated Fund Services -
Subscriptions to International Organizations under various pieces of legislation namely:
International Finance Corporation Act, CAP 466, International Development Association
Act, CAP 465, Bretton Woods Agreements Act, CAP 464, the African Development Bank
Act, CAP 492 and the Multilateral Investment Guarantee Agency Convention,1988
(Revised 2010).
Previously, the Ministries, Departments and Agencies, (MDAs) had been remitting such
subscriptions through their voted provisions within their budgets. The establishment of
the African Union and Other International Organizations Subscription Fund therefore
rendered all other individual voted provisions to be consolidated and budgeted under one
umbrella body, the African Union and Other International Organizations Subscription
Fund.
Management had not caused the revocation or repealing of the earlier laws to be in
tandem with the current legislation and therefore avert the risk of making multiple
payments to the international organizations.

RESOURCES
Conclusion
resources.
10
AND GOVERNANCE.
Conclusion
CREDIT GUARANTEE SCHEME

Unmodified Opinion
the Scheme.
RESOURCES
Conclusion
resources.

AND GOVERNANCE
Conclusion
PUBLIC SERVICE SUPERANNUATION FUND

Unmodified Opinion
43. There were no material issues noted during the audited of the financial statements of
the Fund.
RESOURCES
44. Unremitted Pension from Employer Contributions
The statement of financial position and as disclosed in Note 4 to the financial statements
reflects a balance of Kshs.8,308,743,652 in respect of receivables from exchange
transactions which includes an amount of Kshs.7,883,302,467 in respect of employer’s
11
contributions due as at 30 June, 2022. This is contrary to Section 8(c) of the Public
Service Superannuation Scheme Act, 2012 which states that, not later than ten working
days after the end of the month in which the contributions are due, the Government shall
remit an amount comprising the member’s and the Government’s contribution to the
custodian. As at the time of the audit, in February, 2023, more than seven months after
the contributions became due, out of the balance of Kshs.7,883,302,467, only an amount
of Kshs.4,012,091,972 had been received leaving a balance of Kshs.3,871,210,495
unremitted and unless it is paid together with the penalty provided for under Section 6(2)
of the Public Service Superannuation Scheme Act, 2012, contributors stand to lose
returns that would have been earned had the contributions been received in time.
In the circumstances, Management was in breach of the law.

AND GOVERNANCE
Conclusion
PROVIDENT FUND

46. Long Outstanding Receivables
The statement of financial position reflects a balance of Kshs.3,921,000 in respect of
other receivables which as disclosed in Note 9 to the financial statements represents an
amount owed by the defunct Cereals and Sugar Finance Corporation. As previously
reported, the amount has been outstanding for a long time pending conclusion of the
winding up process of the Corporation. The Fund may not recover the amount owed by
the defunct Corporation which may result to loss of public funds.
In the circumstances, the recoverability of other receivables balance of Kshs.3,921,000
was doubtful.
47. Unsupported Long Outstanding Payables
The statement of financial position reflects a balance of Kshs.9,715,111 in respect to
other pending payables and as disclosed in Note 11 to the financial statements. This
represented amounts due to National Government entities. However, as previously
reported, the supporting documents or analysis for the balance were not provided for
review. Further, the balance had remained outstanding for a long period of time.
In the circumstances, the accuracy and completeness of other pending payables balance
12
Emphasis of Matter

As previously reported, the Provident Fund does not have any surviving beneficiaries as
disclosed in Note 7 to the financial statements. The National Treasury had formed a Task
Force on the winding up of dormant funds which included the Provident Fund and in
consultation with the Attorney General developed a Cabinet Memorandum on winding up
of the dormant funds. This effort resulted to revocation orders which were approved by
the Cabinet. However, there was no evidence provided to confirm that the Repeal Act
had been passed by the National Assembly. The winding up of the Fund has taken an
unduly long time resulting into wastage of public resources.

RESOURCES
Conclusion
resources.

AND GOVERNANCE
Conclusion
EUROPEAN WIDOWS AND ORPHANS PENSION FUND

51. Doubtful Recoverability of Receivables
As reported in the previous years, the statement of financial position reflects a balance of
Kshs.16,900,000 in respect to receivables which, as disclosed under Note 12.9 to the
financial statements, represents an amount of Kshs.16,900,000 being cash owed by the
defunct Cereals and Sugar Finance Corporation. The amount had been outstanding for
more than ten (10) years pending conclusion of the winding up process of the Corporation
and the Fund may not recover the amount resulting to loss of public funds.
Under the circumstances, the recoverability of receivables accounts balance of
Kshs.16,900,000 could not be confirmed.
13
RESOURCES
Conclusion
resources.
AND GOVERNANCE
Conclusion
ASIAN OFFICERS FAMILY PENSIONS FUND

54. Unsupported Receivables

The statement of financial position reflects receivables balance of Kshs.15,200,000
which, as disclosed in Note 8 to the financial statements related to cash owed by defunct
Cereals and Sugar Finance Corporation. The amount had been outstanding for long and
no supporting documents were provided for audit. Although Management stated that a
Task Force to wind up dormant Funds including Cereals and Sugar Finance Corporation
was instituted, the recoverability of the receivable will be determined once the Task Force
Committee completes. The process had not been finalised as at the time of the audit.
In the circumstances, the accuracy, completeness and recoverability of the outstanding
account receivables balance of Kshs.15,200,000 could not be confirmed.
Other Matter
The statement of comparison of budget and actual amounts reflects final receipts budget
and actual on comparable basis of Kshs.5,297,728 and Kshs.3,000 respectively, resulting
to an underfunding of Kshs.5,294,728 or 100% of the budget. Similarly, the Fund spent a
total of Kshs.1,093,196 against an approved budget of Kshs.1,761,316 resulting to an
underexpenditure of Kshs.668,120 or 38% of the approved budget.
The underfunding and underexpenditure affected the planned activities of the Fund and
may have impacted negatively on service delivery to the public.
14
RESOURCES
Conclusion
resources.
AND GOVERNANCE
Conclusion
ASIATIC WIDOWS AND ORPHANS PENSION FUND

Unmodified Opinion
the Fund.
Emphasis of Matter
59. Delay in Winding-Up of the Fund
As previously reported, the Fund has been dormant since June, 2002 when the only
surviving beneficiary died. The National Treasury had formed a task force on the
winding-up of dormant funds which included the Asiatic Widows and Orphans Pension
Fund. Further, The National Treasury, in consultation with the Attorney General
developed a Cabinet Memorandum on winding up of the dormant funds. This effort
resulted to Revocation Orders which were approved by the Cabinet. However, there was
no evidence provided to prove that the Repeal Act had been passed by the National
Assembly. In the circumstances, the winding up of the Fund has taken an unduly long
time resulting into wastage of public resources.
RESOURCES
Conclusion
resources.
AND GOVERNANCE
Conclusion
15
STATE DEPARTMENT FOR PLANNING – VOTE 1072
NATIONAL GOVERNMENT CONSTITUENCIES DEVELOPMENT FUND

Unmodified Opinion
the Fund.
RESOURCES
Conclusion
resources.
AND GOVERNANCE
Conclusion
WOMEN ENTERPRISE FUND

65. Long Outstanding Receivables from Exchange Transactions
reflects receivables from exchange transactions balance of Kshs.3,826,850,526. The
amount includes balances of Kshs.15,704,964 and Kshs.3,413,671,660 relating to LPO
financing and Constituency Women Enterprise Schemes respectively. However, the
balances include an amount of Kshs.922,091,922 which had been outstanding for more
than one (1) year contrary to the Fund’s loans policy.
Further, the receivables balance includes loans due from financial intermediary (FI)
partners and piki piki loans advanced to field officers of Kshs.71,330,000 and
Kshs.507,170 respectively all totalling Kshs.71,837,170 out of which, an amount of
Kshs.71,613,333 represented non-performing loans. However, as previously reported,
there were ongoing court cases between the Fund and the Intermediaries. No specific
provision for bad debts was made in the financial statements to recognize the impairment.
16
In addition, the balance includes imprests and advances balance of Kshs.2,174,708
which includes salary advances of Kshs.148,081 owed by former staff members.
In the circumstances, the recoverability and completeness of the receivables from
exchange transactions totalling Kshs.993,853,336 could not be confirmed.
Other Matter
66. Unresolved Prior Year Matters
In the audit report of the previous year, several issues were raised under the Report on
Financial Statements and Report on Lawfulness and Effectiveness in Use of Public
Resources. However, Management has not resolved the issues or given any explanation
for failure to adhere to the provisions of the Public Sector Accounting Standards Board
template.
RESOURCES
Conclusion
resources.
AND GOVERNANCE
Conclusion
NATIONAL GOVERNMENT AFFIRMATIVE ACTION FUND

69. Failure to Charge Depreciation on Property, Plant and Equipment
The statement of financial position reflects property, plant and equipment balance of
Kshs.176,083,723 and as disclosed in Note 19 to the financial statements. However, the
assets were not revalued or charged depreciation to reflect the carrying amount of the
property, plant and equipment.
In the circumstances, the accuracy, valuation and completeness of the property, plant
and equipment balance of Kshs.176,083,723 could not be confirmed.
70. Inaccuracies in Cash and Cash Equivalents
The statement of financial position reflects cash and cash equivalents balance of
Kshs.610,895,558 and as disclosed in Note 17(a) to the financial statements. Review of
the respective bank reconciliation statements revealed long outstanding unreconciled
expenses in the cash books, revenues and bank payments not in cash books amounting
17
to Kshs.2,096,499, Kshs.1,435,485 and Kshs.401,526, respectively. Further, stale
cheques totalling Kshs.2,096,499 had not been reversed in the cash books at the end of
the financial year. In addition, cash book balances held in Kisii and Bungoma County
Fund Offices were supported by unsigned bank reconciliation statements while bank
reconciliations statements for balances held in Machakos County Fund Office were not
provided for audit.
In the circumstances, the existence, accuracy and completeness of cash and cash
71. Unsupported Payables
reflects payables balance of Kshs.952,000 which includes a balance of Kshs.360,000
owed to the Kenya School of Government. However, the balance was not supported with
any documents such as invoice, statement of account and Local Service Order (LSO).
In the circumstances, the accuracy, completeness and validity of payables balance of

Kshs.952,000 could not be confirmed.
72. Unsupported Provisions for Gratuity
The statement of financial position reflects provision for gratuity balance of
Kshs.18,862,058 and as disclosed in Note 15 to the financial statements. However,
Management did not maintain a schedule and analysis to support the provision.
In the circumstances, the accuracy and completeness of provision for gratuity balance of
Other Matter
Financial Statements and Report on Lawfulness, Effectiveness in Use of Public
Resources. However, Management had not resolved the issues or given any explanation
for failure to implement the recommendations.
RESOURCES
74. Failure to Use the Government E-Procurement Module
During the year under review, the Fund did not comply with the Executive Order Number
2 of 2018 on use of e-procurement module. Further, the Fund procured two separate
stand-alone modules - Integrated Financial and Programmes Management Information
System (IFPMIS) and e-board, which are still in the evaluation stage and have not been
integrated with IFMIS.
The Management did not provide satisfactory explanation for the failure to use the
e-procurement module.
18
AND GOVERNANCE
Basis of the Conclusion
75. Inadequate Governance Structure
During the year under review, the Fund’s Board did not have a Corporate Secretary as
required by the Organization structure and Section 1.20 of the Mwongozo Code of
Governance, 2015 which states that the Board will be assisted by a qualified, competent
and experienced Secretary.
In the circumstances, the effectiveness of the internal controls, risk management and
overall governance at the Fund could not be confirmed.
19
STATE DEPARTMENT FOR INTERIOR AND CITIZEN SERVICES -
VOTE 1021
NATIONAL HUMANITARIAN FUND

Unmodified Opinion
the Fund.
RESOURCES
77. Dormant Bank Accounts
Review of records provided for audit indicated that the Fund operated four commercial
bank accounts and one account at Central Bank of Kenya which were established for the
purpose of disbursing grants to Internally Displaced Persons (IDPs) under the cash
payment programme. Review of the bank statements revealed that the bank accounts
had been dormant for over two years and had a balance of Kshs.272,621,261 as at
30 June, 2022 despite the conclusion of disbursement of grants to IDPs under the cash
payment programme. This was contrary to Section 16 (2) of the Prevention, Protection
and Assistance to Internally Displaced Persons and Affected Communities Act, 2012
which provides that the Accounting Officer may, with the approval of the Cabinet
Secretary for the time being responsible for finance, invest or place on a deposit interest
earning account any of the moneys of the Fund and any interest earned on moneys so
invested or deposited shall be placed to the credit of the Fund.
In the circumstances, the effective use of the Fund’s financial resources could not be
confirmed.
AND GOVERNANCE
78. Non-Functioning Fund Committee
As reported in the previous year, although the Prevention, Protection and Assistance to
Internally Displaced Persons and Affected Communities Act, 2012 prescribes the Fund
Administration procedures including the composition and functions of the Committee and
Secretariat, there was no evidence in form of minutes to indicate that the Committee
deliberated on the matters of the Fund and directed its administration in the year under
audit as provided for under the Act. Further, no evidence was provided of an active
Secretariat as provided for in the Act.
In the circumstances, the adequacy and effectiveness of risk management and oversight
on the Fund could not be confirmed.
20
GOVERNMENT PRESS FUND
79. Long Outstanding Debtors
The statement of financial position reflects receivables from exchange transactions
balance of Kshs.189,683,941 which as disclosed in Note 10 to the financial statements
includes long outstanding debts amounting to Kshs.68,764,954 that have been
outstanding since the year 2017. However, no provision for bad and doubtful debts was
made in the financial statements for the long outstanding debts.
In the circumstances, the recoverability of the receivables from exchange transactions
balance of Kshs.68,764,954 could not be confirmed.
Kshs.325,145,992 which as disclosed in Note 8 to the financial statements includes postal
money orders amounting to Kshs.12,456,139 owed by Postal Corporation of Kenya. The
money orders relate to payments made for services rendered by the Fund for the period
between 1 July, 2019 and 30 June, 2022 but which had not been cashed. However,
confirmation from records held by Postal Corporation of Kenya revealed that the
Corporation reflected an amount of Kshs.11,802,499 as owing to the Fund as at
30 June, 2022 hence a variance of Kshs.653,640. Although Management explained that
they had engaged Postal Corporation of Kenya for recovery of the uncleared amount, no
evidence was provided to support the explanation.
In the circumstances, the accuracy of cash and cash equivalents balance could not be
confirmed.
RESOURCES
Conclusion
resources.
AND GOVERNANCE
82. Use of Old and Inefficient Equipment
As reported in the previous year, most of the Fund’s printing equipment are old and
obsolete with some having been acquired as far as back 1930. The equipment
experienced frequent breakdowns and hence incur high maintenance costs. Further, the
sourcing for spare parts for maintenance of the equipment/machines has been difficult.
In addition, review of machine performance analysis indicates a reduction in production
output per hour over the years as detailed below;
21
Production Speed at Current Production
Machine Name Installation (Pages per Hour) Speed (Pages Per Hour)
Wanup Timson no.27 12,000 5,000
Rotary 1 12,000 3,000
Platen no.6 8,000 1,300
City Line Express 35,000 22,000
In the circumstances, the use of aged equipment has increased the production cost and
hence reduced the Fund’s competitiveness in the industry.
83. Lack of an Integrated Print Production Management System
Review of the Government Press Fund production department revealed various
production phases involving other departments such as handling customer orders,
planning, production, and engineering. However, the Government Press Fund did not
have an integrated management system to manage the print production which includes
estimating and quoting, scheduling, order entry and job tracking, raw material inventory
and shop floor data collection. As a result, it was not possible to have real time tracking
of the customer orders in the chain of production to enhance efficiency in the production
process and decision making.
22
STATE DEPARTMENT FOR CORRECTIONAL SERVICES – VOTE 1023
PRISON INDUSTRIES REVOLVING FUND

