Seventh Report On Examination Of Audited Financial Statements Of State Corporations

DATE: - 2

2-6 FEB 2026

REPUBLICOFKENYA THIRTEENTHPARLIAMENT-FIFTHSESSION

THENATIONALASSEMBLY

THESEVENTHREPORTOFTHE

PUBLICINVESTMENTSCOMMITTEEONGOVERNANCE&EDUCATION

***

ONEXAMINATIONOFTHEREPORTOFTHEAUDITORGENERALONTHE FINANCIALSTATEMENTSOFSTATECORPORATIONSFORTHEFINANCIAL YEARS2018/19,2019/20&2020/21

DIRECTORATEOFAUDIT,APPROPRIATIONS&OTHERSELECT COMMITTEES

THENATIONALASSEMBLY

PARLIAMENTBUILDINGS

NAIROBI

FEBRUARY2026

TABLEOFCONTENTS

| TABLEOFCONTENTS. | |-------------------------------------------------------------------------------------------------------------------------------------| | LISTOFABBREVIATIONSIACRONYMS | | CHAIRPERSON'SFOREWORD. iv | | EXECUTIVESUMMARY. vi | | I.OPREFACE. .vii | | I.IEstablishmentandMandateoftheCommittee vii | | 1.2 Committee Membership .ix | | 1.3CommitteeSecretariat. | | I.4 Committeeproceedings.... | | 2.0GENERALOBSERVATIONSANDRECOMMENDATIONS | | 1.0KENYALAWREFORMSCOMMISSION(KLRC).. | | AuditedStatementsforFinancialYear2018/2019(UnqualifiedOpinion) | | AuditedStatementsforFinancialYear2019/2020(Unqualified Opinion).. | | 2.0KENYACOPYRIGHTBOARD ...10 | | AuditedStatementsforFinancialYear2018/2019(QualifiedOpinion) | | AuditedStatementsforFinancialYear2019/2020(QualifiedOpinion). .13 | | Audited Statements forFinancialYear2020/2021(Unqualified Opinion).... |4 | | 3.0NATIONALCOHESIONANDINTEGRATIONCOMMISSION(NCIC)... .16 | | Audited Statements forFinancialYear2018/2019(UnqualifiedOpinion).... 6 | | AuditedStatements for FinancialYear2019/2020(Qualified Opinion).. .. 16 | | 4.0BUSINESSREGISTRATIONSERVICE .18 | | AuditedStatementsforFinancialYear2018/2019(QualifiedOpinion) ...18 | | AuditedStatementsforFinancial Year2019/2020(Qualified Opinion).. ..20 | | Audited Statements for Ffinancial Year 2020/2021I (Qualified Opinion)......24 5.0NAIROBICENTREFORINTERNATIONALARBITRATION(NCIA) .35 | | AuditedStatements for Financial Year2019/2020(Unqualified Opinion)....37 | | 6.0KENYAACCREDITATIONSERVICE .45 | | AuditedStatementsforFinancialYear2018/2019(UnqualifiedOpinion). ..5 | | Audited Statements for Financial Year 2019/2020 (Unqualified Opinion)..... 53 7.0NATIONALTRANSPORTANDSAFETYAUTHORITY. .59 | | AuditedStatementsforFinancialYear2020/2021 .60 | | AuditedStatementsforFinancialYear2021/2022 65 |

LISTOFABBREVIATIONS/ACRONYMS

| Ag. | Acting | |-----------|------------------------------------------------------| | CEO | ChiefExecutiveOfficer | | CS | CabinetSecretary | | DCI | Directorate of Criminal Investigations | | EACC | EthicsandAnti-CorruptionCommission | | ERP | Enterprise Resource Planning | | FY | Financial Year | | GoK | Government of Kenya | | IAS | International AccountingStandards | | ICT | Information and CommunicationTechnology | | IPSAS | International PublicSectorAccountingStandards | | KES/KSHS. | Kenya Shillings | | MD | Managing Director | | OAG | Office of the Auditor General | | PFMA | Public Finance Management Act, No. 18 of 2012 | | PPADA | PublicProcurement and AssetDisposal Act,No.33of 2015 | | IRRS | International Financial Reporting Standards |

CHAIRPERSON'SFOREWORD

ThePublicInvestmentsCommitteeonGovernance andEducationhereinafterreferred toas"the Committee"is oneof thesixWatchdogCommittees'in the thirteenthParliamentthatexamines reports of the Auditor-General laid before the National Assembly to ensure probity, efficiency, and effectiveness in the use of public funds.The Committee is established pursuant to National Assembly Standing Order 206 to examine the working of public investments based on their audited reports and accounts. This ensures the implementation of Article 229(8) of the Constitution of Kenya, 20l0 on reports laid before the House by the Auditor-General. The Committee was hived off the hitherto singular Public Investments Committee, alongside two others,forefficiency of examination of auditreports.

In examination of the reports, The Committee determined to go back three financial years, after analysisshowedthatmattersbeyondthattimehadeitherbeenovertakenbyevents,orthose that were outstanding and needed address had been recurring in subsequent audits.

TheCommitteeresolvedtoexaminethereportsof theAuditorGeneral basedontheregional domicile of each agency and the nature of operations of the agency, to enable an organized schedule of hearings, countrywide. This report is the seventh report from The Committee and coversvariousagenciesinNairobi,Machakos,Embu andKitui Counties.

eachofthestatecorporationsunderreviewtoadduceevidencebeforeit.

