Key audit findings in the Uasin Gishu county government reveal that assets and liabilities of the defunct Municipal Council of Eldoret, County Council of Wareng and Town Council of Burnt Forest were not officially handed over within the transition period as prescribed by law.
Burnt Forest as at the time of the audit in August 2013, and contrary to instructions then issued by the former ministry of Local Government vide Circular No MLG/1333/TY/52 dated February 18 2013, was not wholly adhered to. The report recommends that the Transition Authority, headed by Kinuthia Wamwangi, should make arrangements to have chief officers of the defunct local authorities officially hand over the assets and liabilities of the former councils for purposes of accountability in the new era.
According to the report, the county executive did not maintain proper cash books and bank balances for the five bank accounts that were opened, four with the Central Bank of Kenya and the other with the Kenya Commercial Bank. In addition, no bank reconciliations were prepared. As at 30 June 2013, the total cash in these accounts totaled Sh122,217,650.
The report recommends that the management should ensure proper cash books are maintained and all the bank accounts and bank reconciliation statements prepared monthly. In addition, all the bank accounts of the defunct councils should be closed and the balances paid into the county government revenue account for proper transparency.
The county government did not maintain debtors’ records in form of ledgers or registers. Further, there was no information regarding the debtors inherited from the defunct Municipal Council of Eldoret, County Council of Wareng and Town Council of Burnt Forest local authorities since the handing over had not been done.
Consequently, the county government did not maintain proper creditors’ records including the individual creditors’ files to support the creditors’ balance of Sh4,168,990 outstanding as at June 30 2013. Further, there was no information relating to the creditors that were taken over from the defunct local authorities as the handing over was yet to be done. The management should ensure proper recording of creditors, the report asserts, and have them verified and updated on regular basis to ensure that only genuine creditors are recorded and paid.
There was no proper handing over of motor vehicles and office equipment from the defunct local authorities. The county government did not maintain assets register to show the motor vehicles and office equipment taken over from the defunct local authorities and those acquired between March and June 30 2013, the report observed.
The detailed report cast aspersions as to why the county government did not implement the IPPD by June 30 2013 although it had been installed and staff trained. Payrolls were prepared by the defunct local authorities using LAIFOMS and paid by the executive. The county government had also not carried out staff head count as it officially took over staff of the defunct councils and recommends that management should carry out a staff head count to ensure that ghost workers are not inherited from the defunct local authorities. Further, critical job evaluation and assessment ought to have been undertaken to facilitate deployment of key staff to relevant departments, the report further observes.
On recurrent and development expenditure funding, the county government did not utilise Sh31,427,121 or (17pc) of the recurrent receipts of Sh185,518,698 received from the national treasury for both county executive and county assembly. In addition, an amount of Sh61,592,200 for development was not utilised. The report recommends that management should ensure that the necessary committees are established to hasten decision making process so that funds are applied towards the purpose for which they were appropriated and intended for.
Irregular Procurement of goods and services was also captured by the report where payment totalling to Sh37,958,378 was irregularly made in advance in respect of supply of furniture, computer and hardware material that had not been delivered contrary to government financial regulations and procedures. An additional payment of Sh3,540,378 was made to a construction company in respect of fencing a public utility at Kapsoya in advance and without either Bills of Quantities or contract. As at the time of audit in August, 2013, the fencing had not been done.
The report advocates that the management should adhere to government financial regulations and procedures and ensure that payments are only made in respect of goods and services that have been supplied and received. Further, evidence of subsequent delivery of the goods should be provided for audit confirmation, and should include pre-delivery inspection report, says the document. All payments, it says, made during the transition period should be investigated and any ineligible expenditure recovered from the culpable officers who might have been involved.
On revenue collection and recording, it is noted that LAIFOMS was used in recording of revenue and same banked to revenue collection account. However, incidences of under banking were noted due to the fact that the cashiers were not posting the bank-in-slips after depositing the money in the bank.
Internal controls should be strengthened in future to avoid possible loss of revenue through pilferages. In addition, management should liaise with the IFMIS directorate to fasttrack the implementation of C-IFMIS to integrate the Revenue Module of LAIFOMS and IFMIS to ensure that all revenue collected by the county is reflected in IFMIS thereby promoting accountability of the funds. The following is full report of the Auditor General’s findings:-
Implementation of the IFMIS, G-pay and IPPD
Uasin Gishu county government had implemented IFMIS and G-Pay. However, only two modules of IFMIS were in use ie Plan to Budget and Procure to Pay.
Payroll processing and revenue recording were still done through LAIFOMS which was in use by the defunct Municipal Council of Eldoret and County Council of Wareng. Although the County Government was connected to internet using modems, it was experiencing some significant down time due to inability to access the IFMIS and G-Pay servers which are located in Nairobi.
As at the time of audit in August 2013, IPPD had been installed but not operationalised as data migration and cleansing was still on. Despite the few challenges, the county had received the computers, software and had trained staff on IPPD, and is thus considered ready to use IPPD in full and should now run the payroll using IPPD.
Hardware
In terms of hardware, Uasin Gishu county received 15 computers from the National Treasury for IFMIS purpose and one machine was dedicated for G-PAY. Three Orange Modems were received by the County for IFMIS and the orange signal within Eldoret town was reliable. The county had in place two operating servers and had Local Area Networks in two offices. However, there was no established Wide Area Network at the county to connect various subcounty offices.
Software
Integrated Financial Management Information System.
In terms of applications in place, the county had started utilising two modules of the Integrated Financial Management Information System; Plan to Budget and Procure to Pay. However, the county was experiencing significant downtime because the IFMIS and G-Pay servers in Nairobi at times were inaccessible.
Training of County Staff
Twelve county staff were trained on IFMIS at the Kenya School of Government and there were two officers nominated from ICT department.
Considering all the above issues, the county is considered ready to fully utilise IFMIS.
Local Authority Integrated Financial Operations Management System.
LAIFOMS had been installed in two former Local Authorities: Eldoret Municipal Council and Wareng’ County Council but Burnt Forest Town Council had no system in place. The Receipting and the Personnel Management Modules were the only active modules since the Expenditure Module was automatically disabled from July 1 2013.
Integrated Payroll and Personnel Database
The county had installed the IPPD system but at the time of assessment the county was yet to pay its employees using the system. Instead the county was using LAIFOMS payroll to process salaries to its staff though employees’ bio data had been migrated to IPPD.