84. Inaccuracies in the Statement of Cash Flows
The statement of cash flows reflects a decrease in payables by Kshs.223,236,974 while
a recalculation of the movement in payables under Note 16 to the financial statements,
revealed a decrease by Kshs.126,151,443 resulting to an unexplained variance of
Kshs.97,085,531.
In addition, the statement reflects no change in non-current receivables while a
recalculation of the movement under Note 13(b) to the financial statements revealed an
increase of Kshs.59,970,930 resulting to an unexplained variance of Kshs.59,970,930.
Further, the statement reflects an amount of Kshs.260,283,489 in respect of net cash
flows used in investing activities. This amount includes Kshs.223,236,974 relating to
decrease in payables which represents an operating activity and not an investing activity.
In the circumstances, the accuracy and completeness of the statement of cash flows
85. Overstatement of Trade and Other Payables Balance
reflects trade and other payables - creditors balance of Kshs.186,193,731 which included
an amount of Kshs.58,879,973 paid and posted in the cash book on 30 June, 2022.
However, the payment was also disclosed in the bank reconciliation statement for the
month of June, 2022 among the unpresented cheques.
In the circumstances, the accuracy of the trade and other payables - creditors balance of
reflects cash and cash equivalents balance of Kshs.7,795,251. However, one cash book
and a single bank account was maintained in the year under review for recording of
financial transactions for both the Prison Farms Revolving Fund and the Prisons
Industries Revolving Fund yet the two (2) Funds are distinct and prepare separate sets
of financial statements.
Further, the bank reconciliation statement for the Fund presented for audit reflected an
amount of Kshs.20,469,565 as payments in the bank statement not in the cash book as
at 30 June, 2022, out of which an amount of Kshs.650,000 related to 2019/2020 financial
year. The failure to record the payments in the cash book was not explained.
23
In addition, the bank reconciliation statement for the month of June, 2022 reflects
unpresented cheques totalling Kshs.115,526,747 which included stale cheques totalling
Kshs.2,284,510.
In the circumstances, the accuracy, completeness, and existence of the cash and cash
87. Unexplained Variance and Incomplete Fixed Asset Register
The statement of financial position reflects non-current assets balance of
Kshs.93,404,716 while the corresponding Note 15 to the financial statements indicates a
non-current assets balance of Kshs.94,595,861 resulting to an unexplained variance of
Kshs.1,191,145.
Further, the assets register provided for audit was not comprehensive and updated to
reflect the date/year of acquisition, cost, depreciation rate, disposals and serial numbers
as required.
In the circumstances, the completeness and accuracy of the property, plant and
equipment balance of Kshs.93,404,716 could not be confirmed.
Emphasis of Matter
88. Material Uncertainty Related to Sustainability of Services
I draw attention to Note 5 to the financial statements which discloses that if the motor
vehicle number plates production is transferred to National Transport and Safety Authority
(NTSA) or any other Government entity, the sustainability of services of the Prison
Industries Revolving Fund shall be affected adversely. As at November, 2022, production
of the number plates at Kamiti Maximum Prison was transferred to NTSA through a
Cabinet decision as a result of which production has since stopped at Kamiti Maximum
Prison resulting to the raw materials worth Kshs.101,348,772 and the fixed assets
(machinery) held at Kamiti Maximum Prison being idle. These conditions indicate that a
material uncertainty exists which may cast significant doubt on the Fund’s ability to
continue to sustain its services.
My opinion is not qualified in respect of this matter.
Other Matter
The statement of comparison of budget and actual amounts reflects a final revenue
budget amount of Kshs.608,047,134 and an actual on comparable basis amount of
Kshs.381,290,980 resulting to under collections of Kshs.226,756,156 or 37% of the
budgeted revenue. Similarly, the statement reflects final recurrent budget expenditure
amount of Kshs.652,043,729 against an actual on comparable basis expenditure of
Kshs.467,853,225 resulting to an under expenditure of Kshs.184,190,504 or 28% of the
budgeted expenditure. Management has not provided justification for the
underperformance and suppressed expenditure.
The under collection of revenue may have affected the operations and hence negatively
impacted planned activities of the Fund.
24
In the previous year audit report, several issues were raised under Report on Financial
Statements, Report on Lawfulness and Effectiveness in Use of Public Resources, and
Report on Effectiveness of Internal Controls, Risk Management and Governance.
However, Management has not resolved the issues or given any explanation for failure
to adhere to the provisions of the Public Sector Accounting Standards Board templates.

RESOURCES
Conclusion
resources.
AND GOVERNANCE
Conclusion
PRISON FARMS REVOLVING FUND

93. Unsupported Cash and Cash Equivalents
reflects cash equivalents balance of Kshs.55,704,138. However, one cash book and a
single bank account was maintained in the year under review for recording of financial
transactions for both the Prison Farms Revolving Fund and the Prisons Industries
Revolving Fund yet the two Funds are distinct and prepare separate sets of financial
statements.
Further, bank reconciliation statement for the month of June, 2022 reflects an amount of
Kshs.115,526,747 in respect of unpresented cheques out of which cheques amounting
to Kshs.2,284,510 were stale.
In the circumstances, the accuracy, completeness and existence of cash and cash
Other Matter
94. Unresolved Prior Year Audit Issues
In the audit report of the previous year, several issues were raised in the Report on
Financial Statements and Report on Lawfulness and Effectiveness in Use of Public
25
Resources. However, Management has not resolved the issues or given any explanation
for failure to resolve the issues.
RESOURCES
95. Failure to Use Information Technology in Finance and Procurement
Departments
The Prison Farms Revolving Fund was established by Legal Notice No.87 of the
Exchequer and Audit Act (Cap 412) Regulations,1993 and was deemed to be operational
from 1 July, 1992. The Fund, despite being in operation for 30 years, is yet to automate
its operations. The financial transactions processing, ledgers and financial statements are
done manually.
Further, the Fund is yet to implement e-procurement for managing the procurement
processes as required by the Public Procurement and Asset Disposal Regulations, 2020
and the Executive Order No.2 of 2018.

AND GOVERNANCE
Conclusion
26
STATE DEPARTMENT FOR INFRASTRUCTURE – VOTE 1091
MECHANICAL AND TRANSPORT FUND

Kshs.121,978,474. Review of the bank reconciliation statement for the month of
June, 2022 revealed payments in the cash book not in bank of Kshs.11,942,594 and
receipts in bank not in the cash book of Kshs.6,092,571 whose details on the dates of
payment or receipt and payee or paying party were not provided for audit review. In
addition, no records were provided to show when the payments in the cash book not in
the bank cleared in the bank. Further, no explanation was provided for not updating the
cash book with the receipts in bank statement and not in the cash book.
In the circumstances, the accuracy and completeness of the cash and cash equivalents
98. Inaccuracies in Intangible Assets Balance
reflects a Nil balance for intangible assets. However, the audited financial statements for
2020/2021 financial year reflected intangible assets balance of Kshs.5,906,199.
Management provided for audit the movement schedule of the balance from
Kshs.5,906,199 to the Nil balance reported in the year under review. Further, and as
previously reported, the Nil intangible assets balance excludes an Enterprise Resource
Planning (ERP) system procured by the World Bank through the Kenya Transport Sector
Support Programme (KTSSP) in the year 2019 at a cost of Kshs.12,397,245 with an aim
of integrating its business operations.
In the circumstances, the accuracy of the Nil intangible assets balance could not be
confirmed.
99. Unconfirmed Property, Plant and Equipment Balance
The statement of financial position and Note 14 to the financial statements reflect
property, plant and equipment balance of Kshs.3,640,633,941. However, and as
previously reported, the historical cost of property, plant and equipment balance of
Kshs.6,810,896,239 as at 30 June, 2022 was not supported by an updated fixed asset
register. The assets register presented for audit had various gaps in the details relating
to purchase prices, location, logbook number, and year of purchase. Audit verification of
assets revealed that the assets had not been tagged and therefore it was difficult to verify
the details against the register and the existence of the assets.
Further, information available indicated that the Fund occupies several parcels of land
across the Country whose details and values were not disclosed in the financial
statements. Management had not obtained ownership documents for the parcels of land.
27
In the circumstances, the valuation, accuracy and completeness of the property, plant
and equipment balance of Kshs.3,640,633,941 could not be confirmed.
100. Unsupported and Irregular Travel and Subsistence Allowance
The statement of financial performance and as disclosed in Note 5 to the financial
statements reflects travel and subsistence allowance of Kshs.101,881,651 which include
domestic travel and subsistence allowance of Kshs.34,270,659 out of which an amount
of Kshs.4,589,480 was paid as lunch and dinner allowance. However, it was noted that
the allowances were paid to officers who had not travelled outside their normal duty
stations.
Further, travel and subsistence allowances include project allowances amounting to

Kshs.60,396,792. However, an examination of documents revealed that there were no
regulated rates to guide in the payment of allowances for attendants, supervisors,
operators, drivers and mechanics.
In the circumstances, the validity and accuracy of travel and subsistence allowance
totalling Kshs.64,986,272 could not be confirmed.
101. Unsupported Expenditure on Routine Maintenance
statements reflects an amount of Kshs.274,412,500 in respect of routine maintenance of
vehicles, equipment and other assets. Included in this expenditure is Kshs.188,536,185
spent on routine maintenance of vehicles and purchase of tyres and tubes. However,
examination of payment records and other supporting documents revealed that an
expenditure of Kshs.18,035,050 was not supported with documents such as requisitions
and records on stores issues and utilization.
In addition, included in the routine maintenance of vehicles, tyres and tubes expenditure
are payments totalling Kshs.8,981,250 in respect of gravels and quarry wastes which did
not relate to maintenance of vehicles, plants and equipment. Further, although the gravels
and quarries were procured and received, no records were provided to show how they
were used.
In the circumstances, the accuracy and validity of routine maintenance expenditure of
Kshs.274,412,500 for the year ended 30 June, 2022 could not be confirmed.
102. Long Outstanding and Unconfirmed Receivables
The statement of financial position and as disclosed under Note 12 to the financial
statements reflects receivables balance of Kshs.85,047,569. Included in this balance is
Kshs.48,710,152 due from Kisii County Government which remained outstanding from
2018/2019 financial year. It was also noted that in a letter dated 11 October, 2022, the
County acknowledged an amount of Kshs.48,000,000 as the balance owed to the Fund
resulting to an unexplained variance of Kshs.710,152. Further, included in the receivables
balance is Kshs.36,337,417 due from Nairobi Metropolitan Services (NMS). However, no
confirmation had been provided from the NMS confirming the balance. In addition,
Management did not provide the Fund’s debt collection policy for audit review.
28
In the circumstances, the accuracy and recoverability of the receivables balance of
Kshs.85,047,569 as at 30 June, 2022 could not be confirmed.
103. Trade and Other Payables
reflects trade and other payables balance of Kshs.19,754,813 as at 30 June, 2022.
Included in the balance is an opening balance of Kshs.13,729,635 relating to customer
tender deposits dating back to financial year 2017/2018. No explanation was provided for
holding the deposits for that long.
In the circumstances, the accuracy and validity of the tender deposits opening balance of
Other Matter
resulting in a revenue shortfall of Kshs.143,392,699 or 18% of the budget. Similarly, the
Fund spent an amount of Kshs.490,077,153 against an approved budget of
Kshs.780,825,554 resulting in an under-absorption of Kshs.290,748,401 or 37% of the
budget.
The under-funding and under-absorption affected the planned activities of the Fund and
impacted negatively on service delivery to the public.
105. Unresolved Prior Year Audit Matters
In the audit report of the previous year, a number of issues were raised. However,
Management has not resolved the issues or disclosed the prior year matters as provided
by the Public Sector Accounting Standards Board (PSASB) and The National Treasury’s
Circular dated 30 June, 2022.
106. Poor Financial Performance
During the year under review, the Fund reported a deficit of Kshs.128,695,987 (2020/2021
deficit - Kshs.208,927,996) resulting in depletion of accumulated reserves from
Kshs.1,626,608,870 as at 1 July, 2021 to Kshs.1,497,912,883 as at 30 June, 2022.
Management did not disclose strategies put in place to reverse the unfavourable trend
which if not addressed timely, may adversely affect the Fund’s ability to sustain its
services.
RESOURCES
Conclusion
public resources.
29
AND GOVERNANCE
108. Non-Compliance with Authorized Staff Establishment
Review of the Fund's authorized staff establishment revealed that in-post staff in various
cadre were 981 against an authorized establishment of 2,695 resulting in a shortage of
1,714. The staff shortage, if not addressed, could impact negatively on the operations of
the Fund.
ROADS ANNUITY FUND

Unmodified Opinion
the Fund.
Other Matter
and actual on comparable basis of Kshs.11,822,186,340 and Kshs.14,472,865,319
respectively, resulting to an over-funding of Kshs.2,650,678,979 or 22% of the budget.
Further, the statement indicates that out of the budgeted receipts of
Kshs.11,822,186,340, the Fund budgeted to spend only Kshs.2,994,000,000, leaving
Kshs.8,828,186,340 not allocated for spending. In addition, the actual receipts of
Kshs.14,472,865,319 exceeded actual expenditure of Kshs.2,937,429,510, resulting to
surplus cash of Kshs.11,535,435,809 that remained unutilized as at 30 June, 2022.
According to the supporting documents provided for audit, the expenditure of
Kshs.2,937,429,510 was utilized on one (1) project-Lot 33 (Ngong-Kiserian-Isinya-
Kajiado-Imaroro Road), representing ninety-one (91) km of roads out of the initial target
of four hundred and sixty-five (465) km under the first phase of the annuity programme.
However, no disclosure was provided on why the Management budgeted to spend only
Kshs.2,994,000,000 despite there being enough projects to fully absorb the receipts
budget of Kshs.8,828,186,340 not allocated for spending.
In the circumstances, the Fund may not achieve its objectives as stipulated in Regulation
5 of the Public Finance Management (Roads Annuity Fund) Regulations, 2015.
30
RESOURCES
Conclusion
public resources.