This report contains observations, findings and recommendations arising from the examination of reports of the Auditor-General for thirteen (13) state corporations for three financial years runningup tothelatest,2020/21FY.Thereport is structured as follows:

• i)general observations arising from recurring and cross-cutting audit queries;
• i)recommendationstoeachofthe above;
• iiaudit queries identified by the Auditor General in the audit reports of each state corporation;
• iv)management responses to eachof the queries;
• v)CommitteeObservation/findings oneachquery;and

• vi)recommendationsofTheCommitteetoeachqueryraised.

challenges and at the same time recommends specific actions against specific officers who may have actedcontrary tothe law.It alsorecommendsfurther investigations ofcertainmatters by public funds accountable, in accordance with Article 226 (5) of the Constitution.

The Committee appreciates the Offices of the Speaker and the Clerk of the National Assembly for the support accorded to it to enable it to perform its mandate. The Committee further extendsitsappreciationtotheOfficeoftheAuditor-Generalfortheservicesitofferedto Committee during the entire period, as well as thoseAccounting Officerswho compliedwith

I also extend my appreciation to my fellow Members of The Committee and the secretariat whoseimmense contribution and dedication todutyhas enabledTheCommitteetoexamine the audit queries and produce this report.

Onbehalf of thePublicInvestments Committee on Governance and Education,and pursuant to National Assembly Standing Order I99(6), it is my pleasant duty and honor to present to the 7th Reportof thePublicInvestmentsCommitteeonGovernance andEducationonAuditedFinancial Statements for thirteen (l3) State Corporations.

HON.WANAMIWAMBOKA,MP CHAIRMAN,PUBLICINVESTMENTS COMMITTEE ON GOVERNANCE AND EDUCATION

EXECUTIVESUMMARY

The7thReportof thePublicInvestmentsCommitteeonGovernanceand Education(PlC-G&E) contains theCommittee'sexaminationofaudited financialstatementsofthirteen(l3) State Corporations.

In its examination and scrutiny of the audited financial statements of the various State Corporations, the Committee's primary approach was to elicit background information as to why particular courses of financial and/or management actions were or were not taken. This was done the Public Audit Act, Cap. 412B, the Public Finance Management Act, Cap. 412A and the attendant Regulations, the Public Procurement and Asset Disposal Act, Cap. 4l2C and the attendant Regulations, the International Public Sector Accounting Standards (IPSAS) and the International

The preface of the report contains preliminaries on the establishment of the Committee; its membership and secretariat; mandate; and the guiding principles governing The Committee in the discharge of its mandate.

Parttwoof thereportcontains theCommittee'sgeneralobservations/findingson cross-cutting issues,anditsrecommendations.

Part three of the report contains reports of the specific State Corporations whose financial statementswereexamined;thefinancialyearsconsideredforeachstatecorporation;thespecific eachauditreservationraisedby the Auditor-General;Committee Observation/findings after consideration of the respective audit reservation; and finally, Committee recommendations on each audit query.

I.0PREFACE

1.1EstablishmentandMandateoftheCommittee

1. ThePublicInvestmentsCommitteeonGovernanceandEducationisestablishedunderthe National Assembly Standing Order (S.O.) 206 and is responsible for the examination of the working of public investments based on their audited reports and accounts. It is mandated to :- 2. i.examine the reports and accounts of the public investments; 3. lil.examine the reports, if any, of the Auditor-General on the public investments; and

• ili. examine, in the context of the autonomy and efficiency of the public investments, whether the affairs of the public investments are being managed in accordance with sound financial or business principles and prudent commercial practices.

2. The Committee in considering the Audited accounts of State Corporations is guided by the Constitution of Kenya and the following statutes and codes/regulations in undertaking its mandate:-

a)ChapterTwelve of the Constitution onPublicFinance

PartI-PrinciplesofPublicFinance

Article 20I sets out the principles of public finance which include: -

• 。 openness and accountability, including public participation in financial matters (Article 201(a)); use of public money in a prudent and responsible way (Article 201(d)); and
• 20 1(e)).

Part 6-Control of Public Money

Article226dealswiththeaccountsandauditofpublicentitiesandprovidesthat:

• ·the accounting officer of a national public entity is accountable to the National Assembly for its financial management (Article 226(2)); and
• ·the holder of a public office, including a political office, who directs or approvestheuseofpublicfundscontrarytolaworinstructions,is personallyliableforanylossarisingfromthatuseandshallmakegoodthe loss, whether the person remains the holder of the office or not (Article 226(5));and

goods or services, it shall do so in accordance with a system that is fair, equitable, transparent, competitive, and cost-effective".

b)ThePublicFinanceManagementAct,Cap.412A

entities,theParliamentandtheJudiciary.ThisincludesaccountabilitytotheNational Assembly for ensuring that the resources of the respective entity for which he or she is the accountingofficer areused ina lawful,authorized,effective,efficient,economical and transparent manner.

Section 72 focuses on the accounting officers' responsibility to manage the assets and liabilitiesofnationalgovernmententities.