However, the data that was migrated into IPPD from LAIFOMS had the following integrity issues:
• Incorrect KRA Personal Identification Numbers.
• Employees whose details showed that they had been employed when they were below the statutory age of 18.
• Incorrect ages at employment.
• Some officers’ ID numbers in IPPD were different from what was migrated from LAIFOMS.
•Officers whose statuses in LAIFOMS were either, resigned, retired, terminated or deceased yet they were on the August IPPD payroll.
However, these officers did not receive any salary. Since the County had received the computers, software and had trained staff on IPPD, it is considered ready to use IPPD in full and should now run the payroll using IPPD.
IT Control Environment and ICT Governance
• The IT section had five personnel and there were defined roles and responsibilities on how to oversee the IT operations.
• From the approved 2013/14 County budget, the ICT department was allocated Sh90,126,214 with Sh80,000,000 being allocated to capital expenditure.
• The county had an executive member who would solely be in charge of finance and ICT.
• Although the county had been able to come up with a county ICT
Framework which illustrated the intended future plans for the ICT
Department, the county was yet to develop and implement some of the key ICT documents including; ICT policies and procedures, ICT
Strategic Plan, business continuity policies (and disaster
Recovery plans. There was also no ICT Steering Committee in place.
• The server room did not have adequate physical access and environmental controls.
Handing over of defunct local authority
All Local Authorities ceased to exist effective March 4 2013 after the general election. According to the Transition to the Devolved Government Act, 2012, Local Authorities were supposed to prepare a detailed listing of assets, liabilities and staff to facilitate handing over to the county governments in their region of jurisdiction. Although the Uasin Gishu county assembly took possession of the premises and some equipment of the defunct county council of Wareng, no handing over was done by February 28 2013 and even as at the time of audit in August 2013. Arrangements should be made by the Transition Authority to have the assets and liabilities of the defunct local authorities officially handed over to the county government.
Establishment and payroll records
Personnel records were properly maintained. The payroll was prepared by the defunct county council of Wareng in LAIFOMS and paid by the Executive. The monthly wage bill for the 63 employees of the defunct County Council of Wareng amounted to Sh4,346,135 while that of 30 MCAs and one speaker totalled to Sh2,601,000. However, the head count had not been carried out to determine the staffs that were to be taken over by the county assembly.
Recurrent expenditure – funding
The county assembly received an amount of Sh102,416,654 from county treasury for recurrent expenses and incurred expenditures amounting to Sh80,943,137 and bank charges of Sh10,900. The surplus of Sh21,462,017 was paid back to the Treasury on July 5 2013.
Standing Imprest
Petty cashbooks for imprest were not maintained and several imprests were issued to the same officers before accounting for previous imprests contrary to Government Financial Regulations and Procedures. The county government should ensure that imprests issued are surrendered or accounted for before the closure of the financial year.
Irregular payment for un-delivered vehicles
An amount of Sh40,999,990 was paid to motor vehicle dealers on June 28 2013 for supply of six motor vehicles before they vehicle delivered. Three of the vehicles were delivered in July and the last three in October 2013. No reason was provided for making payment in advance before delivery of the vehicles. The county government should ensure that future payments are effected in accordance with the Government Financial Regulations and Procedures.
Single sourcing of motor vehicle insurance
The County Assembly procured Insurance covers for six new motor vehicles for Sh2,093,073 without going through competitive bidding process. In addition, the payment was made to an Insurance company on June 29 2013 while the vehicles were supplied in July and October, 2013. No reason was provided for paying for insurance for vehicles that had not been supplied.
It is recommended that all future procurement of goods and services should be done in accordance with the Public Procurement and Disposal Act, 2005 and related 2006 Regulations in order for the county to ensure competitiveness and realise value for money.
Stores records
Further, stores records were not maintained. Consequently, hardware materials and other building materials worth Sh607,800 and Sh1,141,000 respectively supplied in June 2013 were not recorded in stores ledgers. The county government should ensure that systems are developed which will facilitate proper recording and management of stores and inventory to prevent loss or misappropriation of public property.
Municipal Council of Eldoret
Handing over to County Government
The defunct Municipal Council of Eldoret had not officially handed over the assets and liabilities to the county government as at the time of audit in August 2013, contrary to instructions issued by the former Ministry of Local Government vide Circular No MLG/1333/TY/52 dated February 18 2013.
The Transition Authority should make arrangement to have the chief officers of the defunct Local Authority officially hand over the assets and liabilities of the former council to the county government.
Cash and Bank balances
The defunct council neither maintained proper cashbooks nor balanced them on daily basis as required by the Government Financial Regulations and Procedures. Further no bank reconciliations were done and thus it was not possible to confirm the balances outstanding as at February 28 2013 when these accounts were supposed to be closed.
Further a review of LAIFOMS system at the Eldoret Municipal Council revealed that there was an under banking of Sh91,037,673 for the period January 1 to 4 March, 2013 and an under banking Sh199,673,618 for the period March 5 to September 2 2013.
It is recommended that the accounting officer should ensure that all bank accounts for the former local authorities are closed and the balances transferred to the county revenue account. The county government management should ensure that proper cashbooks are maintained and reconciled monthly. The accounts maintained by the former local authorities should also be reconciled to ascertain the closing balances. Revenue collections should be banked intact and promptly.
The county government should ensure that a receipts cashbook is maintained where revenue collected is promptly recorded and strong internal control system put in place to ensure proper accountability of revenue at every stage in the revenue collection cycle. The county government should consider automating revue collection and recoding.
Debtor’s balances
There were no proper and up to date debtors’ records maintained. Balance of Sh1,325,489,333 was outstanding as at February 28 2013 all of which related to 2011/12 and earlier years and there was no evidence of efforts being made to have them collected. The management should ensure debtors’ registers/ledgers are updated and proper listing of debtors done to ensure accuracy of the balances to be transferred to the county government and recoverability.
Creditor’s balances
No proper creditor’s records were maintained. However, information available showed that a law firm is owed a total of Sh132,518,933 for representing the defunct council in various court cases. However, there was no information as to how the firm was contracted and the fee charged determined. The management should ensure that the creditors’ ledgers are up to date and individual accounts reconciled so that correct balances are handed over to the county government.