AND GOVERNANCE
112. Effectiveness of the Road Annuity Oversight Committee
As previously reported, review of the composition of the Fund’s Oversight Committee
revealed that, the Committee is not duly constituted as required by Regulation 12(1) of
the Public Finance Management (Roads Annuity Fund) Regulations, 2015 as there was
no representation from the Kenya Bankers Association and two other persons being
eminent professionals drawn from the engineering, accounting or legal professions. It
was therefore not clear whether the Oversight Committee as constituted discharged its
oversight functions as provided in the law.
In the circumstances, the Oversight Committee may not effectively discharge its mandate
as envisaged by the Public Finance Management (Roads Annuity Fund)
Regulations, 2015.
31
STATE DEPARTMENT FOR TRANSPORT – VOTE 1092
RAILWAY DEVELOPMENT LEVY FUND (HOLDING ACCOUNT)

113. Unaccounted for Disbursements
The statement of receipts and payments and Note 7 to the financial statements reflects
transfers to The National Treasury of Kshs.26,844,351,913 for railway related
development. However, records held at Kenya Railways Corporation which is the
implementing agency indicated that the amounts received by the Corporation and
amounts paid by The National Treasury to various Government entities on behalf of the
Corporation totalled Kshs.26,792,446,818. The resultant difference of Kshs.51,905,095
was not explained or reconciled.
In the circumstances, the accuracy and completeness of transfers to The National
Treasury of Kshs.26,844,351,913 could not be confirmed.
114. Irregular Payments from the Fund
The statement of receipts and payments reflects transfers to The National Treasury of
Kshs.26,844,351,913 as disclosed in Note 7 to the financial statements. Included in the
amount are payments totalling Kshs.2,099,848,494 for the purchase of Meter Gauge
Railway (MGR) locomotives. However, Section 8(3) of the Miscellaneous Fees and
Levies Act, 2010 provided that the purpose of the Railway Development Levy shall be to
provide funds for the construction and operation of a Standard Gauge Railway (SGR)
network in order to facilitate the transportation of goods. No justification was provided for
the utilization of the funds on the purchase of the MGR locomotives.
In the circumstances, the regularity of the expenditure of Kshs.2,099,848,494 on
purchase of MGR locomotives could not be confirmed.
RESOURCES
Conclusion
public resources.
AND GOVERNANCE
Conclusion
32
STATE DEPARTMENT FOR HOUSING AND URBAN
DEVELOPMENT – VOTE 1094
CIVIL SERVANTS HOUSING SCHEME FUND

117. Inaccuracies in the Financial Statements
The statement of financial position reflects a balance of Kshs.2,569,169,152 in respect of

work-in-progress. However, work in progress was reported under current assets instead
of non-current assets.
In addition, the statement of comparison of budget and actual amounts reflects final
expenditure budget of Kshs.271,984,361. However, the total approved budget was
Kshs.3,250,600,000 comprising of recurrent expenditure of Kshs.310,600,000 and
development expenditure of Kshs.2,840,000,000. The resulting variance of
Kshs.2,978,615,639 was not explained or reconciled.
Further, the statement of comparison of budget and actual amounts reflects final revenue
budget of Kshs.473,556,292. However, the approved receipts budget was
Kshs.3,400,000,000 resulting to an unexplained and unreconciled variance of
Kshs.2,926,443,708.
In the circumstances, the accuracy and completeness of the financial statements for the
financial year ended 30 June, 2022 could not be confirmed.
118. Unsupported Revenue Balances
118.1 Mortgage Interest
The statement of financial performance reflects mortgage interest income of
Kshs.203,188,793 as disclosed in Note 6 to the financial statements. However,
Management did not provide for audit review the detailed monthly analysis indicating
amounts that accrued from each loan.
In the circumstances, the accuracy and completeness of mortgage interest of
118.2 Investment Interest
The statement of financial performance reflects investment interest of Kshs.152,308,983
as disclosed in Note 7 to the financial statements. However, Management did not provide
detailed analysis in support of the balance.
In the circumstances, the accuracy and completeness of investment interest of

33
118.3 Rental Income
The statement of financial performance reflects rental income of Kshs.95,722,648 as
disclosed in Note 9 to the financial statements. However, Management did not provide
detailed analysis in support of the balance.
In the circumstances, the accuracy and completeness of rental income of
119. Unsupported Refurbishment of Residential Buildings
Included in the repairs and maintenance balance of Kshs.16,836,662 is expenditure on
refurbishment of residential buildings of Kshs.10,797,713 as disclosed in Note 14 to the
financial statements. However, Management did not provide supporting schedules with
details of the refurbished houses.
In the circumstances, the accuracy and completeness of refurbishment of residential
buildings expenditure of Kshs.10,797,713 for the year ended 30 June, 2022 could not be
confirmed.
120. Unsupported Cash and Cash Equivalents Balances
Kshs.2,221,363,832 as disclosed in Note 16 to the financial statements. However,
included in the balance is an amount of Kshs.51,423,249 in respect of deposit bank
account. Bank reconciliation statement for the month of June, 2022 reflects payments in
bank statement not in the cash book totalling Kshs.1,259,840 whose clearance status as
at the time of the audit was not disclosed. Additionally, the statement includes two (2)
unpresented cheques amounting to Kshs.2,750,500 paid on 30 June, 2022 vide payment
voucher Nos.10115 and 10116 to the Fund Administrator whose details were not provided
for audit purposes.
Further, included in the balance is Kshs.1,137,283 in respect of operation bank account
and for which bank confirmation certificate was not provided for audit review. Additionally,
included in the balance is Kshs.2,168,803,300 in respect of four (4) fixed deposit banks
accounts and for which Management did not provide for audit verification the bank
confirmation certificates. Further, no approvals from The National Treasury for depositing
the funds in fixed deposit bank accounts was provided for audit.
balance of Kshs.2,221,363,832 as at 30 June, 2022 could not be confirmed.
121. Unsupported and Long Outstanding Current Receivables from Exchange
Transactions
The statement of financial position reflects current portion of receivables from exchange
transactions balance of Kshs.676,392,613 as disclosed in Note 17(a)(i) to the financial
statements. Included in the balance are mortgage principal arrears-HFCK of
Kshs.142,662,920, mortgage interest-HFCK of Kshs.26,401,375, investment interest
arrears of Kshs.8,176,666 and credit interest on bank of Kshs.2,813,475 whose
supporting schedule were not provided for audit review.
34
In addition, the balance includes rent and service charge arrears balance of
Kshs.377,317,476 whose supporting schedule did not disclose persons or institutions
from whom the rent and service charge arrears were due from.
Further, the balance includes an amount of Kshs.109,647,557 due from the Principal
Secretary, Ministry of Lands and which had been outstanding for several years.
In the circumstances, the recoverability, accuracy and completeness of current
receivables from exchange transactions balance of Kshs.676,392,613 could not be
confirmed.
122. Unsupported Long-Term Receivables from Exchange Transactions
The statement of financial position reflects long-term receivables from exchange
transactions balance of Kshs.6,558,557,448 as disclosed in Note 17(b) to the financial
statements. However, the supporting schedules provided for audit in respect of each
category of the reported balances were incomplete as they did not reflect key
beneficiaries information such as names, personal numbers, job groups, dates of the
loans, amounts of loans issued, repayment periods, opening loan balances, repayments
during the year, closing loan balances and locations of the houses. In addition,
Management did not provide for bad and doubtful debts during the year.
In the circumstances, the recoverability, accuracy and completeness of long-term
receivables from exchange transactions balance of Kshs.6,558,557,448
could be confirmed.
123. Inaccuracies in Work-In-Progress Balance
The statement of financial position reflects work-in-progress balance of
Kshs.2,569,169,152 as disclosed in Note 18 to the financial statements. However,
Management did not provide for audit review the analysis of the balance per project. In
addition, the balance includes purchase of houses for sale of Kshs.1,046,000,000 and
which ought to have been disclosed as land and buildings.
Further, the balance includes expenditure on statutory fees and other charges of
Kshs.4,783,624 which is at variance with the ledger’s negative balance of Kshs.4,783,624
resulting to an unexplained and unreconciled variance of Kshs.9,567,248.
Additionally, the balance includes construction cost of Kshs.1,377,777,649 which is at
variance with the ledger balance of Kshs.1,405,876,084 resulting to an unexplained and
unreconciled variance of Kshs.28,098,435.
In the circumstances, the accuracy and completeness of the work-in-progress balance of
Kshs.2,569,169,152 as at 30 June, 2022 could not be confirmed.
124. Unexplained Variances Between Property, Plant and Equipment and Fixed
Assets Register Balances
The statement of financial position reflects property, plant and equipment net book value
balance of Kshs.877,238,301 as disclosed in Note 19(a) to the financial statements.
However, the following anomalies were noted;
35
i. A comparison between the financial statements and fixed asset register balances
revealed unexplained and unreconciled variances as tabulated below:
Financial Fixed Assets
Statements Register Variance
Description (Kshs.) (Kshs.) (Kshs.)
Net Land and Buildings Rental 864,743,611 888,534,142 (23,790,531)
- Investment Property
Motor Vehicle 30,190 40,252 (10,062)
Furniture and Fittings 4,699,411 2,953,706 1,745,705
Computers 6,903,614 1,688,741 5,214,873
Plant and Equipment 861,475 3,888,131 (3,026,656)
ii. The depreciation amount of Kshs.20,884,361 in the property, plant and equipment
movement schedule could not be traced to the fixed assets register.
iii. Desktop computers and tablets with a balance of Kshs.3,925,310 were wrongly
classified under land and buildings in the assets register.
iv. The assets register reflects plant and equipment additions of Kshs.700,000 while
the property, plant and equipment movement schedule reflect additions of
Kshs.451,000 resulting to an unexplained and unreconciled variance of
Kshs.249,000.
In the circumstances, the accuracy and completeness of the property, plant and
125. Investment Properties with no Ownership
The statement of financial position reflects net land and buildings rental - investment
property balance of Kshs.864,743,611 as disclosed in Note 20 to the financial statements.
However, ownership titles for parcels of land on which some housing units are located
were not provided for audit review. The properties include Kileleshwa Gichugu I,
Kileleshwa Gichugu II, Kilimani-Dennis Pritt, Park Road-Nairobi, Jogoo Road-Nairobi,
Kibera Highrise, Mukenia South B, Kileleshwa Flats, Shauri Moyo-Kisumu, Kiambu,
Bondeni-Nakuru, Machakos and Embu.
In the circumstances, the ownership of the investment properties of Kshs.864,743,611
Other Matter
The statement of comparison of budget and actual amounts reflects actual expenditure
amount of Kshs.192,737,179 against an approved budget of Kshs.271,984,361 resulting
in an under expenditure of Kshs.79,247,182 (or 29%) of the budget. The
underperformance affected the planned activities and may have impacted negatively on
service delivery to the public.
Financial Statements, Report on Lawfulness and Effectiveness in Use of Public
36
Resources, and Report on Effectiveness of Internal Controls, Risk Management and
Governance. However, Management has not resolved the issues or given explanations
for failure to do so, contrary to the reporting format prescribed by the Public Sector
Accounting Standards Board and The National Treasury Circular dated 6 July, 2022.

RESOURCES
Conclusion
128. There were material issues relating to lawfulness and effectiveness in use of public
resources.
AND GOVERNANCE
Conclusion
KENYA SLUM UPGRADING, LOW COST HOUSING AND

INFRASTRUCTURE TRUST FUND
130. Unauthorized Administrative and Other Operating Costs
The statement of financial performance reflects administrative and other operating costs
of Kshs.54,151,293 against an approved budget of Kshs.50,000,000 resulting in an
unapproved overexpenditure of Kshs.4,151,293. Further, the expenditure includes
administration fees of Kshs.1,232,430 and various payments to staff totalling
Kshs.18,843,736 whose basis and justification were not provided. In addition, out of the
payments to staff, an amount of Kshs.5,884,819 was described as payments to various
officers and no supporting documentation or details of payments were provided for audit.
In the circumstances, the accuracy and validity of administrative and other operating costs
131. Unsupported Subsidy from Disposal of Houses
statements reflects subsidy from sale of houses of Kshs.90,150,000. The subsidy arose
from transfer of two hundred and twenty-seven (227) housing units of the Mavoko
Sustainable Neighbourhood Project to the Civil Servants Housing Scheme at
Kshs.632,150,000 against a market value (Acquisition Costs) of Kshs.722,300,000
resulting to a subsidy of Kshs.90,150,000. However, the approved Cabinet memo
authorizing the sale/transfer of the 227 units to the Civil Servants Housing Scheme was
not provided. Further the subsidy of Kshs.90,150,000 was a loss to the Fund and no
37
justification was provided as to why the loss was absorbed by the Fund yet the housing
units were intended for sale to civil servants at cost price.
In the circumstances, the completeness and validity of the subsidy amount of
reflects cash and cash equivalents balance of Kshs.518,262,835 which includes
Kshs.218,263,555 held at a local bank. Review of the bank reconciliation statement for
the month of June, 2022, revealed three unpresented cheques totalling Kshs.174,000
were stale as at 30 June, 2022. Further, there were receipts in the bank statement not
yet recorded in the cash book amounting to Kshs.19,670,039, which included receipts
amounting to Kshs.4,543,965 that relate to the period between 04 August, 2016 and
31 December, 2020 and a further Kshs.5,538,346 which relates to the period
09 January, 2021 to 31 December, 2021. In addition, a receipt of Kshs.18,175,583 made
on 30 June, 2022 was not supported.
Management did not provide an explanation why these long outstanding receipts were
not recorded in the cash book.
133. Undisclosed Imprests Balance
Review of the bank reconciliation statement for the month of June, 2022 revealed that
payments totalling Kshs.6,474,600 were made to staff on 30 June, 2022 through a local
bank but were not reflected as outstanding imprest as at the close of the year. Further,
no documents were provided to indicate when the activities were to take place.
In the circumstances, the accuracy and validity of the nil imprest balance as at
30 June, 2022 could not be confirmed.
134. Unsupported Current Receivables from Exchange Transactions
reflects current receivables from exchange transactions balance of Kshs.360,709,990
which includes mortgage receivable balance of Kshs.28,559,990 and receivable from the
Civil Servants Housing Scheme Fund of Kshs.332,150,000. The amount was the
outstanding balance from the transfer of two hundred and twenty seven (227) housing
units. However, the analysis of the mortgage receivables balance of Kshs.28,559,990
was not provided for audit.
In the circumstances, the accuracy of the current receivables from exchange transactions
135. Unsupported Non-Current Receivables from Exchange Transactions
reflects non-current receivables from exchange transactions balance of
38
Kshs.1,210,257,625. The amount includes advance payments of Kshs.349,169,394,
mortgage receivable of Kshs.556,881,489 and contract retention of Kshs.304,206,742.
However, detailed analysis to support the advance payments balance of
Kshs.349,169,394 and mortgage receivables of Kshs.556,881,489 were not provided.
Further, the contract retention balance of Kshs.304,206,742 was similarly included under
payables from exchange transactions. The basis for the inclusion of retention money as
a receivable was not provided.
In the circumstances, the accuracy, completeness and validity of the non-current

receivables from exchange transactions balance of Kshs.1,210,257,625 could not be
confirmed.
136. Unsupported Work-In-Progress
reflects work-in-progress balance of Kshs.7,818,429,056. However, the balance includes
an unexplained adjustment of Kshs.395,632,323 described as understatement of
advance in prior year.
In the circumstances, the accuracy and completeness of the work-in-progress balance of