• c) Apart from the above-named laws, The Committee was further guided by the following:

2. (i)the Parliamentary Powers and Privileges Act, Cap. 6; 3. (i)thePublicProcurement and AssetDisposalAct,Cap.412C; 4. (iv) the Public Procurement and Asset Disposal Regulations, 2020; 5. (v)theState CorporationsAct,Cap.446; 6. (vi) thePublicAuditAct,Cap.412B; 7. (vii)theFair Administrative Action Act,Cap.7L; 8. (vili)theAccountantsAct,Cap.53l;and 9. (ix)theNationalAssemblyStandingOrders

1.2Committee Membership

• 2.The Committee comprises of the following fifteen(15) Members;

Chairperson

The Hon. Wanami Wamboka, M.P. Bumula Constituency

DAP-K Party

Vice Chairperson

The Hon. Kibagendi Antoney, MP Kitutu Chache South Constituency ODM Party

TheHon.(Amb.)FrancisSigei,EBS,MP Sotik Constituency UDA Party

The Hon. Thuddeus Nzambia, MP. Kilome Constituency

WDM Party

TheHon.Wamacukuru GithuaKamau,CBS, MP. Kabete Constituency

UDA Party

The Hon. Maurice K. Bisau, MP. Kiminini Constituency DAP-K Party

The Hon. Rebecca Tonkei, MP. Narok County UDA Party

The Hon. Mark Mwenje, CBS,MP. Embakasi West Constituency Jubilee Party The Hon.Alfah Miruka,CBS,MP. Bomachoge Chache Constituency UDA Party The Hon. Bonaya Gollo, MP Isiolo County Jubilee Party The Hon. Shadrack Mwiti, MP.

Imenti South Constituency Jubilee Party

The Hon.MosesKirima,MP Imenti Central Constituency UDA Party

The Hon. Daniel Karitho, MP Igembe Central Constituency Jubilee Party

The Hon. Chiforomodo Munga, MP Lungalunga Constituency

UDM Party

The Hon.Joseph Tonui,MP Kuresoi South Constituency UDA Party

I.3CommitteeSecretariat

3. The secretariatfacilitating the Committee comprises thefollowing technical staff;

Ms. Christine Ndiritu

ClerkAssistantI/ LeadClerk

| Mr. Victor Mutugi Fundi | Ms. Rinha Saineye | |---------------------------|-----------------------------| | ClerkAssistant Il1 | MediaRelationsOfficer | | Ms. Winny Otieno | Ms.Eunice Liavuli | | ClerkAssistant Ill | Research Officer Il | | Mr.AbdimalikAhmed | Ms. Geogina Okoth | | Clerk Assistant III | Research Officer I | | Ms.Noel Amutabi | Mr. Stephen Otieno | | Legal Counsel II | Sergeant at Arms | | Mr.Machuki E.Mwebi | Ms. Mary Kamande | | Fiscal Analyst II | PublicCommunicationsOfficer | | Mr. Collins Mahamba | | | Audio Officer | |

1.4 Committee proceedings

4. To produce this report, The Committee held twenty-one (2l) sittings in which it examined the audited financial statements of thirteen (13) State Corporations and the accompanying Reports by the Auditor-General. 2. sound business principles and prudent commercial practices, The Committee heard and received bothoral andwrittenevidence fromChief Executive Officers,Principals and Directors-General (Accounting Officers) ofvariousState Corporations and otherrelevant witnesses. 3. 6.The recommendations on the issues raised by the Auditor-General for the various State Corporations are found under appropriate sections of the report on each of the State Corporations examined. 7. These observations and recommendations, if considered and implemented, will enhance viability and value for money in State Corporations and the public investments made in the governance and education sectors as a whole.

2.0GENERALOBSERVATIONSANDRECOMMENDATIONS

8. cutting and at times persistent matters that informed the general observations and recommendations.Specific observations and recommendations are,however,made in relationtotherespectiveagency.

2.1 Understaffing

9. The Committee observed that most institutions across the country are significantly understaffed.For instance, theKenya Law Reform Commission has only 65 employees against an approved staff establishment of 240, resulting in a shortfall of 175 personnel. leaving a gap of 74 staff members. These staffing deficits severely hinder the institutions' capacitytodeliverserviceseffectively.

To address the significant staffing gaps undermining institutional performance, the government should implement a phased and well-coordinated strategy that prioritizes accelerated recruitment for critical roles, establishes medium-term workforce plans aligned with evolving mandates, and to enhanceoperational efficiency,alongsidethecreationofaclearmonitoringframeworkto track progress andensure accountability inrestoringinstitutions to optimal staffinglevels.

2.2Failure to adhere togender,ethnicity andregional balance

• 10.The Committee observed that some institutions exhibited a skewed ethnic diversity within concerns regarding the underrepresentation of certain ethnic groups, potential discriminatory practices in recruitment and promotion, and broader issues related to reflects gender imbalance, with only one female among its nine members.

The Committee recommends that all public agencies must comply with the constitutional provision onequity and inclusivenessbuttressed by theNational Cohesionand Integration Act,Cap,7N. Further,TheNational CohesionandIntegrationCommissiontogetherwiththeInspectorateofState Corporations conduct bi-annual examination of ethnic composition in these state-owned enterprises,toconfirmincrementaladdressofthematter.

TheCommitteefurtherrecommends thatinstitutionstakedeliberateandproactivemeasuresto includePersonswithDisabilities(PWDs)intheirworkforce,inaccordance with theprovisionsof theConstitution.

2.3LateSubmissionofsupportingdocumentation

• Il. Some accounting officers failed to submit supporting documentation to the AuditorGeneral on time (during the audit cycle) as required under section 68 of the PFM Act. This invariably led totheCommittee discussingmatters thatshould ordinarilynotfeature in the final report,someasmundaneasaccountsnotbalancing.