Motor vehicles and office equipment
The Fixed Assets Register was not updated. Twelve vehicles were not recorded in the Fixed Assets Register while five vehicles donated by JICA on 10 unspecified dates had not been registered in the name of the former council or the county government. Consequently it was not possible to ascertain the value of the motor vehicles and office equipment that were to be handed over to the county government.
The management should ensure that proper and up to date fixed assets register is maintained and all vehicles received from donors registered in the name of the county government and recorded in the register.
3.19 Establishment and Personnel As at June 30 2013 a staff head had not been carried out. The defunct council had eight hundred and 839 employees all of who were taken over by the county government. During the month of June 2013 79 employees earned less than a third of their gross basic salary contrary to the provisions of the Employment Act, 2007.
The management should carry out a staff head count in order to ensure that no ghost workers are transferred or inherited from the defunct Local Authorities. In addition, the Employment Act, 2007 should be adhered to. It is also important that job evaluation and assessment is undertaken to facilitate deployment of key staff to relevant departments and also guide in recruitment of staff with required skills and knowledge.
Unbanked revenue
Revenue amounting to Sh5,095,317 collected between January and February 2013 and Sh17,952,074 collected between March and June 2013were not banked intact. No reason was provided for not adhering the Government Financial Regulations and Procedures which require that all revenue is banked intact. The management should ensure that all unbanked revenue is properly accounted for and that future revenue collected is banked intact.
County Council of Wareng
Handing Over to County Government
All local authorities ceased to be effective March 4 2013 after the general election. According to the Transition to the Devolved Government Act, 2012, Local Authorities were supposed to prepare a detailed listing of assets, liabilities and staff to facilitate handing over to the county governments in their region of jurisdiction. No handing over was done by February 18 2013, and even as at the time of audit in August 2013. Arrangements should be made by the Transition Authority to have the assets and liabilities of the defunct Local Authorities officially handed over to the county government.
Cash and bank balances
The defunct council operated four bank accounts which had total credit balance of Sh14,039,575 as at February 28 2013. The accounts were not closed on February 28 as instructed by the Transition Authority.
Further a review of the county council of Wareng’ LAIFOMS revealed that there was an under banking of Sh2,665,927 for the period March 5 to September 2 2013.
It is recommended that the accounting officer should ensure that all bank accounts for the former local authorities are closed and the balances transferred to the county revenue vccount. The county government management should ensure that proper cashbooks are maintained and reconciled monthly. The accounts maintained by the defunct county council of Wareng should also be reconciled to ascertain the closing balances. Revenue collections should be banked intact and promptly. The county government should ensure that a receipts cashbook is maintained where revenue collected is promptly recorded and strong internal control system put in place to ensure proper accountability of revenue at every stage in the revenue collection cycle. The county government should consider automating revue collection and recording.
Establishment
Casual Employees
Nineteen casual employees were engaged without evidence of contract or agreements contrary to Employment Act, 2007. The county government should carry out an audit of the personnel inherited from the defunct council to ascertain the optimum staff and skills requirements.
Procurement and procurement procedures-award of non-responsive tenders
The defunct County Council of Wareng on February 15 2013 awarded three contracts amounting to Sh6,134,190 to three construction firms to carry out various construction works within the council. However, the bids were non-responsive and should have been re-advertised due to the following shortcomings:
•Three construction contracts were awarded although the minimum number of at least three bids was not met.
• In one instance there was only one quotation while in the other two, there were two quotations for each.
It is recommended that all future procurement of goods and services should be done in accordance with the Public Procurement and Disposal Act, 2005 and related 2006 Regulations.
Town Council of Burnt Forest
Handing over to county government
All Local Authorities ceased to be on effective March 4 2013 after the general election. According to the Transition to the Devolved Government Act, 2012, Local Authorities were supposed to prepare a detailed listing of assets, liabilities and staff to facilitate handing over to the county governments in their region of jurisdiction.
No handing over was done by February 28 2013 and even as at the time of audit in August 2013. Arrangements should be made by the Transition Authority to have the assets and liabilities of the defunct Local Authorities officially handed over to the county government.
Cash and bank balances - non-closure of bank accounts
The defunct council had three bank accounts with a total credit balance of Sh16,838 as at June 30 2013. The accounts continued to operate beyond February 28 2013. However, this was done with the authority of the county government to former chief officers to operate the bank accounts after March 4 2013 while the county government arranged to open new accounts. The accounts should be closed without further delay.
Debtors balance
The debtors’ balance of Sh45,800,275 was not analysed. Further, no proper debtor’s records were maintained. Consequently, the debtors balance that was to be handed over to county government could not be confirmed. Appropriate systems for recording debtors by the county government should be developed in order to ensure accuracy of balances. Also, a debt collection policy should be put in place to facilitate collection of county debts as and when they fall due.
Creditors’ balance
The creditors’ balance of Sh924,000 was not supported by any record or documentation thus the validity could not be confirmed. The management should ensure that the creditors’ ledgers are up to date and individual accounts reconciled so that correct balances are handed over to the county government.
Establishment - casual employees
Three casual employees were irregularly engaged in June 2013 by former chief officers of the defunct council without the authority of the county government. Copies of letters of appointment were also not provided for audit verifications. The county government should carry out an audit of the personnel inherited from the defunct council to ascertain the optimum staff and skills requirements.
Procurement and procedures - local authority transfer funds projects
Procurement of materials and labour for construction of classrooms at Koiwo Arusei Secondary School and Usalama Primary School at a cost of Sh565,438 and Sh560,320 respectively was done through single sourcing instead of competitive bidding process as required by the Public Procurement and Disposal Act, 2005 and 2006 Regulations.
The former chief officers withdrew cash and paid for materials and labour cost in cash contrary to Government Financial Regulations and Procedures. However, there was no record kept for materials procured worth Sh853,258 before taking them on site.
Further, the expenditure of Sh1,125,758 spent on the two schools exceeded the approved budget of Sh900,000 by Sh225,758.
The county government should investigate the above payments to confirm delivery of goods and services. Also procurement procedures should be adhered to when procuring goods and services.
Unbanked revenue
Revenue amounting to Sh430,209 collected between January and June 2013 was not banked promptly and intact contrary to the Government Financial Regulations and Procedures. No explanation was provided as to how the unbanked revenue was utilised. Revenue received or collected should be banked intact in accordance with government financial regulations and procedures.