Kshs.7,818,429,056 could not be confirmed.
137. Inaccuracies in the Statement of Cash Flows
The statement of cash flows reflects net receipts and net payments to related parties of
equal amounts of Kshs.750,000,000 which as reflected under Note 18(a) to the financial
statements relates to Kenya Informal Settlement Improvement Project. Review of the
projects financial statements indicated that the transactions related to reimbursement of
funds transferred to Safaricom for National Housing Project wages and that the funds
were not accounted for in the statement of financial performance. However, no
explanation was provided for failure to account for the funds in the statement of financial
performance.
Further, the statement reflects prior year net receipts from related parties’ amount of
Kshs.114,955,197 which did not have a corresponding payment. In addition, the amount
of Kshs.114,955,197 was at variance with the amount of Kshs.4,147,765,009 reflected
under Note 18(a) to the financial statements, resulting to an unexplained variance of
Kshs.4,032,809,812.
In the circumstances, the accuracy and completeness of the statement of cash flows
138. Lack of an Updated Fixed Assets Register
reflects property, plant and equipment balance of Kshs.2,702,280,033. However, the
Management did not maintain an updated asset register contrary to Regulation 143(1) of
the Public Finance Management (National Government) Regulations, 2015 which
requires the Accounting Officer to be responsible for maintaining a register of assets
under his or her control or possession.
39
In the circumstances, the existence, accuracy and completeness of the property, plant
and equipment balance of Kshs.2,702,280,033 could not be confirmed.
Other Matter
139. Pending Bills
As disclosed in Note 15 to the financial statements are pending bills due to contractors
for work done and certified totalling to Kshs.172,547,235. Management has not provided
reasons for non-payment of the pending bills despite having a bank balance of
Kshs.518,262,835 as at 30 June, 2022. The Fund risks incurring significant unquantified
interest costs and penalties due to delays in settling invoiced bills. In addition, failure to
settle bills during the year in which they relate adversely affects provisions of the
subsequent year to which they have to be settled as a first charge.
The statement of comparative budget and actual amounts reflects final receipts budget
and actual on a comparable basis of Kshs.1,265,000,000 and Kshs.1,271,665,607
respectively resulting to an overfunding of Kshs.6,665,607 or 0.5% of the budget.
Similarly, the Fund expended Kshs.403,985,139 against an approved budget of
Kshs.1,340,000,000 resulting to an underexpenditure of Kshs.936,014,861 or 70% of the
budget.
The underperformance affected the planned activities and may have impacted negatively
on service delivery to the public.
RESOURCES
141. Presentation and Disclosure of the Financial Statements – Non-Compliance
with Public Sector Accounting Standards Board Guidelines
The financial statements of the Fund for the year ended 30 June, 2022 were not prepared
in accordance with the recommended reporting template by the Public Sector Accounting
Standards Board (PSASB) revised on 30 June, 2022. The following unsatisfactory
matters were observed on the presentation and disclosure of the statement of cash flows;
i. The statement of cash flows only contained net cash flows from operating activities
and omitted the net cash flows from investing activities and financing activities. This
is despite the fact that the statement of financial position and the statement of
changes in net assets indicate that there were cash flows from investing and
financing activities respectively.
ii. The statement of cash flows did not have a disclosure note on net cash flows from
operating activities whereas the recommended reporting template requires the Fund
to include a disclosure note.
iii. The financial statements did not contain a statement on the following areas though
they are recommended in the financial reporting template:
40
a) The Corporate Governance Statement;
b) The Management Discussions and Analysis Section; and
c) The Environmental and Sustainability Reporting Section.
In the circumstances, the presentation and disclosure of the Fund’s financial statements
did not comply with the PSASB reporting guidelines.

AND GOVERNANCE
Conclusion
41
STATE DEPARTMENT FOR PUBLIC WORKS – VOTE 1095
STORES AND SERVICES FUND

143. Lack of Underlying Records and Approved Budget
As previously reported, Management did not provide the underlying records used to
prepare the financial statements by way of approved budget and trial balance. In addition,
the financial statements presented for audit did not include the statement of comparison
of budget and actual amounts as per the prescribed reporting template issued by the
Public Sector Accounting Standards Board (PSASB).
In the circumstances, the accuracy and completeness of the financial statements could
not be confirmed.
144. Unsupported Receivables from Exchange Transactions
balance of Kshs.1,232,261 and as disclosed in Note 9 to the financial statements which
had been outstanding for more than four (4) years. However, as previously reported,
Management did not provide any documentation or information in support of this balance.
In addition, no provision for bad and doubtful debts was made in respect of the amount.
In the circumstances, the accuracy and recoverability of the receivables from exchange
transactions balance of Kshs.1,232,261 could not be confirmed.
145. Unsupported Inventories
The statement of financial position reflects inventories balance of Kshs.197,048,168 and
as disclosed in Note 10 to the financial statements. However, Management did not
provide for audit the supporting documents including stock take schedules and stock
ledgers. In addition, the amount had remained the same over the years without an
explanation from the Management.
In the circumstances, the accuracy and existence of the inventory balance of
146. Trade and Other Payables from Exchange Transactions
The statement of financial position reflects trade and other payables from exchange
transactions balance of Kshs.76,808,202 and as disclosed in Note 11 to the financial
statements. However, the following anomalies were observed:
146.1 Unsupported Suspense Account Balance
Included in the trade and other payables from exchange transactions balance of
Kshs.76,808,202 is a suspense account balance of Kshs.19,641,489. However, as
previously reported, supporting documents for the balance were not provided for audit.
42
In the circumstances, the accuracy, existence and completeness of the suspense account
146.2 Unsupported Payments Received in Advance
Included in the trade and other payables from exchange transactions balance of
Kshs.76,808,202 is payments received in advance balance of Kshs.57,166,713.
However, as previously reported, the documents in support of the balance by way of bank
statements or a schedule indicating dates of the deposits were not provided for audit
review.
In the circumstances, the accuracy and completeness of the payments received in
advance balance of Kshs.57,166,713 could be confirmed.
147. Unsupported Bank Overdraft/Long Term Portion of Borrowing
The statement of financial position reflects borrowings-bank overdraft (CBK) balance of
Kshs.283,595,154 and as disclosed in Note 12 to the financial statements. However, as
reported previously, Management did not provide for audit the supporting documents for
this balance. This was contrary to Regulation 83(3) of Public Finance Management
(National Government) Regulations, 2015 which requires that a National Government
overdraft at the Central Bank of Kenya shall be retired by the end of the financial year.
In the circumstances, the accuracy and regularity of the bank overdraft balance of
148. Ineffective Audit Committee
Review of Fund’s records revealed that the Audit Committee of the State Department for
Public Works met twice during the year under review. This was contrary to Regulation
179(1) of the Public Finance Management (National Government) Regulations, 2015
which states that the audit committee shall meet at least once in every three months.
In the circumstances, the effectiveness of the Audit Committee over the Fund’s operations
RESOURCES
Conclusion
AND GOVERNANCE
Conclusion
43
MINISTRY OF LANDS AND PHYSICAL PLANNING – VOTE 1112
LAND SETTLEMENT FUND

151. Long Outstanding Receivables from Exchange Transactions
balance of Kshs.12,039,439,278 and as disclosed in Note 13 to the financial statements.
Included in the balance were long term loans repayments due and development loans
issued balances of Kshs.6,811,916,396 and Kshs.68,966,377 respectively both totalling
Kshs.6,880,882,773. Review of records provided revealed that some of these loans were
issued to settlers as far back as the year 1962 and have remained outstanding to date.
In addition, Fund Management has no clear policy on evaluation of the account
receivables from time to time to determine the recoverability of the outstanding loans.
In the circumstances, the accuracy and recoverability of the non-current receivables from
exchange transactions balance of Kshs.6,880,882,773 could not be confirmed.
152. Variance in Long Term Outstanding Interest Receivables
balance of Kshs.12,039,439,278 which as disclosed in Note 13 to the financial statements
includes an amount of Kshs.5,158,556,505 relating to outstanding long term interest
receivables. However, the latter balance is at variance with the supporting schedule
balance of Kshs.5,163,007,149 resulting in an unreconciled variance of Kshs.4,450,644.
Further, the interest has accumulated over the years on loans issued to settlers since the
year 1962 and the Fund has continued to compound cumulative interest on the loans
without due consideration to their recoverability.
In the circumstances, the accuracy and recoverability of the outstanding long-term
interest receivables balance of Kshs.5,158,556,505 could not be confirmed.
RESOURCES
153. Undistributed Land
153.1 Kisima Njoro for Resettlement of Internally Displaced Persons (IDPs) in
Nakuru County
As previously reported, Kisima Njoro land was purchased at a cost of Kshs.396,984,000
as per agreement for sale dated 3 October, 2012 for resettlement of Internally Displaced
Persons (IDPs). However, audit verification of the land carried out in the month of
October, 2022, revealed that the land had not been surveyed or sub-divided and,
therefore, the beneficiaries had not been settled ten (10) years after the purchase of the
land.
44
153.2 Mikanjuni Farm in Kilifi County
As previously reported, the Fund purchased Mikanjuni Farm at a cost of
Kshs.377,000,000 as per agreement for sale dated 22 April, 2020 for resettlement of
informal settlers. Although a list of beneficiaries was provided for audit by the Land
Adjudication and Settlement Officer of Kilifi County, the farm was still listed as
undistributed by the Fund as of October, 2022. No justification was given for not
distributing and settling the informal settlers.
153.3 Kadza Ndani Land in Mombasa County
As previously reported, the Fund purchased three (3) parcels of land at Kadza Ndani in
Mombasa County at a cost of Kshs.378,000,000 as per sale agreement dated
11 September, 2020 for resettlement of informal settlers. Although a list of beneficiaries
was provided by the Land Adjudication and Settlement Officer of Mombasa County, the
land was still listed as undistributed as of October, 2022. No justification was given for not
distributing and settling the informal settlers.
In the circumstances, the objective for which the land was acquired and value for money
had not been achieved.
AND GOVERNANCE
154. Lack of Risk Management Policy
During the year under review, the Fund did not have in place Risk Management Policy.
As a result, there was no formal approved processes and guidelines on how to identify,
assess and mitigate operational, legal and financial risks.
In the circumstances, the Management of the Fund is not in a position to evaluate, rank
and prioritize critical risks and channel resources towards mitigating identified risks.
155. Weak Control Environment in Field Offices
Field verification during the month of September, 2022 in ten (10) sampled land
adjudication and settlement offices revealed the following unsatisfactory matters;
i. The stations were under-staffed with none having an accountant or an officer with
financial management background to manage the funds disbursed to the stations.
ii. The stations operated a bank account for funds received for the office administration
but did not maintain a cash book. Further, the monthly bank reconciliation statements
had not been prepared and submitted to The National Treasury with a copy to the
Office of the Auditor-General as stipulated under Regulation 90(1) of the Public
Finance Management (National Government) Regulations, 2015.
iii. Inadequate office space, no filing cabinets and a filing system which made retrieval
of records difficult.
In the circumstances, internal controls, risk management and governance systems were
not effective.
45
STATE DEPARTMENT FOR SPORTS – VOTE 1132
SPORTS, ARTS AND SOCIAL DEVELOPMENT FUND

The statement of financial position and Note 29 to the financial statements reflects cash
and cash equivalents balance of Kshs.1,304,437,854 as at 30 June, 2022. However, a
total of Kshs.1,304,385,284 held in seven (7) bank accounts was not supported by
certificates of bank balances.
balance of Kshs.1,304,437,854 as at 30 June, 2022 could not be confirmed.
157. Unaccounted for Returns for Promotion and Development of Sports
The statement of financial performance and Note 23 to the financial statements reflects
transfers to Government Implementing Agencies and Sports Organizations amounting to
Kshs.13,786,295,836 which includes an amount of Kshs.10,605,595,467 in respect of
promotion and development of sports. However, returns amounting to
Kshs.6,715,627,315 for sports promotion and development were received by the Fund,
leaving an amount of Kshs.3,889,968,152 not accounted for by the respective
Federations and Organizations.
Further, the Fund continued to disburse money to sports organizations that had not
accounted for previous moneys contrary to the provisions of Regulation 15(5) of the
Public Finance Management (Sports, Arts and Social Development) Regulations, 2018
which provides that a recipient who fails to comply with Paragraph (2)(3) shall not be
eligible for any subsequent disbursement until full compliance.
In the circumstances, the regularity, accuracy and completeness of promotion and
development of sports returns amounting to Kshs.10,605,595,467 could not be confirmed.
158. Irregular Payment of Board Sitting Allowance
an amount of Kshs.4,774,000 in respect of remuneration to Oversight Board which
includes an amount of Kshs.70,000 paid to a Board Member as sitting allowances for
chairing Board meetings. However, the Chairperson was not appointed as required by
Regulation 8(4) of the Public Finance Management (Sports, Arts and Social Development
Fund) Regulations, 2018 which states that the President shall appoint one of the
members to be the Chairperson of the Board.
In the circumstances, the regularity of the sitting allowances amounting to Kshs.70,000
46
159. Understated Office Rental Costs
general administrative expenses amounting to Kshs.120,733,096 which includes an
amount of Kshs.12,408,702 in respect of office rental costs. However, review of the lease
agreement revealed that the lease was renewed on 22 October, 2021 and office rent
adjusted upwards resulting to an increase by Kshs.508,148 which was not paid or
disclosed in the financial statements.
In the circumstances, the accuracy and completeness of the office rental costs amounting
to Kshs.12,408,702 could not be confirmed.
Other Matter
The statement of comparison of budget and actual amounts reflects final revenue budget
and actual on comparable basis of Kshs.15,257,440,000 and Kshs.13,744,770,386
respectively resulting to an underfunding of Kshs.1,512,669,614 or 10% of the budget.
Similarly, the statement reflects final budget expenditure and actual on comparable basis
of Kshs.14,168,139,564 and Kshs.13,980,042,979 resulting to underabsorption of
Kshs.188,096,585 or 1% of the budget.
The underfunding and underabsorption of the available funds affected the planned
activities and may have impacted negatively on service delivery to the public.
In the audit of the previous year, several issues were raised. Management indicated that
it had resolved prior year audit issues. However, supporting documents including
invitations to appear before Parliamentary Committee, the Committee’s
recommendations and implementation reports were not provided for audit review as
required by the Public Sector Accounting Standards Board template and The National
Treasury’s Circular Ref: AG/4/16/3/Vol.3(66) dated 06 July, 2022.
RESOURCES
162. Late Submission of Financial Statements
The Fund’s financial statements for the year ended 30 June, 2022 were submitted to the
Office of the Auditor-General on 14 November, 2022, forty-three (43) days after the
statutory deadline date of 30 September, 2022. This was contrary to provisions of
Section 84(3) of the Public Finance Management Act, 2012 which states that, not later
than three months after the end of each financial year, the Administrator of a National
Public Fund shall submit the financial statements prepared under this section to the
Auditor-General.
47
163. Non-Compliance in Presentation of the Financial Statements
Review of the financial statements for the year ended 30 June, 2022, revealed that
Management presented the financial statements which had roman page numbering for
preamble information. However, the financial statements page numbering starts from
page 32 leaving out pages of number 1 to 31. Similarly, the footnotes to the financial
statements also revealed inconsistencies in page numbering.
In the circumstances, the financial statements do not comply with the financial reporting
guidelines issued by the Public Sector Accounting Standards Board.
164. Irregular Disbursements to World Under 20 Championship
The Fund disbursed amounts totalling Kshs.1,361,000,000 to World Under 20
Championship Committee in the 2019/2020 and 2020/2021 financial years to facilitate the
preparation and hosting of the World Under 20 Championship Competition in Nairobi,
Kenya which happened during 2021/2022 financial year. The event had its own
Organizing Committee which was gazetted vide Gazette Notice No.1911 of
01 March, 2019. However, review of the procurement documents revealed that
procurement of goods, works and services were conducted through restricted tender
method. No explanation was provided to justify the choice of the restricted procurement
method as required by Section 102(1) of the Public Procurement and Asset Disposal
Act, 2015.