TheCommitteerecommends thatAccountingOfficershenceforthcomplywithSection68(2)(k)of audits will prescribe punitive measures to those accounting officers who fail to adhere to the requirements of the law in thisregard.

2.4 Unsecured/ untitled land holdings

• I2. The Committee noted several instances where land owned by various institutions remained unsecured and lacked proper title documentation. The absence of legal ownership records exposes these institutions to risks, including land disputes, encroachment, and potential loss of property. ln some cases, institutions were occupying land without formal titles, making it difficult to undertake development projects.

TheCommitteerecommends that theAccountingOfficersfortheaffectedinstitutionsmake deliberate efforts to obtain ownership documents for untitled land holdings in consultation with the relevantParent Ministry andMinistry of Lands and ensure that theland holdingwhich theyhave ownershipdocumentsaresecured.

CONSIDERATIONOFTHEREPORTSOFTHEAUDITORGENERALONTHE FINANCIALSTATEMENTSOFSTATECORPORATIONS

I.OKENYALAWREFORMSCOMMISSION(KLRC)

• I) Mr. Joash Dache, Chief Executive Officer, accompanied by: -

2. i)Mr.Peter Musimi-Ag.Director Legal Services 3. i)Ms. Susan Kuria - Head of Administration 4. ii)Mr.Dan Omondi-Accountant

AppearedbeforeTheCommitteetoadduceevidenceontheauditedaccountsofKenya LawReformsCommission,on22ndNovember2023.

Audited Statements for Financial Year 2018/2019 (Unqualified Opinion)

I.1.1 Prior year matters on Property, Plant, and Equipment.

• 2) As previously reported, the Commission's fleet of motor vehicles includes two (2) vehicles registration GKA 139N and GKA 28lG whose ownership documents have remained under the Ministry of Justice and Constitutional Affairs. Management has, however, indicated that it is pursuing the formal transfer of the vehicles with the Office of the Attorney General and Department of Justice, and the National Transport and Safety Authority but has not been completed as of 30 June, 2019.

Management Response

• 3) I wish to confirm that the ownership of the two vehicles as at the reporting period was withthedefunctMinistryof JusticeandConstitutional Affairs.However,theCommission had initiated the necessary steps with the Office of Attorney General and Department of Justiceforthetransfer.

CommitteeObservation

• 4) The Committee observed that the Commission has received logbooks for 3 vehicles except one: GKA 139N.
• 5) Fewer efforts have been made by the Commission to regularise the issue and acquire documentation.

Committee Recommendation

• 6) The Committee recommends that the Commission makes deliberate efforts to follow up ontheregistrationofthevehicles.

1.1.2 LackofFunctional OversightStructures

• 7) As disclosed in the Chief Executive Officer's report in the Non-financial Information of the Financial Statements, four (4) Commissioners exited the Commission on 30th September 2018 leaving only three (3) Commissioners who also exited in the year. The Commission, therefore,operated without a functional oversight body and requisite committees to provide oversight to the management activities in line with good corporate governance practices.

Management Response

• 8) I wish to confirm that the Commission operated without a proper functional oversight Report, the Commissioners' terms expired and the appointing authority was adequately informed. Part-time Commissioners were subsequently appointed in the second quarter of the succeeding financial year 2019/2020 on 13th December 2019.
• 9) However, the Commission was not fully constituted as there was no substantive Chairperson and a full-time commissioner as stipulated in the KLRC Act. Consequently, 1 would liketoinformtheCommitteethattheCommissionwasadministrativelyreporting to the Office of the Attorney General and Department of Justice as the parent ministry.

CommitteeObservation

• 10) The Committee observed that the Commission is fully constituted, gazetted and functional,thustheissueisresolved.

Audited Statements for Financial Year 2019/2020 (Unqualified Opinion)

I.1.3 Prior year matters on property, plant, and Equipment.

• Il) As previously reported, the Commission's fleet of motor vehicles includes two (2) vehiclesregistrationGKAI39NandGKA28lGwhoseownershipdocumentshave remained under the Ministry of Justice and Constitutional Affairs. Management has, however, indicated that it is pursuing the formal transfer of the vehicles with the office of the Attorney General and Department of Justice, and the National Transport and Safety Authority but had not been completed as at 30 June, 2020.

Management Response

• I2) Hon. Chairperson, I wish to confirm that the ownership of the two vehicles as at the reporting period was with the defunct Ministry of Justice and Constitutional Affairs. However,the Commission had initiated thenecessarystepswiththeNClA.

CommitteeObservation

• I3) The Committee observes that the matter has been addressed in previous financial years andreiteratesitsrecommendations.

1.1.4 Budgetary performance and control

• I4) During the year under review, the Commission's actual expenditure net of depreciation and amortization amounted to Kshs. 244,042,055 against the budgeted expenditure of Kshs. 293,524,960 resulting in an overall under-absorption of Kshs. 49,482,905 or 17%.
• on the service delivery to the public.

Management Response

• 16) Hon. Chairperson, I wish to confirm that the Commission had an under-absorption of Kshs. 49,482,905 from its 2019/2020 budgeted expenditure. As you may be aware Hon. Chairperson, this is the period that the Country and the globe were dealing with the

2. I7) This therefore meant that as a Commissionwe could notundertake some of the planned activities within the year under review. However, I am happy to report that we have managed to gradually roll over the activities into the subsequent financial years and service delivery to the public has not been negatively impacted.