Conclusion
The foregoing observations indicate that the process of taking over of assets and liabilities, including staff of the defunct Local Authorities was not properly handled due to lack of adequate leadership by officials of the Transition Authority who had the responsibility to ensure a smooth and seamless transition process. The county government should ensure full control of functions, including revenue collection, recording and proper accounting for the same while awaiting guidance from the National Treasury based on the accounting and reporting systems to be developed by the Public Sector Accounting Standards Board in accordance with Section 194 of the Public Finance Management Act, 2012. Expenditure should be incurred in accordance with the requirements of the Public Finance Management Act, 2012 and for the benefit of the tax payers.
The defunct Municipal Council of Eldoret operated 13 bank accounts, which, according to the Transitional Authority were supposed to be closed on February 28 2013. It was however noted that these accounts were not closed and continued to operate even as at the time of audit in August 2013. No reason was given for this noncompliance with the instructions.
Further, cash books were not written and balanced on a daily basis as required by the Government Financial Regulations and Procedures. Bank reconciliations were also not done on monthly basis to identify any irregular transactions as required by Section 5.9.2 of the Government Financial Regulations and Procedures. According to the bank statements, these accounts had the following balances:
KCB-1102431915- GRF Sh865,972
Sh38,820, KCB-1102430293-salaries Sh16,223,101, 7,406,725, KCB-1102432881-Housing 1,413,832 1,481,009, KCB-1125279605-LATF 121,372,854, Sh6,622,862 KCB-1118702662-Renewal fund 1,117,887, 1,117,887: KCB-1102471674-Roads Board Fund 664,461,14,747; NBK-01231027665500-Kipkaren Sewerage Project 98,591,98,695; NBK-01242027977700-Mayor’s Tree Fund; No statement 99,945, Standard Bank 0102017688400-LATF 1,661,108, 17,305,512, Standard Chartered Bank 0102017688401; Courts 759,472, 921,809; Standard Chartered Bank 0152517688400-LATF Safari Savings 5,114,903, 5,161,897; Equity Bank 0300290263429-Drugs323,174, 323,174.10; Faimly-0850004274-Family court- No statement.
In the absence of up to date cashbooks and bank reconciliation statements, the correct position of cash and bank balances could not be confirmed. Further, it was not clear why the former Local Authority was allowed to continue to operate these bank accounts when they were supposed to have been closed by February 28 2013.
Recommendation
The management should ensure that proper cash books are kept and bank reconciliations prepared on a timely basis as required by the Government Financial Regulations and Procedures.
Debtors and creditors balances
Records maintained by the defunct Municipal Council of Eldoret showed debtors amounting to Sh1,325,489,333 as at February 28 2013 which related to 2011/12 and earlier years as below:
There was however no evidence of the efforts being made by the management of the former council to have these debts recovered. Further, there were no records to support these debtors.
Creditors
The former Municipal Council of Eldoret did not maintain proper creditors’ records. As a result, the creditors balance as at February 28 2013 could not be confirmed. Further, the following unsatisfactory matters were observed:
Information available indicated that a law firm, Gicheru and Company Advocates is owed an amount of Sh89,727,880 in terms of legal fees. This amount is indicated as being the balance of the fee of Sh109,727,880 after a payment on account of Sh20,000,000 which had been made to the firm according to a letter dated May 24 2013.
Further, according to Minute No C 9/2012 of the Meeting of the Full Council held on January 31 2012, the issue of the legal representation by the firm in this case was deferred pending further consultation on way forward as the issue spans over 30 years back. No further information was available to show how the decision to pay Sh20,000,000 to the firm was arrived at or when this money was actually paid and when the balance of Sh89,727,880 will be paid.
In another fee demand note dated May 24 2013, the firm invoiced the county government of Uasin Gishu an amount of Sh42,791,053 for representing the former Municipal Council of Eldoret in 32 cases.
However, no details were provided about these cases or how the firm was engaged. The council did not provide information to show how the law firm was engaged to provide the legal services billed at Sh152,518,933 out of which Sh132,518,933 was outstanding as at May 24 2013.
Consequently, the county government may pay for services that were not actually provided. Further due to improper creditors’ records maintained, the risk of double payment is high.
Recommendation
•The management should investigate all the court cases taken over from the defunct council and renegotiate the legal fee.
• The management should ensure that debtors’ registers/ledgers are updated in order to ensure accuracy of the balance to be transferred to the county government and recoverability.
•The management should ensure that the creditors’ ledgers are up to date and individual accounts reconciled to ensure that correct balances are handed over to the county government.
Motor vehicles and office equipment
A review of the fixed assets register showed that the register was not up to date and the following unsatisfactory matters were noted:
Twelve vehicles and trailers had not been entered in the register and thus they may not be properly accounted for or safeguarded against loss:
Five motor vehicles which were received from JICA on unspecified date were not registered in the name of the council and were yet to be registered in the name of the county government and entered in the fixed assets register.
In the absence of an up to date assets register, the assets may be lost without trace.
Recommendation
The management should ensure that proper and up to date Fixed Assets Register is maintained up to date and all vehicles received from donors registered in the name of the county government and recorded in the Fixed Assets Register.
Establishment and personnel records
The former Municipal Council of Eldoret had 839 permanent employees who remained on its payroll up to June 2013. As at the time of audit in August 2013, a headcount of the staff had not been carried out to confirm these numbers taken over by the county government.
Officers earning less than a third of their basic salary
Examination of payroll for the month of June 2013 showed that 79 employees earned salaries that were less than a third of their basic pay contrary to Section 19(3) of the Employment Act, 2007.
Recommendation
n The county government should carry out a staff head count in order to ensure that no ghost workers are inherited from the defunct council and to align its payroll with the head count.
n A critical job evaluation and assessments should be undertaken to facilitate deployment of key staff to relevant departments. This will also assist in identification of skill gaps and recruitment of staff with the required skills and qualifications.
Unbanked revenue
Review of revenue collection and banking records for the period between January 1 2013 and February 28 2013 and also March to 30 June 2013 showed that some revenue was not banked intact as required by Section 6.8 of the Government Financial Regulations and Procedures. Such unbanked revenue for the period January to June 2013 amounted to Sh23,047,391.
No reason was given for the underbanking of revenue and no documentary evidence was provided to show how the unbanked revenue was utilised. Further, no reason has been given as to why revenue continued to be banked in the council account after March 4 instead of the county government account.