AND GOVERNANCE
165. Weak Corporate Governance Structure
Review of the Fund’s corporate governance system revealed that Board Members and
Chairperson of the Fund were appointed by the Head of Public Service. This was contrary
to Regulation 8(3)(4) of the Public Finance Management (Sports, Arts and Social
Development Fund) Regulations, 2018 which states that the person nominated under
paragraph (2)(f)(g)(h) shall be appointed by the Cabinet Secretary. The President shall
appoint one of the members appointed under this regulation to be the chairperson of the
Board. Further, the Oversight Board passed resolutions affecting the operations of the
Fund during four (4) different Board meetings attended by three (3) Board Members
contrary to Regulation 8(8) of the Public Finance Management (Sports, Arts and Social
Development Fund) Regulations, 2018 which states that the quorum for the conduct of
meetings of the Board shall be four members. In addition, five (5) Oversight Board
minutes for the meetings held during the year were not signed.
In the circumstances, Management was in breach of the law and the efficiency and
effectiveness of governance systems could not be confirmed.
48
166. Failure to Appoint a Substantive Chief Executive Officer
Review of the Fund’s personnel records and financial statements submitted for audit,
revealed that, the Fund was headed by an Acting Chief Executive Officer since
12 February, 2019. This was contrary to Regulation 12(1)(2) of the Public Finance
Management (Sports, Arts and Social Development) Regulations, 2018 which state that
there shall be a secretariat of the Fund which shall consist of a Chief Executive Officer
and such other staff as are necessary for the proper discharge of the functions of the
Fund. The Chief Executive Officer and other staff of the Secretariat shall be appointed
competitively in consultation with the Public Service Commission.

167. Lack of Internal Audit Function and an Audit Committee
The Fund had not established an internal audit function and an Audit Committee of the
Board during the year under review. This was contrary to Section 73(1) and (5) of the
Public Finance Management Act, 2012 which provides for the establishment of the
internal audit function and an Audit Committee. As such the Fund did not benefit from
the assurance and advisory services from the internal audit function as well as oversight
from the Audit Committee.
49
MINISTRY OF ENERGY – VOTE 1152
PETROLEUM DEVELOPMENT FUND

Unmodified Opinion
the Fund.
Other Matter
169. Budgetary Performance and Control
The statement of comparison of budget and actual amounts reflects receipts budget and
actual amounts on comparable basis of Kshs.2,333,000,000 and Kshs.2,346,184,703
respectively resulting to an over collection by Kshs.13,184,703 or 0.6% of the budget.
Similarly, the Project spent an amount of Kshs.2,335,647,077 against the approved
budget of Kshs.2,333,000,000 resulting to an over-expenditure of Kshs.2,647,077 or 0.1
% above the approved budget.
The over collection of revenue and over-expenditure was as a result of interest income
and general expenses which were not budgeted for and Management has not explained
the failure to budget for the income and expenditure.
RESOURCES
170. Irregular Utilization of the Fund Resources
As disclosed in Note 3 to the financial statements, the statement of receipts and payments
reflects transfers to other Government Entities of Kshs.2,333,000,000. The Fund
Management transferred the funds to various Government entities and one private entity
all of which have no responsibility in the oil and petroleum industry, contrary to Section
4(4) of the Petroleum Development Fund Act, No.4 of 1991 (Revised 2012), which
provides that there shall be paid out of the Petroleum Development Funds such monies
as are necessary for the development of common facilities for distribution or testing of oil
products and matters relating to the development of the oil industry.
Further, Management did not provide explanations to support how the funds were utilized
upon being transferred to the entities listed below;
Amount
No. Payee (Kshs.)
1. Ministry of Energy 386,000,000
2. Kenya Association of Manufacturers 35,000,000
3 Kenya Energy Sector - Environment and Social Responsibility 72,000,000
Programme
50
Amount
No. Payee (Kshs.)
4. Rural Electrification and Renewal Energy Corporation 1,740,000,000
5. Nuclear Power and Agency 100,000,000
Total 2,333,000,000

AND GOVERNANCE
Conclusion
KENYA ENERGY SECTOR ENVIRONMENT AND SOCIAL

RESPONSIBILITY PROGRAMME FUND

Unmodified Opinion
the Fund.
Other Matter
The statement of comparison of budget and actual amounts reflects budgeted revenue
and actual on comparative basis of Kshs.72,000,000 and Kshs.86,052,723 respectively
resulting to revenue overcollection of Kshs.14,052,723 or 20% of the budget. Further, the
Fund budgeted to spend Kshs.72,000,000 but spent Kshs.68,258,437 resulting in under
expenditure of Kshs.3,741,563 or 5%.
The under absorption of funds affected the planned activities and may have impacted
negatively on service delivery to the public.
RESOURCES
174. Low Contribution to the Fund
As previously reported, the projected contributions towards the Fund by eight (8)
Agencies, based on the 2019-2029 Action Plan, revealed that out of the expected
contribution of Kshs.824,000,000, only Kshs.230,000,000 or 28% was realized from three
(3) Agencies while five (5) Agencies had not made any contributions over the last three
years as detailed below;
51
Total
Proposed Contribution Contribution
Phase Two Allocation Received in
Allocation for Last the Last Deficit in
No. Organization (2019-2029) 3 Years 3 Years Contribution
(Kshs.) (Kshs.) (Kshs.) (Kshs.)
1 Ministry of Energy 659,000,000 197,700,000 222,000,000 -24,300,000
(MOE)
2 Kenya Electricity 5,000,000 1,500,000 0 1,500,000
Transmission
Company
3 Geothermal 54,000,000 16,200,000 0 16,200,000
Development
Company
4 Nuclear Power and 12,000,000 3,600,000 0 3,600,000
Energy Agency
5 Kenya Power and 10,000,000 3,000,000 2,000,000 1,000,000
Lighting Company
Limited
6 Energy and 20,000,000 6,000,000 6,000,000 0
Petroleum
Regulatory Authority
7 Kenya Electricity 10,000,000 3,000,000 0 3,000,000
Generating Company
8 Rural Electrification & 54,000,000 16,200,000 0 16,200,000
Renewable Energy
Corporation
Total 824,000,000 247,200,000 230,000,000 17,200,000
No explanation was given as to why the five (5) Agencies were not contributing in
accordance with the agreement.
In the circumstances, the non-contribution to the Fund is a violation of the terms of
agreement and may impact negatively on the operations of the Fund and its ability to
achieve the intended goals and objectives.
175. Low Utilization of Funds on Core Activities
The Ministry of Energy entered into a contract with the Kenya Forest Service to procure
goods, works and services required for the project from Community Forest Association
and to be financed out of the proceeds of the Fund. Review of the financial records
revealed that out of an expenditure of Kshs.10,476,848 relating to afforestation at various
forest areas, only an amount of Kshs.3,303,068 or 32% was incurred on the afforestation
projects. The balance of the expenditure of Kshs.7,173,780 or 68% was incurred on other
expenses that were not related to afforestation. Further, Management of the Fund did not
have control of the procurement records and thereby affecting the accountability of the
process.
In the circumstances, the objectives of the Fund may not be attained.
52
AND GOVERNANCE
Conclusion
53
STATE DEPARTMENT FOR LIVESTOCK – VOTE 1162
VETERINARY SERVICES DEVELOPMENT FUND

177. Unsupported Property, Plant and Equipment Balance

Kshs.29,596,333 and as disclosed in Note 12 to the financial statements. However,
detailed analysis of individual assets costs, accumulated depreciation and net book value
under the various classes of assets was not provided for audit.
178. Long Outstanding Receivables
The statement of financial position reflects receivables from non-exchange transactions
balance of Kshs.374,800. The balance relates to outstanding imprest of Kshs.98,000 and
rent arrears of Kshs.276,800 due from various staff and have been outstanding for more
than one year. However, no provision for doubtful debts was made in the financial
statements for the outstanding debts. In addition, there was no evidence of progress
made to recover these debts.
In the circumstances, the accuracy, completeness and recoverability of the receivables
from non-exchange transactions balance of Kshs.374,800 could not be confirmed.
RESOURCES
Conclusion
public resources.

AND GOVERNANCE

180. Lack of Enterprise - Wide Risk Management (ERM)
As previously reported, there was no documented enterprise-wide risk management
process and policies in place during the year under review to effectively guide the
enterprises risk management processes at large. It was not clear how the Management
managed risk exposure. This was in contravention of Regulation 165(1)(a) and (b) of the
Public Finance Management (National Government) Regulations, 2015 which requires
54
the Accounting Officer to ensure that the entity develops risk management strategies,
which include fraud prevention mechanism; and the entity develops a system of risk
management and internal control that builds robust business operations.
In the circumstances, internal controls and risk management systems were not effective.
55
STATE DEPARTMENT FOR CROP DEVELOPMENT AND
AGRICULTURAL RESEARCH – VOTE 1169
COMMODITIES FUND

181. Unsupported Prior Year Adjustments
reflects revenue reserves of (Kshs.11,981,926,000) which includes a prior year
adjustment figure of (Kshs.1,006,000) dating back to 2016/20217 financial year. Although
Management explained that the prior year adjustments arose after a reconciliation of
loans, the reconciliation amounts were not supported by the loan statements.
In the circumstances, the validity, accuracy and completeness of the prior year
adjustments of (Kshs.1,006,000) could not be confirmed.
182. Lack of Logbooks for Motor Vehicles
Kshs.17,364,000 whose original cost as disclosed in Note 21 to the financial statements
was Kshs.170,172,000. The balance of Kshs.170,172,000 includes motor vehicles with a
cost of Kshs.65,208,000. However, the Fund did not have logbooks for one motor vehicle
and one motorcycle costing Kshs.8,859,358 and Kshs.111,071 respectively, both totalling
Kshs.8,970,429.
In the circumstances, ownership status of the motor vehicle and the motorcycle valued at
183. Long Outstanding Loans
The statement of financial position reflects long term receivables of Kshs.657,067,000
which as disclosed in Note 18 (iv) to the financial statements is a net of gross loans and
advances of Kshs.15,805,522,000 and of a total provision of Kshs.14,686,786,000 or 93%
of the gross amounts.
Review of loans disbursement records revealed that the balance includes a loan number
LN0377 of Kshs.31,100,000 for coffee establishment that had been disbursed to a farmer
in Nyeri on 2 March, 2016 and was to be repaid within 18 months. However, the farmer
had not finished servicing the loan by the renegotiated repayment date of 30 June, 2021
and the outstanding balance as at 30 June, 2022 was Kshs.46,289,452.
Further, the balance includes loans that were inherited from Agriculture and Food
Authority, Sugar Board and Coffee Development Fund that are non-performing and have
outstanding overdue total principal and interest arrears balances totalling
Kshs.19,287,452,848.
56
In the circumstances, the accuracy and recoverability of the receivables from exchange
transactions - gross loans and advances of Kshs.15,805,522,000 could not be confirmed.
184. Failure to Revalue Fully Depreciated Assets
Kshs.17,364,000. However, Note 21 to the financial statements reflects fully depreciated
property, plant and equipment with a historical cost value of Kshs.140,128,248 whose
residual values over the remaining useful life of assets was not estimated and disclosed
in the financial statements. This indicates a possible material variance between the fair
value and the carrying value of the assets necessitating a revaluation as required under
paragraph 49 of IPSAS 17 - property, plant and equipment.
Further, the Fund has no assets and liabilities management policy contrary to Paragraph
4(4.5) of The National Treasury Policy on Assets and Liabilities Management in the public
sector.
In the circumstances, it has not been possible to confirm the fair statement of the property,
plant and equipment net book value of Kshs.17,364,000 reflected in the financial
statement.
185. Irregular Payment of House Allowances
The statement of financial performance reflects Kshs.115,697,000 in respect of employee
costs. However, review of the payroll records for the year under review revealed that there
were employees whose house allowances exceeded the approved rate by the Salaries
and Remuneration Commission (SRC) as per their respective grades resulting in an
over-expenditure of Kshs.3,270,250. No evidence was provided to confirm if approval for
the payments of the allowances was granted by SRC.
In the circumstances, the regularity of the house allowance payment of Kshs.3,270,250
RESOURCES
186. Lack of an Approved Staff Establishment and Remuneration Structure
During the year under audit, the Fund did not have an updated approved staff
establishment hence it was not possible to establish the optimal levels or number of
employees per post.
In addition, the salary structure and scale used by the Fund for payment of employees’
salaries and allowances was not approved by the Salaries and Remuneration
Commission contrary to Article 230(4) (a & b) of the Constitution.
In the circumstances, the regularity of the payments of salaries and allowances could not
be confirmed.
187. Irregular Procurement of Security Expenses
The statement of financial performance reflects an amount of Kshs.100,402,000 in
respect of use of goods and services which includes a payment of Kshs.1,174,000 that
57
was made to a security firm. This was as a result of a contract extension to provide
security service at Kshs.40,000 plus VAT per guard per month. The contract was an
extension of an earlier contract dated 1 January, 2017 whose charges for security
services was Kshs.27,543 plus VAT per guard per month.
In the circumstances, it was not possible to confirm if value for money was realized for
Kshs.1,174,000 expenditure on security services.
188. Board of Trustees Matters
The statement of financial performance reflects remuneration of trustees of
Kshs.17,160,000 and as disclosed under Note 11 to the financial statements. However,
the appointment letters for two (2) Board Members were not provided for audit review.
The Fund Management vide a letter dated 16 December, 2019 requested the Principal
Secretary, State Department for Crops Development and Agricultural Research for the
appointment letters but no evidence was provided to indicate that they were received.
In addition, the Fund did not have a substantive holder for the position of Corporate
Secretary. Minutes of the Board meetings were taken by the Legal Manager on behalf of
the Managing Trustee but no evidence inform of delegation of authority or appointment
letter was provided for audit.
189. Failure to Prepare Financial Statements for the Staff Car Loan and Mortgage
Scheme
Note 23 to the financial statements reflects investment in staff mortgage loan and car loan
of Kshs.115,011,000 and Kshs.11,326,000 respectively. However, the Fund did not
prepare financial statements for the schemes and submit them for audit as required by a
Circular of 17th December, 2014 on Car Loan and Mortgage Schemes for State Officers
and other Public Officers of the Government of Kenya.
The National Treasury through a memo dated 20 June, 2022 gave Management the
authority to open and operate a Commodities Staff Mortgage Account. Management
opened an account with a local bank and deposited Kshs.30,000,000 to the account
without entering into a contractual agreement with the bank on the management of the
scheme. In addition, the status report on the transition from the Housing Finance
Company (HFC) Scheme to the Cooperative Scheme was not provided for audit review.
In the circumstances, Management contravened the requirements of the Salary and
Renumeration Commission circular on car loan and mortgage schemes.
190. Irregular Investment of Surplus Funds in Fixed Deposits at Commercial
Banks
The reported cash and cash equivalents balance of Kshs.1,880,202,000 includes
Kshs.1,794,659,000 being fixed deposits held in commercial banks, as disclosed under
Note 17 (C) to the financial statements. This was contrary to The National Treasury
Circular of 26 March, 2018 which directed all State Corporations and Semi-Autonomous
Government Agencies (SAGAs) to invest surplus funds in Treasury Bills and/or Treasury
Bonds directly through Central Bank of Kenya without intermediaries. All funds previously
58
held in fixed deposits in commercial banks/financial institutions were not to be rolled over
but retired and invested in Treasury bills/bonds. Although Management provided authority
from National Treasury dated 13 November, 2017 in support of the fixed deposits, the
letter only authorizes the Fund to invest in on call deposits.
In the circumstances, the regularity of the investment of Kshs.1,794,659,000 in fixed

