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Auditor-General flags Kenya Power for engaging in a looting spree of KSh2.5bn in irregular spending

Auditor-General flags KSh2.5bn irregular spending at Kenya Power without the approval of the Treasury.

In the fiscal year that ended in June, Kenya Power engaged in erroneous spending totaling Sh2.5 billion, including an outlay of Sh1.2 billion to pay salaries without the Treasury’s consent.

The most recent audit queries imply that the State-backed electrical utility has not yet addressed the procurement issues that have recently cost top executives their jobs.

A KSh2.06 billion additional budget that was approved by the company’s board in May but not by the Treasury is the subject of the majority of the questions.

The money was allocated to employee costs, transformer maintenance, and system reinforcement for the company.

“The board on May 4, 2022, approved a supplementary budget of Sh2.06 billion, comprising of Sh860 million for system reinforcement, trace maintenance, and transformer repairs and Sh1.2 billion for staff cost deficit by June 2022,” says the Auditor-General report.

“However, there was no evidence that management has sought approval of the National Treasury for the supplementary budget as provided for in the law. There is a likelihood of incurring unauthorized expenditure contrary to public finance management laws,” adds the report by the Business Daily.

The Auditor-General further accuses the company of violating public procurement rules by hiring generators for its Mandera and Lodwar power stations through a direct tender to power producer Aggreko Kenya for Sh185 million.

Kenya Power contended that by issuing the direct tender, it complied with the Public Procurement and Asset Disposition Act. It cited the need to guarantee the interoperability and standardization of the generators inside its system as justification.

The Auditor-General, however, points out that the generators could have been sourced from other providers as well.

The auditor also expressed concerns about the payment of Sh114 million made to a consultant for legal assistance with the renegotiation of power purchase agreements.

Given that the consultants were not asked to provide performance security, the Auditor-General says, non-performance of the contract would expose the power company to losses.

The power distributor is also accused of overpaying for insurance services by Sh50.6 million, having paid Sh810.6 million against an approved budget of Sh760 million.

In addition to expenditure queries, the auditor has put Kenya Power on the spot for keeping 59 procurement officers who had been suspended in November 2021 pending investigation on full pay for the duration of their stay in the cold. 

The employees remained suspended until October this year, when they were brought back into the fold following the conclusion of investigations by the electricity distributor.

The company’s regulations stipulate that they ought to have been on full pay for the first two months of the suspension, half pay for the next two months and no pay thereafter until their cases were resolved.

“The company may have overpaid employee staff on suspension and those on compulsory leave, leading to an overstatement of employee costs and misuse of public funds,” says the report.

The audit queries have once again shone a spotlight on potential revenue leaks at the utility, largely linked to irregular procurement.

The firm was a decade ago on the list of the Nairobi Securities Exchange’s most liquid firms, boasting large cash reserves that allowed it to roll out significant projects to expand its distribution network.

However, a series of procurement scandals and accusations of holding dead stock have eaten into the firm’s reserves and reduced its profitability.

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