Recommendation
The management should ensure that all unbanked revenue is properly accounted for and that future revenue collected is banked intact.
Burnt Forest as at the time of the audit in August 2013, and contrary to instructions then issued by the former ministry of Local Government vide Circular No MLG/1333/TY/52 dated February 18 2013, was not wholly adhered to. The report recommends that the Transition Authority, headed by Kinuthia Wamwangi, should make arrangements to have chief officers of the defunct local authorities officially hand over the assets and liabilities of the former councils for purposes of accountability in the new era.
According to the report, the county executive did not maintain proper cash books and bank balances for the five bank accounts that were opened, four with the Central Bank of Kenya and the other with the Kenya Commercial Bank. In addition, no bank reconciliations were prepared. As at 30 June 2013, the total cash in these accounts totaled Sh122,217,650.
The report recommends that the management should ensure proper cash books are maintained and all the bank accounts and bank reconciliation statements prepared monthly. In addition, all the bank accounts of the defunct councils should be closed and the balances paid into the county government revenue account for proper transparency.
The county government did not maintain debtors’ records in form of ledgers or registers. Further, there was no information regarding the debtors inherited from the defunct Municipal Council of Eldoret, County Council of Wareng and Town Council of Burnt Forest local authorities since the handing over had not been done.
Consequently, the county government did not maintain proper creditors’ records including the individual creditors’ files to support the creditors’ balance of Sh4,168,990 outstanding as at June 30 2013. Further, there was no information relating to the creditors that were taken over from the defunct local authorities as the handing over was yet to be done. The management should ensure proper recording of creditors, the report asserts, and have them verified and updated on regular basis to ensure that only genuine creditors are recorded and paid.
There was no proper handing over of motor vehicles and office equipment from the defunct local authorities. The county government did not maintain assets register to show the motor vehicles and office equipment taken over from the defunct local authorities and those acquired between March and June 30 2013, the report observed.
The detailed report cast aspersions as to why the county government did not implement the IPPD by June 30 2013 although it had been installed and staff trained. Payrolls were prepared by the defunct local authorities using LAIFOMS and paid by the executive. The county government had also not carried out staff head count as it officially took over staff of the defunct councils and recommends that management should carry out a staff head count to ensure that ghost workers are not inherited from the defunct local authorities. Further, critical job evaluation and assessment ought to have been undertaken to facilitate deployment of key staff to relevant departments, the report further observes.
On recurrent and development expenditure funding, the county government did not utilise Sh31,427,121 or (17pc) of the recurrent receipts of Sh185,518,698 received from the national treasury for both county executive and county assembly. In addition, an amount of Sh61,592,200 for development was not utilised. The report recommends that management should ensure that the necessary committees are established to hasten decision making process so that funds are applied towards the purpose for which they were appropriated and intended for.
Irregular Procurement of goods and services was also captured by the report where payment totalling to Sh37,958,378 was irregularly made in advance in respect of supply of furniture, computer and hardware material that had not been delivered contrary to government financial regulations and procedures. An additional payment of Sh3,540,378 was made to a construction company in respect of fencing a public utility at Kapsoya in advance and without either Bills of Quantities or contract. As at the time of audit in August, 2013, the fencing had not been done.
The report advocates that the management should adhere to government financial regulations and procedures and ensure that payments are only made in respect of goods and services that have been supplied and received. Further, evidence of subsequent delivery of the goods should be provided for audit confirmation, and should include pre-delivery inspection report, says the document. All payments, it says, made during the transition period should be investigated and any ineligible expenditure recovered from the culpable officers who might have been involved.
On revenue collection and recording, it is noted that LAIFOMS was used in recording of revenue and same banked to revenue collection account. However, incidences of under banking were noted due to the fact that the cashiers were not posting the bank-in-slips after depositing the money in the bank.
Internal controls should be strengthened in future to avoid possible loss of revenue through pilferages. In addition, management should liaise with the IFMIS directorate to fasttrack the implementation of C-IFMIS to integrate the Revenue Module of LAIFOMS and IFMIS to ensure that all revenue collected by the county is reflected in IFMIS thereby promoting accountability of the funds. The following is full report of the Auditor General’s findings:-
Implementation of the IFMIS, G-pay and IPPD
Uasin Gishu county government had implemented IFMIS and G-Pay. However, only two modules of IFMIS were in use ie Plan to Budget and Procure to Pay.
Payroll processing and revenue recording were still done through LAIFOMS which was in use by the defunct Municipal Council of Eldoret and County Council of Wareng. Although the County Government was connected to internet using modems, it was experiencing some significant down time due to inability to access the IFMIS and G-Pay servers which are located in Nairobi.
As at the time of audit in August 2013, IPPD had been installed but not operationalised as data migration and cleansing was still on. Despite the few challenges, the county had received the computers, software and had trained staff on IPPD, and is thus considered ready to use IPPD in full and should now run the payroll using IPPD.
Hardware
In terms of hardware, Uasin Gishu county received 15 computers from the National Treasury for IFMIS purpose and one machine was dedicated for G-PAY. Three Orange Modems were received by the County for IFMIS and the orange signal within Eldoret town was reliable. The county had in place two operating servers and had Local Area Networks in two offices. However, there was no established Wide Area Network at the county to connect various subcounty offices.
Software
Integrated Financial Management Information System.
In terms of applications in place, the county had started utilising two modules of the Integrated Financial Management Information System; Plan to Budget and Procure to Pay. However, the county was experiencing significant downtime because the IFMIS and G-Pay servers in Nairobi at times were inaccessible.
Training of County Staff
Twelve county staff were trained on IFMIS at the Kenya School of Government and there were two officers nominated from ICT department.
Considering all the above issues, the county is considered ready to fully utilise IFMIS.
Local Authority Integrated Financial Operations Management System.
LAIFOMS had been installed in two former Local Authorities: Eldoret Municipal Council and Wareng’ County Council but Burnt Forest Town Council had no system in place. The Receipting and the Personnel Management Modules were the only active modules since the Expenditure Module was automatically disabled from July 1 2013.
Integrated Payroll and Personnel Database
The county had installed the IPPD system but at the time of assessment the county was yet to pay its employees using the system. Instead the county was using LAIFOMS payroll to process salaries to its staff though employees’ bio data had been migrated to IPPD.