deposits accounts could not be confirmed.
AND GOVERNANCE
Conclusion
AGRICULTURAL INFORMATION RESOURCE CENTRE

REVOLVING FUND
The statement of financial performance reflects expenditure on purchase of goods and
services of Kshs.2,475,395 while the corresponding Note 4 to the financial statements
reflects an amount of Kshs.2,575,395 resulting to an unreconciled variance of
Kshs.100,000.
Further, Note 8 to the financial statements reflects internet connection expenses of
Kshs.654,288 out of which VAT payment of Kshs.7,569 was recorded as Kshs.75,680
resulting to overstatement of Kshs.68,111.
In addition, the statement of changes in net assets reflects opening capital replacement
development reserve balance of Kshs.10,881,738 as at 1 July, 2021. However, audited
financial statements for the previous year reflected a balance of Kshs.9,282,448 as at 1
July, 2020 resulting to an unreconciled variance of Kshs.1,599,290.
In the circumstances, the accuracy and fair presentation of the financial statements could
not be confirmed.
193. Understatement of Property, Plant and Equipment Balance
reflects property, plant and equipment net book balance of Kshs.336,683. However, the
balance excludes fully depreciated assets with total original cost of Kshs.38,347,572 but
which were still in use and had not been revalued. This is contrary to Paragraph 49 of the
International Public Sector Accounting Standard (IPSAS) No.17 on property, plant and
equipment, which provides for revaluation of property, plant and equipment every three
to five years.
59
equipment balance of Kshs.336,683 could not be confirmed.
194. Inaccuracies in Cash and Cash Equivalents Balance
Kshs.923,285 and a comparative balance of Kshs.809,219. However, and as previously
reported, the comparative balance was the amount as per the bank statement and not
the cash book balance of Kshs.277,052. Further, reflected in the respective bank
reconciliation statement was unbanked cash amount of Kshs.18,000 which Management
explained was as a result of an amount of Kshs.102,000 being recorded as Kshs.120,000.
No explanation was provided by Management for failure to adjust the cash book
accordingly.
In the circumstances, the accuracy and completeness of cash and cash equivalents
balance of Kshs.923,285 could not be confirmed.
195. Unsupported Receivables from Exchange Transactions Balance
reflects receivables from exchange transactions balance of Kshs.7,804,209. Review of
the debtors ageing analysis revealed that debtors amounting to Kshs.7,316,169 have
been outstanding for more than one (1) year. However, no provision for bad and doubtful
debts was made for the outstanding debts and Management had not provided evidence
of efforts made to collect the debts.
Further, the receivables balances were not supported with relevant documents including
individual debtors’ statements and contract documents.
In the circumstances, the accuracy and completeness of receivables from exchange

transactions balance of Kshs.7,804,209 could not be confirmed.
196. Long Outstanding Current Liabilities
reflects current liabilities balance of Kshs.1,498,598. Review of the supporting ledger
revealed that the payables have been long outstanding with some dating back to the
financial year 2017/2018 for which none of the creditors has laid claim on the amounts.
However, the Management did not explain why these payables had remained unpaid.
In the circumstances, the accuracy and existence of the current liabilities balance of
197. Unsupported Daily Subsistence Allowance
statements reflects employee costs of Kshs.38,894,500 relating to daily subsistence
allowances. Included in the expenditure are payments of Kshs.36,762,800 made to
facilitators and trainees involved in generating baseline data for livestock masterplan
development at ward level for the State Department for Livestock. However, the
expenditure was not supported with signed daily attendance registers.
60
In the circumstances, the propriety, accuracy and completeness of the daily subsistence
allowances expenditure of Kshs.38,894,500 could not be confirmed.
Other Matter
198. Failure to Disclose Material Uncertainty in Relation to Sustainability of
Services
The statement of financial performance reflects a deficit of Kshs.820,932 resulting into an
accumulated deficit of Kshs.2,216,159. This material uncertainty casts significant doubt
on the Fund’s ability to continue to sustain its services and may face challenges in settling
obligations as and when they may fall due.
RESOURCES
199. Lack of Approved and Balanced Budget
The statement of comparison of budget and actual amounts reflects total budgeted
income and expenditure of Kshs.41,400,000 and Kshs.23,419,036 respectively.
However, the amounts were not supported with the approved budget. Further, the
statement reflects actual expenditure of Kshs.54,676,672 resulting to an over expenditure
of Kshs.31,257,636. This was contrary to Regulation 33 of Public Finance Management
(National Government) Regulations, 2015 which provides that, the expenditure entered
in national government budget estimates shall be authorised for one financial year only
and that budget shall be balanced.
200. Non-Adherence to the Provisions of the Public Procurement Regulations
Contrary to Regulation 40 of the Public Procurement and Asset Disposal Regulations,
2020, the procurement plan provided for audit review was not prepared in accordance
with the set format and was not approved by the Cabinet Secretary.
Further, there was no evidence that the annual departmental procurement plans were
submitted to the Accounting Officer by heads of user departments prior to the
commencement of the financial year.
In addition, there was no evidence that the Fund prepared and submitted quarterly reports
on implementation of the annual procurement plan to the Cabinet Secretary.
In the circumstances, Management was in breach of the Regulations.
AND GOVERNANCE
201. Failure to Appoint Members to the Board of Directors
Section 2, page V of the financial statement lists seven (7) persons including the Fund’s
director as being members of the Board of Directors. However, review of records revealed
that the Fund did not have a duly appointed and functional Board. The Fund therefore
61
lacked the governance structure as prescribed in the Exchequer and Audit (Agricultural
Information Resource Centre Revolving Fund) Regulations, 1993.
In the circumstances, risk management and governance structures were not effective.
202. Internal Controls Weaknesses
Assessment of the Fund’s internal control environment revealed that the Fund did not
have an internal audit function to continuously monitor implementation of internal controls.
No evidence was provided to confirm that internal audit activities were performed on the
Fund. Further, during the year under review the Fund did not have a documented Risk
Management Policy and did not perform any risk assessments. In addition, the Fund
Management had not established a disaster recovery/business continuity plan.
In the circumstances, the Fund’s internal controls were not effective.
62
STATE DEPARTMENT FOR CO-OPERATIVES – VOTE 1173
CO-OPERATIVE SOCIETIES LIQUIDATION FUND

Unmodified Opinion
the Fund.

RESOURCES
Conclusion
public resources.

AND GOVERNANCE
Conclusion
MANAGEMENT AND SUPERVISION FUND

]

The statement of financial position and Note 4 to the financial statements reflect cash and
cash equivalents balance of Kshs.2,536,230. However, the balance was not supported
with a cash book and a bank reconciliation statement. Further, Management did not open
a separate bank account for the Fund but instead operated the Fund from the State
Department for Cooperatives Deposit Account.
207. Long Outstanding Debts
management and supervision fees - debtors balance of Kshs.10,219,347. Review of the
schedules provided for audit revealed that these debts remained un-recovered for more
than ten (10) years. It was not clear why these debts remained uncollected and no
evidence of Management’s effort to recover the debts was provided.
63
In the circumstances, the accuracy and recoverability of the debtors balance of
Kshs.10,219,347could not be confirmed.

RESOURCES
Conclusion
public resources.
AND GOVERNANCE
Conclusion
COFFEE CHERRY ADVANCE REVOLVING FUND

The financial statements presented for audit had the following inaccuracies:
i. The statement of financial performance reflects Nil balance in respect of other
income (CCARF 3% Admin Charges) while the supporting schedules reflects an
amount of Kshs.4,569,522.
ii. The statement of financial position reflects cash and cash equivalents balance of
Kshs.2,917,791,246 and a comparative balance of Kshs.2,867,405,160 while the
supporting Note 13 to the financial statements reflects Kshs.2,898,209,112 and
Kshs.2,838,428,505 resulting to variances of Kshs.19,852,134 and
Kshs.28,976,655 respectively.
iii. The statement of financial position reflects current receivables from exchange
transactions balance of Kshs.101,396,534 and comparative balance of Kshs.2,571
while the supporting Note 14 (b) to the financial statements reflects
Kshs.101,396,494 and Kshs.13,400,216 resulting to variances of Kshs.40 and
Kshs.13,397,645 respectively.
iv. The statement of financial position reflects current liabilities amounting to
Kshs.6,181,918. However, the balance was not supported by any note to the
financial statements.
v. The statement of financial position reflects total assets balance of
Kshs.3,032,138,972. However, total equity and liabilities amounts to
Kshs.3,025,381,697 resulting in an unexplained variance of Kshs.6,757,274.
64
vi. The statement of cash flows reflects net cash flows from operating activities
amounting to Kshs.151,785,620. However, the corresponding Note 17 to the
financial statements reflects an amount of Kshs.89,361,314 resulting in an
unexplained variance of Kshs.62,424,305.
In the circumstances, the presentation, accuracy and completeness of the above
balances as reflected in the financial statements could not be confirmed.
211. Omission in Presentation and Disclosure of the Financial Statements
Review of the financial statements revealed that the financial statements were not signed
by the Chairman of the Board and Appendix 1 on implementation status of the
Auditor-General’s recommendations which appears on page 31 of the financial
statements was not signed by the Managing Director. In addition, Note 14(c) to the
financial statements reflects disclosures on movement of Equity Investment together with
impairment allowances/provision. However, the source and intent of the disclosure was
not clear. This is contrary to the Public Sector Accounting Standard Board Reporting
Template (Revised 2022).
In the circumstances, presentation and disclosure of the financial statements was not in
the format prescribed by the Public Sector Accounting Standards Board.
RESOURCES
212. Failure to Prepare Annual Workplan and Budget for the Fund
The Fund did not prepare an annual work programme and budget for the financial year
ended 30 June, 2022. In the foregoing circumstances, it was impossible to establish the
Fund’s approved activities and cost estimates thereof for the financial year under review
as envisaged. This was in contravention of Regulation 23(1) of the Public Finance
Management (Coffee Cherry Advance Revolving Fund) Regulations, 2020 which states
that, “at least six months before the commencement of each financial year, the Board
shall cause to be prepared estimates of the revenue and expenditure of the fund for that
year”.
Further, Regulation 6(2) of the Public Finance Management (Coffee Cherry Advance
Revolving Fund) Regulations, 2020 stipulates that the expenditure on the Fund shall be
on the basis of and limited to annual work programmes and cost estimates which shall be
prepared by the Administrator at the beginning of every financial year and approved by
the Board.
213. Late Submission of the Annual Report and Financial Statements
The Fund submitted the annual financial statements to the Office of the Auditor-General
on 2 November, 2022, two (2) months after the deadline of 30 September, 2022. This
was contrary to Section 47(1) of the Public Audit Act, 2015 which requires the financial
65
statements to be submitted to the Auditor-General within three months after the end of
the fiscal year to which the accounts relate.
214. Irregular Investment of Undisbursed Funds in Call Accounts at a Commercial
Bank
The reported cash and cash equivalents balance of Kshs.2,917,791,246 includes an
amount of Kshs.2,894,433,219 invested in call deposits held at a local bank as disclosed
in Note 13 to the financial statements. This was contrary to The National Treasury Circular
of 26 March, 2018 which directed all State Corporations and Semi-Autonomous
Government Agencies (SAGAs) to invest surplus funds in Treasury Bills and/or Treasury
Bonds directly through Central Bank of Kenya without intermediaries. All funds previously
held in fixed deposits in commercial banks/financial institutions were not to be rolled over
but retired and invested in Treasury bills/bonds.
Further, the balances held with the commercial banks on call deposit have accumulated
unapplied interest of Kshs.278,824,709. Unapplied funds do not benefit from interest,
unless rolled over as part of the principal balances. This has denied the Fund the benefit
of a higher return on those unapplied funds.
In the circumstances, Management was in breach of The National Treasury directive.
AND GOVERNANCE
Conclusion
66
MINISTRY OF LABOUR – VOTE 1184
OCCUPATIONAL SAFETY AND HEALTH FUND

216. Long Outstanding Payables
The statement of financial position reflects trade and other payables from exchange
transactions balance of Kshs.681,213 and as disclosed in Note 10 to the financial
statements. Review of documents provided for audit revealed the balance comprises of
Kshs.300,000 and Kshs.381,213 in respect of audit fees and retention fees respectively
which have remained outstanding for a period of more than one year. No plausible
explanation was provided for non-payment of the outstanding payables before the end of
the financial year under review.
In the circumstances, the completeness and accuracy of the trade and other payables
from exchange transactions balance of Kshs.681,213 could not be confirmed.
217. Variance in Comparative Balance-Specialized Plant and Equipment
The statement of financial performance reflects comparative amount in respect to
purchase of specialized plant and equipment of Kshs.13,365,540. However, audited
financial statements for the year ended 30 June, 2021 did not reflect an amount in respect
to purchase of specialized plant and equipment.
In the circumstances, the existence and accuracy of the comparative amount on purchase
of specialized plant and equipment of Kshs.13,365,540 could not be confirmed.