CommitteeObservation

• 18) The Committee observes and takes into consideration the response given by the Commission and acknowledges that the pandemic disrupted the Institution's functioning thus could not achieve the required budget expenditure.

CommitteeRecommendation

• 19) The Committee recommends that the Commission henceforth adjust its budget and seek necessary approvals accordingly.

1.1.5LackofFunctionalOversightStructures

• 20)As disclosed in thenon-financial information of thefinancial statements,the Chairman exited the Commission on 30 September 2019 after the expiry of his term while the rest of theCommissionersexitedin the2018/2019financialyear.

• 21) The Commission, therefore, operated without a functional oversight body and requisite committees to provide oversight to the management activities in line with good corporate governance practices.

Management Response

• 22) Hon. Chairperson, I wish to confirm that the Commission operated without a proper functional oversight body and the requisite committees during the reportingperiod.As indicated in the report, the Commissioners' terms expired and the appointing authority was adequately informed.Part-time Commissioners were subsequently appointed in the second quarter of the succeeding financial year 2019/2020 on 13th December 2019.
• 23) However, the Commission was not fully constituted as there was no substantive would like to inform the Committee that the Commission was administratively reporting to the Office of the Attorney General and Department of Justice as the parent ministry.

Committee Observation

• 24) The Committee observes that the matter has been addressed in previous financial years andreiteratesitsrecommendations.

Audited Statements for Financial Year 2020/2021 (Unqualified Opinion)

• 25) As previously reported, the Commission's fleet of motor vehicles includes two (2) vehiclesregistrationGKAI39NandGKA28IGwhoseownershipdocumentshave remained under the Ministry of Justice and Constitutional Afairs. Management has, however, indicated that it is pursuing the formal transfer of the vehicles with the office of the Attorney General, and Department of Justice, and the National Transport and SafetyAuthoritybuthadnotbeencompleted as at30June,2021.

Management Response

• 26)Hon.Chairperson,Iwish toconfirm that the ownershipof thetwovehicles as atthe reporting period was with the defunct Ministry of Justice and Constitutional Affairs. However,I would like to report that the Commission managed to acquire the ownership ofvehicle registrationGKA 28lG.Currently,we are stillfollowing upon vehicle registration GKA I39N.

CommitteeObservation

• 27) The Committee observes that the matter hasbeen addressed inprevious financialyears andreiteratesitsrecommendations.

1.1.7LackofFunctionalOversightStructures

• 28)As disclosed in the non-financial informationof the financial statements,the Chairman exitedtheCommissionon30September2019aftertheexpiryofhistermwhiletherest of theCommissionersexitedinthe2018/2019financialyear.
• 29) The Commission, therefore, operated without a functional oversight body and requisite governance practices.

Management Response

• 30) Hon. Chairperson, I wish to confirm that the Commission operated without a proper functional oversight body and the requisite committees during the reporting period. As indicatedinthereport,theCommissioners'termsexpiredandthe appointingauthority was adequatelyinformed.Part-timeCommissionersweresubsequently appointed in the
• 31) However,the Commission was not fully constituted as there was no substantive Chairperson and a full-time commissioner as stipulated in the KLRC Act. I however, wouldlike toinformtheCommitteethattheCommissionwelcomed the appointmentof its chairperson and the full-time Commissioner via the gazette notice of August I, 2022 and the subsequent swearing-in of all Commissioners on August 15, 2022.

CommitteeObservation

• andreiteratesitsrecommendations.

1.1.8 Under-staffing

• 33) A review of employee records and staff payroll for the year ended 30 June 2021 revealed that the Commission had sixty-five (65) employees against staff establishment of two five (175). The understaffing may hinder the effective delivery of services by the Commission.

Management Response

• 34) Hon. Chairperson, it is true that the Commission in the year under review was understaffed by one hundred and seventy-five (175) employees which therefore hindered

the effective deliveryof service by the Commission.Thiswas occasioned by the issuance of a circular on a freeze of new employment in the public service and continues to be in effectto date.However,I wish toreiterate that the Commissionhas continuallyput in place measures to effectively utilize the available personnel to ensure it delivers on its mandate.

CommitteeObservation

• 35)TheCommitteeobservedthattheKenyaLawReformCommissionhasonly65 employees against an approved staff establishment of 240, resulting in a shortfall of 175 personnel. This staffing deficit severely hinder the institutions'capacity to deliver services effectively.

CommitteeRecommendation

• 36) To address the significant staffing gaps undermining institutional performance, the government should implement a phased and well-coordinated strategy that prioritizes acceleratedrecruitmentfor criticalroles,establishesmedium-termworkforce plans aligned with evolving mandates, and provides adequate budgetary allocations to support sustained hiring and retention. This should be complemented by targeted capacity-building initiatives, including training and digital modernization, to enhance operational efficiency, accountability in restoring institutions to optimal staffing levels.

1.l.9AssetManagement

• 37)Asdisclosed inNote I5tothefinancial statements,the statement of financialposition o e s i s o a e d ss 2021. However, the assets register was not updated with pertinent details including a clear description of assets, date of acquisition cost, location, and unique identification numbers of the assets. Further, the assets were not tagged with unique identification numbers.
• weakduringtheyearunderreview.