However, the data that was migrated into IPPD from LAIFOMS had the following integrity issues:
• Incorrect KRA Personal Identification Numbers.
• Employees whose details showed that they had been employed when they were below the statutory age of 18.
• Incorrect ages at employment.
• Some officers’ ID numbers in IPPD were different from what was migrated from LAIFOMS.
•Officers whose statuses in LAIFOMS were either, resigned, retired, terminated or deceased yet they were on the August IPPD payroll.
However, these officers did not receive any salary. Since the County had received the computers, software and had trained staff on IPPD, it is considered ready to use IPPD in full and should now run the payroll using IPPD.
IT Control Environment and ICT Governance
• The IT section had five personnel and there were defined roles and responsibilities on how to oversee the IT operations.
• From the approved 2013/14 County budget, the ICT department was allocated Sh90,126,214 with Sh80,000,000 being allocated to capital expenditure.
• The county had an executive member who would solely be in charge of finance and ICT.
• Although the county had been able to come up with a county ICT
Framework which illustrated the intended future plans for the ICT
Department, the county was yet to develop and implement some of the key ICT documents including; ICT policies and procedures, ICT
Strategic Plan, business continuity policies (and disaster
Recovery plans. There was also no ICT Steering Committee in place.
• The server room did not have adequate physical access and environmental controls.
Handing over of defunct local authority
All Local Authorities ceased to exist effective March 4 2013 after the general election. According to the Transition to the Devolved Government Act, 2012, Local Authorities were supposed to prepare a detailed listing of assets, liabilities and staff to facilitate handing over to the county governments in their region of jurisdiction. Although the Uasin Gishu county assembly took possession of the premises and some equipment of the defunct county council of Wareng, no handing over was done by February 28 2013 and even as at the time of audit in August 2013. Arrangements should be made by the Transition Authority to have the assets and liabilities of the defunct local authorities officially handed over to the county government.
Establishment and payroll records
Personnel records were properly maintained. The payroll was prepared by the defunct county council of Wareng in LAIFOMS and paid by the Executive. The monthly wage bill for the 63 employees of the defunct County Council of Wareng amounted to Sh4,346,135 while that of 30 MCAs and one speaker totalled to Sh2,601,000. However, the head count had not been carried out to determine the staffs that were to be taken over by the county assembly.
Recurrent expenditure – funding
The county assembly received an amount of Sh102,416,654 from county treasury for recurrent expenses and incurred expenditures amounting to Sh80,943,137 and bank charges of Sh10,900. The surplus of Sh21,462,017 was paid back to the Treasury on July 5 2013.
Standing Imprest
Petty cashbooks for imprest were not maintained and several imprests were issued to the same officers before accounting for previous imprests contrary to Government Financial Regulations and Procedures. The county government should ensure that imprests issued are surrendered or accounted for before the closure of the financial year.
Irregular payment for un-delivered vehicles
An amount of Sh40,999,990 was paid to motor vehicle dealers on June 28 2013 for supply of six motor vehicles before they vehicle delivered. Three of the vehicles were delivered in July and the last three in October 2013. No reason was provided for making payment in advance before delivery of the vehicles. The county government should ensure that future payments are effected in accordance with the Government Financial Regulations and Procedures.
Single sourcing of motor vehicle insurance
The County Assembly procured Insurance covers for six new motor vehicles for Sh2,093,073 without going through competitive bidding process. In addition, the payment was made to an Insurance company on June 29 2013 while the vehicles were supplied in July and October, 2013. No reason was provided for paying for insurance for vehicles that had not been supplied.
It is recommended that all future procurement of goods and services should be done in accordance with the Public Procurement and Disposal Act, 2005 and related 2006 Regulations in order for the county to ensure competitiveness and realise value for money.
Stores records
Further, stores records were not maintained. Consequently, hardware materials and other building materials worth Sh607,800 and Sh1,141,000 respectively supplied in June 2013 were not recorded in stores ledgers. The county government should ensure that systems are developed which will facilitate proper recording and management of stores and inventory to prevent loss or misappropriation of public property.
Municipal Council of Eldoret
Handing over to County Government
The defunct Municipal Council of Eldoret had not officially handed over the assets and liabilities to the county government as at the time of audit in August 2013, contrary to instructions issued by the former Ministry of Local Government vide Circular No MLG/1333/TY/52 dated February 18 2013.
The Transition Authority should make arrangement to have the chief officers of the defunct Local Authority officially hand over the assets and liabilities of the former council to the county government.
Cash and Bank balances
The defunct council neither maintained proper cashbooks nor balanced them on daily basis as required by the Government Financial Regulations and Procedures. Further no bank reconciliations were done and thus it was not possible to confirm the balances outstanding as at February 28 2013 when these accounts were supposed to be closed.
Further a review of LAIFOMS system at the Eldoret Municipal Council revealed that there was an under banking of Sh91,037,673 for the period January 1 to 4 March, 2013 and an under banking Sh199,673,618 for the period March 5 to September 2 2013.
It is recommended that the accounting officer should ensure that all bank accounts for the former local authorities are closed and the balances transferred to the county revenue account. The county government management should ensure that proper cashbooks are maintained and reconciled monthly. The accounts maintained by the former local authorities should also be reconciled to ascertain the closing balances. Revenue collections should be banked intact and promptly.
The county government should ensure that a receipts cashbook is maintained where revenue collected is promptly recorded and strong internal control system put in place to ensure proper accountability of revenue at every stage in the revenue collection cycle. The county government should consider automating revue collection and recoding.
Debtor’s balances
There were no proper and up to date debtors’ records maintained. Balance of Sh1,325,489,333 was outstanding as at February 28 2013 all of which related to 2011/12 and earlier years and there was no evidence of efforts being made to have them collected. The management should ensure debtors’ registers/ledgers are updated and proper listing of debtors done to ensure accuracy of the balances to be transferred to the county government and recoverability.
Creditor’s balances
No proper creditor’s records were maintained. However, information available showed that a law firm is owed a total of Sh132,518,933 for representing the defunct council in various court cases. However, there was no information as to how the firm was contracted and the fee charged determined. The management should ensure that the creditors’ ledgers are up to date and individual accounts reconciled so that correct balances are handed over to the county government.
Motor vehicles and office equipment
The Fixed Assets Register was not updated. Twelve vehicles were not recorded in the Fixed Assets Register while five vehicles donated by JICA on 10 unspecified dates had not been registered in the name of the former council or the county government. Consequently it was not possible to ascertain the value of the motor vehicles and office equipment that were to be handed over to the county government.