RESOURCES
Conclusion
public resources.
AND GOVERNANCE
Conclusion
67
STATE DEPARTMENT FOR SOCIAL SECURITY AND PROTECTION –
VOTE 1185
THE NATIONAL ASSISTANCE TRUST FUND

Unmodified Opinion
the Fund.
Other Matter
The statement of comparison of budget and actual amounts reflects total actual
expenditure of Kshs.39,438,331 against total actual receipts of Kshs.35,336,560.
However, the Fund did not prepare an itemized budget contrary to Regulation 32(4) of
the Public Financial Management (National Government) Regulations, 2015 which
requires that budget proposals to be submitted in the prescribed formats that support
program-based budgeting and classification of expenditure in economic classes.
Management did not provide explanation for the anomaly.
In the circumstances, the efficiency and effectiveness of the budgetary making process
RESOURCES
Conclusion
public resources.
AND GOVERNANCE
223. Lack of an Internal Audit Department and Audit Committee
The Fund has not established an internal audit function and an Audit Committee of the
Board. This is contrary to Section 73(1) and (5) of the Public Finance Management Act,
2012 which provides for the establishment of the internal audit function and an Audit
Committee. The Fund therefore, did not benefit from the assurance and advisory services
from the internal audit function as well as oversight from the Audit Committee.
In the circumstances, the effectiveness of internal controls and risk management could
not be confirmed.
68
STREET FAMILIES REHABILITATION TRUST FUND
224. Lack of Land Ownership Documents
The statement of financial position and Note 8 to the financial statements reflect property,
plant and equipment balance of Kshs.10,603,417. However, the balance excludes
unvalued parcels of land that had no ownership documents as detailed below:
224.1 Land Donated by Kenya Pipeline Company Limited
As previously reported, Kenya Pipeline Company (KPC) donated and surrendered to the
Fund a piece of land at Mukuru kwa Njenga area of Nairobi on 23 August, 2007 vide a
letter addressed to the Commissioner of Lands by the Managing Director of the Company.
The title deed was surrendered to the Commissioner of Lands on 06 August, 2007 for
purposes of transferring and registering the property in the name of the Fund. However,
audit verification revealed that the land was encroached upon and ownership had not
been transferred to the Fund.
224.2 Parcels of Land in Embu, Murang’a and Laikipia
As previously reported, available information indicates that the defunct Local Authorities
of Embu, Murang’a and Laikipia had informally allocated land to the Street Families
Rehabilitation Trust Fund as captured in the Minutes dated 19 September, 2016.
However, audit revealed that the Fund had not identified the location of these properties
and had not obtained their ownership documents. Further, Management did not
demonstrate efforts put in place to acquire the ownership documents.
In the circumstances, the ownership, accuracy and completeness of the property, plant
and equipment balance of Kshs.10,603,417 as at 30 June, 2022 could not be confirmed.
Other Matter
In the audit report of the previous year, a number of paragraphs were raised in the Report
on Financial Statements. However, Management did not resolve the issues or disclose
all the prior year matters as provided by the Public Sector Accounting Standards Board
Templates.
RESOURCES
Conclusion
public resources.
AND GOVERNANCE
Conclusion
69
MINISTRY OF PETROLEUM AND MINING – VOTE 1194
PETROLEUM DEVELOPMENT LEVY FUND

228. Unaccounted for Transfers to Other Government Entities
The statement of receipts and payments and Note 3 to the financial statements reflects
an amount of Kshs.23,572,772,102 being transfers to other Government entities. The
transfers include amounts of Kshs.220,000,000 and Kshs.200,000,000 transferred to
National Oil Corporation of Kenya (NOCK) and Energy and Petroleum Regulatory
Authority (EPRA) respectively. However, budget, work plans, cost statements for oil and
gas exploration activities and oil exploration and monitoring reports to support the
transfers were not provided . In addition, framework agreement in support of the transfers
was not provided for audit verification.
Further, during the year under audit, the Fund transferred a total of Kshs.23,152,125,774
to the Ministry of Petroleum and Mining. However, no supporting evidence was provided
to demonstrate that the transferred funds were used as provided by Section 4(4) of the
Petroleum Development Act, 1991 and the Petroleum Development Levy Order No. 124
issued on 10 July, 2020. The Act and the Order requires that the funds be used for
development of common facilities for distribution or leasing of oil products, for matters
relating to development of oil industry as the Minister may direct and for matters relating
to development of the oil industry including stabilization of local petroleum pump prices.
In the circumstances, it was not possible to confirm whether the transferred funds totalling
Kshs.23,572,772,102 were used for the intended purposes.

RESOURCES
Conclusion
public resources.
AND GOVERNANCE
Conclusion
70
PETROLEUM TRAINING LEVY FUND

Kshs.664,105,397 which includes an amount of Kshs.111,338,125 held at the surface
fees bank account as disclosed in Note 6 to the financial statements. According to Section
52(3) of the Petroleum Act, 2019, all moneys raised by the contractors as training
contribution shall be paid into the Training Fund. However, amounts collected in respect
of surface fees do not comprise the Training Fund revenue and ought to have been
accounted for under the Ministry as Appropriations-In-Aid or surrendered to the
Exchequer.
In the circumstances, the accuracy of the surface fees bank account balance of
232. Long Outstanding Training and Service Fees
The statement of financial position reflects a balance of Kshs.2,732,715,009 in respect of
accounts receivable - fines, penalties, and levies. The balance relates to training levy and
service fees brought forward from the financial year 2020/2021 amounting to
Kshs.2,280,948,522 which has been accumulating over the years and had remained
unpaid by oil exploration companies since the year 2011. The amount was due from nine
(9) oil companies that operated eighteen (18) oil blocks as at 30 June, 2022.
Further, two (2) of the nine (9) contractors with an outstanding amount of US$.925,751.10
(equivalent to Kshs.99,842,256) have since relinquished their blocks to the Government
while the remaining seven (7) are still active. However, the two contractors who
relinquished their blocks were discharged before settling the outstanding training levy and
surface fees. Management did not provide evidence to demonstrate efforts made to
recover the outstanding amounts.
In the circumstances, the recoverability of accounts receivables balance of

Kshs.2,732,715,009 as at 30 June, 2022 remains doubtful.
233. Unaccounted for Expenditure
The statement of financial performance reflects an amount of Kshs.30,000,000 in respect
of transfer to other Government units. The amount relates to transfers to the National Oil
Corporation of Kenya for training activities during the year under review. However, the
amount was not reflected in the Company’s financial statements. Further, detailed
expenditure returns, approved training plans, training attendance registers, evidence of
travel documents and proof of hire of venues used for training were not provided for audit
review.
71
In the circumstances, it was not possible to confirm whether the funds were received by
the Corporation and utilised for training in upstream petroleum operations as provided for
in the Act.
234. Inaccuracies in Accounts Receivables Balances
The statement of financial position reflects accounts receivables - fines, penalties and
levies balance of Kshs.2,732,715,009 as at 30 June, 2022. As disclosed in Note 7 to the
financial statements, the balance comprises of fines, penalties and levies brought forward
from 2020/2021 financial year amount of Kshs.2,280,948,522 and fines, penalties and
levies for the year under review amount of Kshs.451,766,487.
Review of the ledgers revealed that the accounts receivables - fines, penalties and levies
brought forward was translated at a historical rate of Kshs.93.47 instead of the closing
rate of Kshs.117.8324. Additionally, the account receivables - fines, penalties and levies
for the year was translated at a rate of Kshs.117.45 instead of the closing rate of
Kshs.117.8324. This was contrary to paragraph 44(a) of the International Public Sector
Accounting Standards (IPSAS) which requires that assets and liabilities for each
statement of financial position presented, including comparatives be translated at the
closing rate at the date of that statement of financial position.
In the circumstances, accuracy of the account receivables - fines, penalties and levies
balance of Kshs.2,732,715,008 could not be confirmed.
235. Inaccuracies in Revenue from Non-Exchange Transactions
The statement of financial performance reflects revenue from non-exchange transactions
- fines, penalties and levies amounting to Kshs.21,726,282 (2020 - Kshs.198,837,610)
comprising of Kshs.18,630,000 and Kshs.3,096,282 in respect of training levy and surface
fees respectively as disclosed in Note 1 to the financial statements. According to Section
52(3) of the Petroleum Act, 2019, the Fund comprises of funds raised from contractors as
training contribution. Effectively, amounts collected in respect of surface fee do not
comprise the Training Fund revenue and ought to have been accounted for under the
State Department as Appropriation-In-Aid or surrendered to the Exchequer. However,
the financial statements of the Fund recognised the amounts received in respect of
surface fee but did not recognise an accrued transfer to The National Treasury expense
and the corresponding liability under accounts payable in the statement of financial
position as at 30 June, 2022.
In addition, the reduction of the levies for the Oil Company - Training Levy from
Kshs.147,792,592 to Kshs.18,630,000 and surface fee from Kshs.51,045,016 to
Kshs.3,096,282 have not been explained or reconciled despite the fact that fines,
penalties and levies not recoverable from the oil Companies have increased by over 40%.
In the circumstances, the accuracy of the revenue from non-exchange transactions of

Kshs.3,096,282 from surface fees included in the statement of financial performance for
the year under review could not be confirmed.
72
Other Matter
Financial Statements and the Report on Lawfulness and Effectiveness in Use of Public
Resources. However, Management had not resolved the issues or explained their failure
to do so contrary to the provisions of the Public Sector Accounting Standards Board
templates and The National Treasury Circular dated 11 May, 2022.

RESOURCES
resulting to an under-funding of Kshs.205,706,737 or 79% of the budget. Similarly, the
Fund expended a total of Kshs.286,921,963 against an approved budget of
Kshs.260,471,428 resulting in an excess expenditure of Kshs.26,450,535 or 9% of the
budget. Management did not provide the approval or authority for the excess expenditure.
In addition, Management did not provide a statement explaining the variations between
the actual expenditure and the budgeted amount in the financial statements as required
under Section 81(2) of the Public Finance Management Act 2012.

AND GOVERNANCE
Conclusion
73
STATE DEPARTMENT FOR GENDER – VOTE 1212
UWEZO FUND
Kshs.2,216,249,041 and as disclosed in Note 14 to the financial statements. The balance
includes two hundred and ninety (290) constituencies bank balances amounting to
Kshs.1,928,935,051 which was derived from bank statements and was not supported with
bank reconciliation statements, certificates of bank balances, board of survey reports and
copies of cash book extracts. In addition, audit verification revealed that the
constituencies had unreconciled balances resulting from untraceable deposits and
unpresented cheques.
balance of Kshs.2,216,249,041 could not be confirmed.
240. Unsupported Long-Term Receivables-Outstanding Loans
The statement of financial position reflects long-term receivables-outstanding loans
However, the balance was not supported with debtors’ ledgers detailing loans issued
since inception, repayments made and outstanding balances. In addition, Fund’s overall
loan performance indicates loan disbursements of Kshs.6,716,400,895 and loan
repayments of Kshs.741,048,530 or 11% of the disbursement resulting to an outstanding
balance of Kshs.5,975,352,365 or 89% whose recoverability is doubtful. Further, no
provision for bad and doubtful debts was made in the financial statements.
In the circumstances, the accuracy and completeness of the long-term receivables-
outstanding loans balance of Kshs.4,790,521,663 could not be confirmed.
241. Unsupported Trade and Other Exchange Payables
The statement of financial position reflects trade and other exchange payables balance
of Kshs.2,087,911 and as disclosed in Note 18 to the financial statements. The balance
relates to eight (8) Constituencies, however, analysis of these balances revealed
balances totalling Kshs.8,268,312 resulting to unreconciled variance of Kshs.6,180,401.
In addition, the trade and other exchange payables balance excludes outstanding audit
fees of Kshs.5,220,000 since the financial year 2013/2014.
In the circumstances, the accuracy and completeness of the trade and other exchange
payables balance of Kshs.2,087,911 could not be confirmed.
Other Matter
The statement of comparison of budget and actual amounts reflects final expenditure
budget of Kshs.361,041,445 against actual expenditure of Kshs.155,120,092 resulting in
an under expenditure of Kshs.205,921,353 or 57 % of the budget.
74
The under-expenditure affected the Fund’s principal activity of expanding access to
finances in promotion of youth and women businesses and enterprises at the
constituency level for economic growth towards the realisation of the goals of Vision 2030.
In the audit report of the previous year, several paragraphs were raised under the Report
on Financial Statements, Report on Lawfulness and Effectiveness in Use of Public
Governance. However, Management has not resolved the issues nor given any
explanation for failure to adhere to the provisions of the Public Sector Accounting
Standards Board templates.
RESOURCES
Conclusion
public resources.
AND GOVERNANCE
245. Use of Manual Records
The Board had approved the procurement of Enterprise Resource Planning (ERP) system
and during the year under review, a budget provision of Kshs.17,000,000 was made.
However, the system has not been procured and the Fund continues to use manual
system to account for loans and the two hundred and ninety (290) constituencies bank
accounts. In addition, the procurement of goods and services has not been digitized
contrary to Executive Order No.2 of 2018 requiring every public entity to implement the
e-procurement system.
In the circumstances, the effectiveness of controls of the manual systems could not be
confirmed.
246. Weaknesses in Fund Administration
The statement of financial position reflects long-term receivables-outstanding loans
A review of records maintained at eight (8) sampled Constituency Uwezo Fund offices
revealed that, there was no follow-up of beneficiaries to ensure timely loan repayments,
loan reconciliations were not done, there were delays in releasing administrative funds
due to non-compliance in making returns, there were no backups and there were defaults
on loan repayments.
In the circumstances, the effectiveness of controls on loan issuing and repayments could
not be confirmed.
75
STATE DEPARTMENT FOR PUBLIC SERVICE – VOTE 1213
NATIONAL YOUTH SERVICE - MECHANICAL AND TRANSPORT FUND

247. Unsupported Receivables
The statement of financial position reflects balances of Kshs.1,151,440,547 and
Kshs.778,211,304 in respect to receivables from National Youth Service (NYS) Units and
receivables from external operations and as disclosed in Note 19 and Note 20 to the
financial statements respectively both totalling Kshs.1,939,651,851. Included in the
receivables from external operations balance is an amount of Kshs.641,736,869 brought
forward from 2020/2021 financial year and prior years whose ageing analysis was not
provided for audit. Further, although the recoverability of the total receivables amounting
to Kshs.1,939,651,851 is doubtful, provisions for bad and doubtful debts were not made
to recognize possible impairment of the debts.