Management Response

• 39) Hon. Chairperson, I wish to confirm that indeed it is true that the Commission in the year under review did not have an updated asset register with pertinent details including a clear descriptionof assets,date of acquisition,cost,location,and uniqueidentification

numbers of the assets.This is because a majority of theCommission's assetswere inheritedfromthedefunctMinistryofJusticeandConstitutionalAffairsthus the and costs. The Commission was also not able to provide the assets with unique identification numbers as this process required financial commitment that the Commission wasconstrained on.

• 40) However, I wish to inform the Committee that we have been able to estimate the costs for some of the assets, determine the acquisition dates, and comprehensively implement the National Treasury circular numbers 5 and 23 of 2020 on guidelines in the preparation of assets and liabilities register in the public sector. The Commission has also set aside numbers.
• 41) In regard to the weaknesses in internal controls, the Commission is in the initial stages of customizing an internal assets and liabilities management policy based on the National

CommitteeObservation

42) The Committee observed that the asset register is not yet in place.

CommitteeRecommendation

• 43) The Accounting Officer should ensure that a complete fixed asset register is maintained pursuant to Regulation I43(l) of the PFM (National Government) Regulations 2015. Further,theregistershouldbe availedtotheAuditor-Generalatthe timeof auditif requested.
• 44) Within three (3) months of the adoption of this Report, the Accounting Officer should availto theAuditorGeneralacomprehensive fixed assetsregister for reviewand verification.

2.0KENYACOPYRIGHTBOARD

• 45) Mr. Edward Sigei, Executive Director, accompanied by: -

AppearedbeforeTheCommitteetoadduceevidenceontheaudited accountsofKenya

• i)Mr.FredrickMutugu-Director CorporateServices CopyrightBoard,on2lstFebruary2024.

Audited Statements for FinancialYear 2018/2019(Qualified Opinion) 2.l.lFinancialPerformance

• 46) As reflected in the statement of financial performance, the Board reported a deficit of fromKshs.45,197,339 as at 30June,2018 toKshs.23,075,999 as at30June,2019.If strategies are not put in place to address the deficit trend, the Board is likely to face financialdifficultiesinthefuture.

Management Response

• 47) This was due to a budget cut that saw KECOBO's allocated funds drop by Kshs.10 million.

2. Intellectual Property Organization (VViPO). This further contributed to the deficit.

• 49) Work pertaining to the Enterprise Resource Planning System (ERP) which the Board had established, and handover and commissioning had not taken place. This saw the depreciation/ Amortization expense balloon.
• 50) Further, during the same year, there was the implementation of SRC approved salary structure

CommitteeObservation

• 51)TheCommitteeobservedthatnecessarydocumentationswereprovidedtotheAuditor General,thustheissuesisresolved.

2.1.2TransfersfromGovernmentEntities

• 52)AsdisclosedinNote3tothefinancial statements,thestatementoffinancialperformance reflects an amount of Kshs.121,580,000 under transfer from Government representing receipts from the State Law Ofice and Department of Justice. However, records maintained at the State Law Office and Department of Justice indicated that a total of Kshs.124,580,000 was transferred to the Board during the year under review.The resultant difference of Kshs.3,000,0o0 has not been reconciled or explained.
• 53)Inthecircumstances,theaccuracyoftransfersfromotherGovernmententities of Kshs.121,580,000could notbeconfirmed

Management Response

• 54) The difference of the Kshs.3,000,000 is the target of Appropriation-ln-Aid (AlA) which the Board was expected to collect as the National Treasury records.The transfer for the period was confirmed as reflected in the Board's Books.

CommitteeObservation

• 55)TheCommitteeobservedthatrequisitedocumentationswereprovidedtotheAuditor General,thus the issues is resolved.

2.1.3Cash and Cash Equivalents

• 56)Thestatementoffinancialpositionreflectscashandcashequivalentsbalanceof Kshs.5,151,247.However, the current account bank reconciliation statement for June 2019 reflected receipts in bank statement not in cashbook totalling to Kshs.7,009, payments in bank statement not in cashbook totalling to Kshs.2l,564 and receipts in cashbooknot inbankstatementtotalling toKshs.33,745whose,clearance status as at the timeoftheauditinMarch,2020wasnotdisclosed.
• 57) In the circumstances, the accuracy, validity and completeness of cash and cash equivalents balance of Kshs.5,151,247 as at 30 June, 2019 could not be confirmed.

Management response

• 58) The unpresented cheques cleared in subsequent months of July and August 2019.

CommitteeObservation

• 59)TheCommittee observed that requisite documentationswere provided to the Auditor General, thus the issues is resolved.

2.1.4LackofBoardofDirectors

• 60) Section 6(l) of the Copyright Act, Cap. 130 provides the composition of the Board. However, and as disclosed in the Corporate Governance Statement at Page xxi of the Annual Report, the term of the entire Board lapsed on 31 October, 2018. Except for the Chairman who was appointed on 3 May, 2019, the rest of the Board members had not been appointed as at the time of audit in September, 2019. The Copyright Board, therefore, operated without a Board of Directors for nine (9) months during the financial year.

Management Response

• 61) The Executive director had notified the Office of the Attorney General and Department of Justice

Committee Observation

• 62) The prolonged absence of a functioning Board impaired effective governance oversight, strategic direction, and decision-making within the institution.