The management should ensure that proper and up to date fixed assets register is maintained and all vehicles received from donors registered in the name of the county government and recorded in the register.
3.19 Establishment and Personnel As at June 30 2013 a staff head had not been carried out. The defunct council had eight hundred and 839 employees all of who were taken over by the county government. During the month of June 2013 79 employees earned less than a third of their gross basic salary contrary to the provisions of the Employment Act, 2007.
The management should carry out a staff head count in order to ensure that no ghost workers are transferred or inherited from the defunct Local Authorities. In addition, the Employment Act, 2007 should be adhered to. It is also important that job evaluation and assessment is undertaken to facilitate deployment of key staff to relevant departments and also guide in recruitment of staff with required skills and knowledge.
Unbanked revenue
Revenue amounting to Sh5,095,317 collected between January and February 2013 and Sh17,952,074 collected between March and June 2013were not banked intact. No reason was provided for not adhering the Government Financial Regulations and Procedures which require that all revenue is banked intact. The management should ensure that all unbanked revenue is properly accounted for and that future revenue collected is banked intact.
County Council of Wareng
Handing Over to County Government
All local authorities ceased to be effective March 4 2013 after the general election. According to the Transition to the Devolved Government Act, 2012, Local Authorities were supposed to prepare a detailed listing of assets, liabilities and staff to facilitate handing over to the county governments in their region of jurisdiction. No handing over was done by February 18 2013, and even as at the time of audit in August 2013. Arrangements should be made by the Transition Authority to have the assets and liabilities of the defunct Local Authorities officially handed over to the county government.
Cash and bank balances
The defunct council operated four bank accounts which had total credit balance of Sh14,039,575 as at February 28 2013. The accounts were not closed on February 28 as instructed by the Transition Authority.
Further a review of the county council of Wareng’ LAIFOMS revealed that there was an under banking of Sh2,665,927 for the period March 5 to September 2 2013.
It is recommended that the accounting officer should ensure that all bank accounts for the former local authorities are closed and the balances transferred to the county revenue vccount. The county government management should ensure that proper cashbooks are maintained and reconciled monthly. The accounts maintained by the defunct county council of Wareng should also be reconciled to ascertain the closing balances. Revenue collections should be banked intact and promptly. The county government should ensure that a receipts cashbook is maintained where revenue collected is promptly recorded and strong internal control system put in place to ensure proper accountability of revenue at every stage in the revenue collection cycle. The county government should consider automating revue collection and recording.
Establishment
Casual Employees
Nineteen casual employees were engaged without evidence of contract or agreements contrary to Employment Act, 2007. The county government should carry out an audit of the personnel inherited from the defunct council to ascertain the optimum staff and skills requirements.
Procurement and procurement procedures-award of non-responsive tenders
The defunct County Council of Wareng on February 15 2013 awarded three contracts amounting to Sh6,134,190 to three construction firms to carry out various construction works within the council. However, the bids were non-responsive and should have been re-advertised due to the following shortcomings:
•Three construction contracts were awarded although the minimum number of at least three bids was not met.
• In one instance there was only one quotation while in the other two, there were two quotations for each.
It is recommended that all future procurement of goods and services should be done in accordance with the Public Procurement and Disposal Act, 2005 and related 2006 Regulations.
Town Council of Burnt Forest
Handing over to county government
All Local Authorities ceased to be on effective March 4 2013 after the general election. According to the Transition to the Devolved Government Act, 2012, Local Authorities were supposed to prepare a detailed listing of assets, liabilities and staff to facilitate handing over to the county governments in their region of jurisdiction.
No handing over was done by February 28 2013 and even as at the time of audit in August 2013. Arrangements should be made by the Transition Authority to have the assets and liabilities of the defunct Local Authorities officially handed over to the county government.
Cash and bank balances - non-closure of bank accounts
The defunct council had three bank accounts with a total credit balance of Sh16,838 as at June 30 2013. The accounts continued to operate beyond February 28 2013. However, this was done with the authority of the county government to former chief officers to operate the bank accounts after March 4 2013 while the county government arranged to open new accounts. The accounts should be closed without further delay.
Debtors balance
The debtors’ balance of Sh45,800,275 was not analysed. Further, no proper debtor’s records were maintained. Consequently, the debtors balance that was to be handed over to county government could not be confirmed. Appropriate systems for recording debtors by the county government should be developed in order to ensure accuracy of balances. Also, a debt collection policy should be put in place to facilitate collection of county debts as and when they fall due.
Creditors’ balance
The creditors’ balance of Sh924,000 was not supported by any record or documentation thus the validity could not be confirmed. The management should ensure that the creditors’ ledgers are up to date and individual accounts reconciled so that correct balances are handed over to the county government.
Establishment - casual employees
Three casual employees were irregularly engaged in June 2013 by former chief officers of the defunct council without the authority of the county government. Copies of letters of appointment were also not provided for audit verifications. The county government should carry out an audit of the personnel inherited from the defunct council to ascertain the optimum staff and skills requirements.
Procurement and procedures - local authority transfer funds projects
Procurement of materials and labour for construction of classrooms at Koiwo Arusei Secondary School and Usalama Primary School at a cost of Sh565,438 and Sh560,320 respectively was done through single sourcing instead of competitive bidding process as required by the Public Procurement and Disposal Act, 2005 and 2006 Regulations.
The former chief officers withdrew cash and paid for materials and labour cost in cash contrary to Government Financial Regulations and Procedures. However, there was no record kept for materials procured worth Sh853,258 before taking them on site.
Further, the expenditure of Sh1,125,758 spent on the two schools exceeded the approved budget of Sh900,000 by Sh225,758.
The county government should investigate the above payments to confirm delivery of goods and services. Also procurement procedures should be adhered to when procuring goods and services.
Unbanked revenue
Revenue amounting to Sh430,209 collected between January and June 2013 was not banked promptly and intact contrary to the Government Financial Regulations and Procedures. No explanation was provided as to how the unbanked revenue was utilised. Revenue received or collected should be banked intact in accordance with government financial regulations and procedures.