totalling to Kshs.1,939,651,851 could not be confirmed.
248. Unsupported Sundry Creditors
The statement of financial position reflects sundry creditors balance of Kshs.8,579,233,
as disclosed in Note 25 to the financial statements. However, the supporting schedules
were not provided for audit. Further, the balance has been long outstanding and
Management did not provide justification for the delayed payments.
In the circumstances, the accuracy and completeness of the sundry creditors balance of
249. Unconfirmed Small Vehicles, Commercial Trucks, and Plant and Machinery
Balance
The statement of financial position reflects total small vehicles, commercial trucks, and
plant and machinery balance of Kshs.3,631,036,963 and as disclosed in Note 22 to the
financial statements. However, as previously reported, the Management had not valued
the assets for financial reporting purposes since inception and the depreciation policy had
not been approved by the Council. Further, furniture and fittings such as executive tables,
chairs and cabinets had not been tagged with identification numbers.
In the circumstances, the accuracy and completeness of small vehicles, commercial
trucks, and plant and machinery balance of Kshs.3,631,036,963 could not be confirmed.
Other Matter
250. Grounded Motor Vehicles, Plant and Equipment
Review of the Fund’s assets register revealed that one hundred and thirty (130) motor
vehicles, plant, machinery and equipment had been grounded for a long time due to
76
various mechanical defects. Management had not made any efforts to repair or dispose
the assets.
In the circumstances, the assets continued to deteriorate and any salvage value that
could have been realized may be lost.
251. Unresolved Prior Year Audit Issues
In the audit report of the previous year, several issues were raised in the Report on
Governance. However, the Management has not resolved the issues or given any
explanation for failure to resolve the issues.
RESOURCES
Conclusion
public resources.
AND GOVERNANCE
Conclusion
77
STATE DEPARTMENT FOR YOUTH AFFAIRS – VOTE 1214
YOUTH ENTERPRISE DEVELOPMENT FUND

254. Unconfirmed Receivables from Exchange Transactions
balance of Kshs.3,023,667,308. However, Note 17 to the financial statements reflects a
balance of Kshs.3,023,488,374 resulting to a variance of Kshs.178,934 which was not
reconciled or explained. Further, the receivables balance includes unidentified loans
repaid of Kshs.90,148,885 out of which loan repayments totalling Kshs.88,142,199 has
remained unidentified since July, 2008. Management did not explain the long delay in
allocating the repayment to respective borrowers’ accounts.
In addition, the receivables balance of Kshs.3,023,667,308, includes an amount owed by
a local bank of Kshs.180,363,789. Review of judgement on corruption case Number 13
of 2016, revealed that the amount was irregularly paid to a supplier. This led to conviction
of the Director and the Company for conspiracy to commit an economic crime, unlawful
acquisition of public property and making false documents. However, no evidence on
effort made by Management to recover the amount was provided and its recovery is
therefore doubtful.
Further, Management did not provide for bad and doubtful debts.
from exchange transactions balance of Kshs.3,023,667,308 could not be confirmed.
Emphasis of Matter
255. Going Concern of the Fund
I draw your attention to the disclosure in Note 24 to the financial statements which
indicates that the Fund had been reporting losses over several years. During the year
under review, the Fund continued to register dismal performance, reporting a deficit of
Kshs.123,233,755. The poor performance has prevailed over the last seven years. This
has eroded the capital invested in the revolving Fund and impaired the ability of the Fund
to discharge its mandate and thus, casts significant doubt on the ability to sustain its
services in the foreseeable future.
Other Matter
The statement of comparison of budget and actual amounts reflects final budget and
actual receipts on a comparable basis of Kshs.454,219,340 and Kshs.400,057,803
respectively resulting to an underfunding of Kshs.54,161,537, or 12% of the budget under
78
the Recurrent Vote. Similarly, the Fund expended Kshs.523,291,558 against an approved
budget of Kshs.443,119,340 resulting to an over expenditure of Kshs.80,172,218 or 18%
of the budget. The underfunding affected the planned activities and may have impacted
negatively on service delivery to the public while the overexpenditure was incurred
irregularly.
Further, the statement of comparison of budget and actual amounts also reflects final
budget and actual receipts on a comparable basis of Kshs.730,000,000 and
Kshs.406,800,000 respectively resulting to an underfunding of Kshs.323,200,000 or
(44%) of the budget under the Development Vote. Similarly, the Fund expended
Kshs.394,008,848 against an approved budget of Kshs.741,100,000 resulting to an
underexpenditure of Kshs.347,091,152 or 47% of the budget. The underfunding and
underexpenditure affected the planned activities and may have impacted negatively on
service delivery to the public.
In the audit report of the previous year, several paragraphs were raised in the Report on
Resources and Report on Effectiveness of Internal Controls, Risk Management and
Governance. However, Management did not resolve the issues or give explanation for
failure to adhere to the provisions of the Public Sector Accounting Standards Board
Templates and The National Treasury’s Circular.
RESOURCES
258. Doubtful Recovery of Receivables from Non-Exchange Transactions
prepayments balance of Kshs.944,281, being rental deposits for premises that the Fund
vacated in 2017. However, the refund is yet to be made contrary to Regulation 64(1) of
the Public Finance Management (National Government) Regulations, 2015 which require
an Accounting Officer to ensure adequate safeguards exist and are applied for the prompt
collection and proper accounting for all revenue and adequate measures, including legal
action where appropriate, are taken to obtain payment. Management did not provide
explanation for not recovering the deposit.
In the circumstances, delayed recovery of the rental deposits could result to loss of public
funds.
AND GOVERNANCE
259. Grounded Motor Vehicles and Motor Cycles
Review of the assets register revealed that six (6) motor vehicles and one hundred and
seventy-five (175) motorcycles were grounded due to various mechanical defects.
79
Although Management indicated that, it sought for approval of the Head of Public Service
for disposal of the assets on 6 March, 2018, no response had been received as at the
time of the audit.
As a result, the assets continue to deteriorate and salvage value that could have been
realized from sale, may be lost.
80
NATIONAL INTELLIGENCE SERVICE – VOTE 1281
INTELLIGENCE SERVICE DEVELOPMENT FUND

Unmodified Opinion
the Fund.
Emphasis of Matter
261. Material Uncertainty Related to Sustainability of Services
As disclosed in Note 17 to the financial statements, the Management is in the process of
winding up of the Fund in accordance with the provisions of Regulation 207(1)(i) of the
Public Finance Management Regulations, 2015. The Regulations states that the initial
approval for establishment of a National Public Fund shall be for a maximum period of
ten (10) years. The Fund’s bank account has been closed and the acquired assets are in
the process of being transferred to National Intelligence Service.
There is therefore a material uncertainty on the Fund’s ability to continue to sustain its
services.

RESOURCES
Conclusion
public resources.
AND GOVERNANCE
Conclusion
81
OFFICE OF THE REGISTRAR OF POLITICAL PARTIES – VOTE 1311
POLITICAL PARTIES FUND
Unmodified Opinion
the Fund.
RESOURCES
Conclusion
public resources.
AND GOVERNANCE
Conclusion
82
PARLIAMENTARY SERVICE COMMISSION – VOTE 2041
PARLIAMENTARY CATERING FUND

267. Unconfirmed Receivables Balance
The statement of financial position reflects receivables balance of Kshs.42,591,583. As

disclosed in Note 8 and Annex II to the financial statements. The balance includes an
amount of Kshs.41,357,388 owed to the Fund by the National Assembly, Parliamentary
Joint Services and the Senate. However, the outstanding balance was not disclosed as
part of the pending bills in the respective financial statements as detailed below:
Amount
Vote Name (Kshs.)
National Assembly - Offices and Committees 18,619,462
Parliamentary Joint Services and Centre for Parliamentary Studies 12,671,938
and Training
Senate - Offices and Committees 10,065,988
Total 41,357,388
In the circumstances, the accuracy and validity of the receivables balance of


RESOURCES
Conclusion
public resources.
AND GOVERNANCE
Conclusion
83
Appendix A: Unmodified Opinion
No. National Government Funds
1. Equalisation Fund – The National Treasury
2. Contingencies Fund – The National Treasury
3. Petroleum Development Levy (Holding Account) – The National Treasury
4. COVID-19 Emergency Response Fund –The National Treasury
5. Asiatic Widows and Orphans Pension Fund – The National Treasury

6. African Union and Other International Organizations Subscription Fund – The
National Treasury
7. Credit Guarantee Scheme – The National Treasury
8. Public Service Superannuation Scheme Fund – The National Treasury
9. National Government Constituencies Development Fund – Central Bank of
Kenya – State Department for Planning
10. National Humanitarian Fund – State Department for Interior and Citizen Services
11. Roads Annuity Fund – State Department for Infrastructure
12. Petroleum Development Fund – Ministry of Energy
13. Kenya Energy-Sector Environment and Social Responsibility Program Fund –
Ministry of Energy
14. Co-operative Societies Liquidation Fund – State Department for Co-operatives
15. The National Assistance Trust Fund – State Department for Social Security and
Protection
16. Intelligence Services Development Fund – National Intelligence Service
17. Political Parties Fund – Office of the Registrar of Political Parties
84
Appendix B: Qualified Opinion
1. Provident Fund – The National Treasury
2. European Widows and Orphans Pension Fund – The National Treasury
3. Asian Officers Family Pension Fund – The National Treasury
4. State Officers and Public Officers Motor Car Loan Scheme Fund – The National
Treasury
5. Women Enterprise Fund – State Department for Planning
6. National Government Affirmative Action Fund – State Department for Planning
7. Government Press Fund – State Department for Interior and Citizen Services
8. Prison Industries Revolving Fund – State Department for Correctional Services
9. Prison Farms Revolving Fund – State Department for Correctional Services
10. Mechanical and Transport Fund – State Department for Infrastructure
11. Railway Development Levy Fund (Holding Account) – State Department for
Transport
12. Kenya Slum Upgrading Low Cost Housing and Infrastructure Trust Fund
(KENSUF) – State Department for Housing and Urban Development
13. Land Settlement Fund – Ministry of Lands and Physical Planning
14. Sports, Arts and Social Development Fund – State Department for Sports
15. Veterinary Services Development Fund – State Department for Livestock

16. Commodities Fund – State Department for Crop Development and Agricultural
Research
17. Management and Supervision Fund – State Department for Co-operatives
18. Coffee Cherry Advance Revolving Fund - State Department for Co-operatives
19. Occupational Safety and Health Fund – Ministry of Labour

20. Street Families Rehabilitation Trust Fund – State Department for Social Security
and Protection
21. Petroleum Development Levy Fund – Ministry of Petroleum and Mining
85
Appendix B: Qualified Opinion
22. Petroleum Training Levy Fund – Ministry of Petroleum and Mining
23. Uwezo Fund – State Department for Gender
24. National Youth Service - Mechanical and Transport Fund – State Department
for Public Service
25. Youth Enterprise Development Fund – State Department for Youth Affairs
26. Parliamentary Catering Fund – Parliamentary Service Commission
86
Appendix C: Adverse Opinion
1. Rural Enterprise Fund – The National Treasury
2. Treasury Main Clearance Fund – The National Treasury
3. Civil Servants Housing Scheme Fund – State Department for Housing and Urban
Development
4. Agricultural Information Resource Centre Revolving Fund – State Department for
Crop Development and Agricultural Research
87
Appendix D: Disclaimer of Opinion
1. Government Clearing Agency Fund – The National Treasury
2. Kenya Local Loans Support Fund – The National Treasury
3. Stores and Services Fund – State Department for Public Works
88
CONTACTS
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Phone: +254 020 3214000  Email: info@oagkenya.go.ke  Website: https://www.oagkenya.go.ke/
Office of the Auditor-General Kenya oagkenya @OAG_Kenya

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AUDITOR-GENERAL’S

OUR CORE VALUES

THE NATIONAL GOVERNMENT FUNDS

THE FINANCIAL YEAR

2. Agricultural Information Resource Centre Revolving Fund........................................59

Further, as previously reported, an effective mechanism for follow up on implementation

However, despite numerous reports indicating lack of accountability and documents to

1.1 Constitutional Mandate of the Auditor-General

1.2 Responsibilities of Management and those Charged with Governance

Management is also responsible for maintaining an effective internal control environment

I am independent in accordance with Article 249(2) of the Constitution of Kenya and

In order to address these requirements, my audit reports contain the following:

i. Report on Financial Statements, in which I give an audit opinion on whether the

iv. Report on Other Legal and Regulatory Requirements is included where

1.5 Audit Opinions

REPORT ON THE FINANCIAL STATEMENTS

In the circumstances, The National Treasury was in breach of the law.

REPORT ON THE FINANCIAL STATEMENTS

REPORT ON LAWFULNESS AND EFFECTIVENESS IN USE OF PUBLIC

6. There were no material issues relating to effectiveness of internal controls, risk

REPORT ON THE FINANCIAL STATEMENTS

9. There were no material issues relating to effectiveness of internal controls, risk

RURAL ENTERPRISE FUND

REPORT ON THE FINANCIAL STATEMENTS

REPORT ON LAWFULNESS AND EFFECTIVENESS IN USE OF PUBLIC

REPORT ON EFFECTIVENESS OF INTERNAL CONTROLS, RISK MANAGEMENT

COVID-19 EMERGENCY RESPONSE FUND

REPORT ON THE FINANCIAL STATEMENTS

REPORT ON EFFECTIVENESS OF INTERNAL CONTROLS, RISK MANAGEMENT

STATE OFFICERS AND PUBLIC OFFICERS CAR LOAN SCHEME FUND

Basis for Qualified Opinion

18. Unsupported Cash and Cash Equivalents Balance

GOVERNMENT CLEARING AGENCY FUND

In the circumstances, delay in the winding up process have resulted to wastefulness in

TREASURY MAIN CLEARANCE FUND

REPORT ON THE FINANCIAL STATEMENTS

Basis for Adverse Opinion

My opinion is not modified in respect of this matter.

REPORT ON LAWFULNESS AND EFFECTIVENESS IN USE OF PUBLIC

REPORT ON EFFECTIVENESS OF INTERNAL CONTROLS, RISK MANAGEMENT

In the circumstances, delay in the winding up process have resulted to wastefulness in

REPORT ON EFFECTIVENESS OF INTERNAL CONTROLS, RISK MANAGEMENT

REPORT ON THE FINANCIAL STATEMENTS

My opinion is not modified in respect of this matter.

REPORT ON LAWFULNESS AND EFFECTIVENESS IN USE OF PUBLIC

CREDIT GUARANTEE SCHEME

REPORT ON THE FINANCIAL STATEMENTS

REPORT ON EFFECTIVENESS OF INTERNAL CONTROLS, RISK MANAGEMENT

PUBLIC SERVICE SUPERANNUATION FUND

REPORT ON EFFECTIVENESS OF INTERNAL CONTROLS, RISK MANAGEMENT

REPORT ON THE FINANCIAL STATEMENTS

48. Delay in Winding Up the Fund

REPORT ON LAWFULNESS AND EFFECTIVENESS IN USE OF PUBLIC

REPORT ON EFFECTIVENESS OF INTERNAL CONTROLS, RISK MANAGEMENT

EUROPEAN WIDOWS AND ORPHANS PENSION FUND

REPORT ON THE FINANCIAL STATEMENTS

ASIAN OFFICERS FAMILY PENSIONS FUND

54. Unsupported Receivables