CommitteeRecommendation

• 63) Within three (3) months of adoption of this report by the House, the Office of the Attorney General and the Department of Justice should expedite the appointment of the remaining Board members to ensure full compliance with the Copyright Act and to restore effective governance structures. Additionally, mechanisms should be established toensuretimelyrenewalorreplacementofBoardmembersinfuturetoprevent governance gaps that may hinder institutional performance

Audited Statements for Financial Year 2019/2020 (Qualified Opinion)

2.1.5 Prior Year Adjustments

• 64)The statement ofcashflows reflects a prior year adjustment of Kshs.2,612,039.The treatmentishowever,contrarytoParagraph47of InternationalPublicSectorAccounting retrospectivelyinthefirstsetoffinancialstatements authorizedforissue aftertheir discovery by restating the comparative amounts for prior period(s) presented in which the error occurred,orif the error occurred before the earliest priorperiod presented, restating the opening balances of assets, liabilities and net assets for the earliest prior period presented.
• 65) In the circumstances, the validity of the prior year adjustment of Kshs.2,612,039 in the statementofcashflowsfortheyearended30June,2020couldnotbeconfirmed.

Management Response

• 66)Theissuewas addressedbyrestating theassets andthenet assets asrequiredbythe standard.

CommitteeObservation

• 67)TheCommitteeobserved thatrequisitedocumentationswereprovided totheAuditor General,thustheissuesisresolved.

2.1.6CashandCashEquivalents

• 68)Thestatementoffinancialpositionreflectscashandcashequivalentsbalanceof Kshs.10,039,804 as at 30 June, 2020. However, the current account bank reconciliation statementforJune,2020reflectspaymentsinbankstatementnotincashbooktotallingto Kshs.3,813,709,out of which clearance status ofbalances totalling toKshs.21,564was not disclosed.Further,the clearance status of receipts in cashbook not in bank statement totallingtoKshs.4,530was alsonot disclosed.

• 69) In the circumstances, the accuracy, validity and completeness of cash and cash equivalents balance of Kshs.10,039,804 as at 30 June, 2020 could not be confirmed.

Management Response

• 70) The unpresented cheques were cleared in the subsequent months. Communications between theBoardand theBankandBoardResolutions.

CommitteeObservation

• 71) The Committee observes that the matter has been addressed in previous financial years andreiteratesitsrecommendations.

2.1.7CompositionoftheBoardofDirectors

• 72)Reviewof thelistofBoardMemberswhoservedduringtheyearunderreviewindicated that out of the nine (9) Members, only one (l) Member was of the female gender translating toonlyIl%.This thereforeis incontraventionof Article27(8)of the Constitution of Kenya 20l0 which provides that the state shall take steps to ensure that nomorethantwo-thirdsof membersofelectiveor appointivebodiesshallbeofthesame gender. The Board composition does not therefore meet the requirements of the Constitution of Kenya 2010.

Management Response

• 73) The Executive director had notified the Office of the Attorney General and Department of Justice.

CommitteeObservation

• reiteratesitsrecommendations.

AuditedStatementsforFinancialYear2020/2021(Unqualified Opinion) 2.1.8CompositionoftheBoardofDirectors

• 75) Review of thelist of Board Members who served during the year under review indicated that out of the nine (9) Members, only one (l) Member was of the female gender translating to only 1l%. This therefore is in contravention of Article 27(8) of the Constitution of Kenya 20l0 which provides that the state shall take steps to ensure that no more than two-thirds of members of elective or appointive bodies shall be of the same gender.TheBoard composition does not therefore meet the requirements of the Constitution of Kenya 2010.

Management Response

• 76)The Executive director had notified the Office of the Attorney General and Department of Justice.

CommitteeObservation

• reiteratesitsrecommendations.

2.1.9 Board of Directors Operations

• 78)The Committeeshad more thanthree members andoneboard memberserved in all the which guides on Board Committees composition.Further,the Board Committee members served in the same committees since 20l9 contrary to the guidelines on rotations which should be done everyyear.The annual calendar(ALMANAC)of the Board of Directors was also not provided for audit review.As a result, it wasimpossible toascertainwhethertheBoardofDirectorshadindeedfiled thereturnswiththestate Corporations Advisory Committee (SCAC)

Management Response

• 79) The calendar was prepared and there was an oversight in communicating the same to SCAC.

CommitteeObservation

• governance requirements and undermine transparency and accountability in Board operations.

Committee Recommendation

• 81) Management should ensure strict compliance with the guidelines on Board Committee composition and annual rotation of committee members as outlined in the referenced internal controls should be strengthened to prevent recurrence of governance gaps and to enhance accountability, oversight, and adherence to statutory obligations.

2.1.10 Understaffing

• 82) A review of employee records and staff payroll for the year ended 30th June 2021 revealed thattheKenyaCopyrightBoardhad45employeesagainstthestaffestablishmentof1l9 employees resulting in understaffing by 74.

ManagementResponse

• 83) The management agrees with the audit on understaffing and further states, that it has made requests to the National Treasury through the parent Ministry for the budget to recruit and it was waiting response.

CommitteeObservation

• 84)The Committee observed that theKenya Copyright Board has only 45 employees against

CommitteeRecommendation

• 85) To address the significant staffing gaps undermining institutional performance, the government should implement a phased and well-coordinated strategy that prioritizes accelerated recruitment for critical roles, establishes medium-term workforce plans aligned with evolving mandates, and provides adequate budgetary allocations to support initiatives, including training and digital modernization, to enhance operational efficiency, alongsidethecreationof aclearmonitoringframeworktotrackprogressandensure accountability in restoring institutions to optimal staffing levels.