Conclusion
The foregoing observations indicate that the process of taking over of assets and liabilities, including staff of the defunct Local Authorities was not properly handled due to lack of adequate leadership by officials of the Transition Authority who had the responsibility to ensure a smooth and seamless transition process. The county government should ensure full control of functions, including revenue collection, recording and proper accounting for the same while awaiting guidance from the National Treasury based on the accounting and reporting systems to be developed by the Public Sector Accounting Standards Board in accordance with Section 194 of the Public Finance Management Act, 2012. Expenditure should be incurred in accordance with the requirements of the Public Finance Management Act, 2012 and for the benefit of the tax payers.
The defunct Municipal Council of Eldoret operated 13 bank accounts, which, according to the Transitional Authority were supposed to be closed on February 28 2013. It was however noted that these accounts were not closed and continued to operate even as at the time of audit in August 2013. No reason was given for this noncompliance with the instructions.
Further, cash books were not written and balanced on a daily basis as required by the Government Financial Regulations and Procedures. Bank reconciliations were also not done on monthly basis to identify any irregular transactions as required by Section 5.9.2 of the Government Financial Regulations and Procedures. According to the bank statements, these accounts had the following balances:
KCB-1102431915- GRF Sh865,972
Sh38,820, KCB-1102430293-salaries Sh16,223,101, 7,406,725, KCB-1102432881-Housing 1,413,832 1,481,009, KCB-1125279605-LATF 121,372,854, Sh6,622,862 KCB-1118702662-Renewal fund 1,117,887, 1,117,887: KCB-1102471674-Roads Board Fund 664,461,14,747; NBK-01231027665500-Kipkaren Sewerage Project 98,591,98,695; NBK-01242027977700-Mayor’s Tree Fund; No statement 99,945, Standard Bank 0102017688400-LATF 1,661,108, 17,305,512, Standard Chartered Bank 0102017688401; Courts 759,472, 921,809; Standard Chartered Bank 0152517688400-LATF Safari Savings 5,114,903, 5,161,897; Equity Bank 0300290263429-Drugs323,174, 323,174.10; Faimly-0850004274-Family court- No statement.
In the absence of up to date cashbooks and bank reconciliation statements, the correct position of cash and bank balances could not be confirmed. Further, it was not clear why the former Local Authority was allowed to continue to operate these bank accounts when they were supposed to have been closed by February 28 2013.
Recommendation
The management should ensure that proper cash books are kept and bank reconciliations prepared on a timely basis as required by the Government Financial Regulations and Procedures.
Debtors and creditors balances
Records maintained by the defunct Municipal Council of Eldoret showed debtors amounting to Sh1,325,489,333 as at February 28 2013 which related to 2011/12 and earlier years as below:
There was however no evidence of the efforts being made by the management of the former council to have these debts recovered. Further, there were no records to support these debtors.
Creditors
The former Municipal Council of Eldoret did not maintain proper creditors’ records. As a result, the creditors balance as at February 28 2013 could not be confirmed. Further, the following unsatisfactory matters were observed:
Information available indicated that a law firm, Gicheru and Company Advocates is owed an amount of Sh89,727,880 in terms of legal fees. This amount is indicated as being the balance of the fee of Sh109,727,880 after a payment on account of Sh20,000,000 which had been made to the firm according to a letter dated May 24 2013.
Further, according to Minute No C 9/2012 of the Meeting of the Full Council held on January 31 2012, the issue of the legal representation by the firm in this case was deferred pending further consultation on way forward as the issue spans over 30 years back. No further information was available to show how the decision to pay Sh20,000,000 to the firm was arrived at or when this money was actually paid and when the balance of Sh89,727,880 will be paid.
In another fee demand note dated May 24 2013, the firm invoiced the county government of Uasin Gishu an amount of Sh42,791,053 for representing the former Municipal Council of Eldoret in 32 cases.
However, no details were provided about these cases or how the firm was engaged. The council did not provide information to show how the law firm was engaged to provide the legal services billed at Sh152,518,933 out of which Sh132,518,933 was outstanding as at May 24 2013.
Consequently, the county government may pay for services that were not actually provided. Further due to improper creditors’ records maintained, the risk of double payment is high.
Recommendation
•The management should investigate all the court cases taken over from the defunct council and renegotiate the legal fee.
• The management should ensure that debtors’ registers/ledgers are updated in order to ensure accuracy of the balance to be transferred to the county government and recoverability.
•The management should ensure that the creditors’ ledgers are up to date and individual accounts reconciled to ensure that correct balances are handed over to the county government.
Motor vehicles and office equipment
A review of the fixed assets register showed that the register was not up to date and the following unsatisfactory matters were noted:
Twelve vehicles and trailers had not been entered in the register and thus they may not be properly accounted for or safeguarded against loss:
Five motor vehicles which were received from JICA on unspecified date were not registered in the name of the council and were yet to be registered in the name of the county government and entered in the fixed assets register.
In the absence of an up to date assets register, the assets may be lost without trace.
Recommendation
The management should ensure that proper and up to date Fixed Assets Register is maintained up to date and all vehicles received from donors registered in the name of the county government and recorded in the Fixed Assets Register.
Establishment and personnel records
The former Municipal Council of Eldoret had 839 permanent employees who remained on its payroll up to June 2013. As at the time of audit in August 2013, a headcount of the staff had not been carried out to confirm these numbers taken over by the county government.
Officers earning less than a third of their basic salary
Examination of payroll for the month of June 2013 showed that 79 employees earned salaries that were less than a third of their basic pay contrary to Section 19(3) of the Employment Act, 2007.
Recommendation
n The county government should carry out a staff head count in order to ensure that no ghost workers are inherited from the defunct council and to align its payroll with the head count.
n A critical job evaluation and assessments should be undertaken to facilitate deployment of key staff to relevant departments. This will also assist in identification of skill gaps and recruitment of staff with the required skills and qualifications.
Unbanked revenue
Review of revenue collection and banking records for the period between January 1 2013 and February 28 2013 and also March to 30 June 2013 showed that some revenue was not banked intact as required by Section 6.8 of the Government Financial Regulations and Procedures. Such unbanked revenue for the period January to June 2013 amounted to Sh23,047,391.
No reason was given for the underbanking of revenue and no documentary evidence was provided to show how the unbanked revenue was utilised. Further, no reason has been given as to why revenue continued to be banked in the council account after March 4 instead of the county government account.
Recommendation
The management should ensure that all unbanked revenue is properly accounted for and that future revenue collected is banked intact.
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