3.0NATIONAL COHESION AND INTEGRATION COMMISSION(NCIC)

• 86) Mr. Samuel Kobia, Chairman NCIC, accompanied by: -

2. i)Mr.HarrisonKariuki-Ag.Chief Executive Officer 3. ii)Ms.Catherine Njuki-Principal Accountant 4. ii) Ms. Caren Lochi- Finance Officer

Appeared before The Committee to adduce evidence on the audited accounts of National Cohesion and Integration Commission, on I4th February 2024.

Audited Statements for Financial Year 2018/2019(Unqualified Opinion)

• 87) The Commission received an unqualifiedopinion withno material issues(outstanding audit queries) from the Office of the Auditor General in regard to the Commission.

AuditedStatements forFinancial Year2019/2020(Qualified Opinion)

3.1.1UnsupportedExpenditure

• 88) As disclosed in Note I0 to the financial statements, the statement of financial performance reflects an expenditure balance of Kshs.142,142,932 under general expenses which

payments include allowances paid for meetings, retreats, workshops, burials and court attendance. The allowances are not supported with relevant documents including attendancesheetsbytheparticipantsandworkshop/retreatreports.

• 89)Inthecircumstances,ithasnotbeenpossibletoconfirm the accuracy andvalidityofthe reported general expenses balance of Kshs.142,142,932.

Management Response

• 90) The Commission in its letter Ref: NCIC/FNC/Vol. (38) dated 22nd July, 2021 submitted that during the audit execution the auditor general relied on payment vouchers that had transferredfunds to imprest holders as opposed to the surrender documents that were fully supported.

CommitteeObservation

• 91) The Committee observed that the Commission used funds for burial which is indicated in theCommission'sHumanResourcesManual.

CommitteeRecommendation

• 92)TheCommitteerecommendsthatAccountingOfficershenceforthcomplywithSection ( Committee in subsequent audits will prescribe punitive measures to those accounting officers who fail to adhere to the requirements of the law in this regard.

3.1.2LackofFixedAssetsRegister

• plant andequipment as at30June,2020.TheCommission,however,didnot availa register of fixed assets during the year under review. As a result, it has not been possible balanceofKshs.79,965,371.Further,itcouldnotbeconfirmedthatpreventative 2015 were in place to eliminate theft, security threats, losses, wastage and misuse of assets.
• 143(1) of the Public Finance Management (National Government) Regulations, 2015 which provides that the Accounting Officer shall be responsible for maintaining a register of assetsunderhisorhercontrolorpossessionasprescribedbytherelevantlaws.

ManagementResponse

• 95) The Commission submitted the assets register for verification and that they have a register in place.

CommitteeObservation

• 96)TheCommitteeobservedandnotes that thematterhadsubstantivelybeen actedupon sincetheinstitutionhassubmittedtheassetsregisterwhichwasverifiedbytheauditor andmakesnofurtherrecommendations.

Audited Statements for Financial Year 2020/2021 (Unqualified Opinion)

• 97) The Commission received an unqualified opinion with no material issues (outstanding auditqueries)fromtheOfficeoftheAuditorGeneral inregardtotheCommission.

4.OBUSINESSREGISTRATIONSERVICE

• 98) Mr. Kenneth Gathuma, Director General, accompanied by;

2. i)ErastusNdanu-Deputy Director Finance 3. ii)Dennis Okello-Accountant

AppearedbeforeTheCommitteetoadduceevidenceontheauditedaccountsof BusinessRegistrationService,on 2lstFebruary2024.

AuditedStatementsforFinancialYear2018/2019(Qualified Opinion)

4.1.1 Unsupported Receivables

• 99) The Statement of Assets and liabilities reflect a receivables balance of Kshs.127,726,843 as of 30 June 2019 which includes a balance of Kshs. 41,082,583 due from the Deposit Protection Board whose analysis was not availed for audit verification.In the circumstances, the accuracy, validity and completeness of the receivables balance of Kshs.127,726,843 as of 30 June2019 could not be confirmed.

Management Response

• 100) The receivables for the year ended 30th June 2019 were Kshs.127, 726,843 comprising Consolidated bank shares totaling Kshs. 86,644,260 and deposit Protection Board Deposits totaling Kshs. 41,082,583. During the audit period, the auditors were not availed with confirmation certificate of deposits from the Kenya Deposit Insurance totaling to Kshs. 4l,082,583 due to delay by the institution to provide the deposit confirmation certificates in good time. However, the certificate was availed later and a copy is hereby attached with its analysis

CommitteeObservations

• I0l) The Committee observes that the matter had been resolved as the Auditor-General was satisfied with the management response having verified all the necessary documents.

4.1.2 Unconfirmed Short-term Deposits and Treasury Bills

• 102) The statement of assets and liabilities reflects short-term deposits and treasury bills balance ofKshs.339,686,292 as of30June2019,madeup of short-term deposits totaling Kshs.185,273,300 and Treasury bills amounting to Kshs. 154,412,292. The short-term deposit balance of Kshs.185,273,300 was held in seventeen(17)bank accounts as disclosedinNote7(a)tothefinancialstatementswhiletreasurybillsbalanceofKshs. I154,412,992 was in two (2) accounts as disclosed in Note 7(b) to the financial statements. Management did not, however, avail bank confirmation certificates for the seventeen (17) short-term deposit accounts and the two (2) treasury bills accounts.
• 103) In the circumstances, the accuracy and validity of short-term deposits and treasury bills balance of Kshs. 339,686,295 as of 30th June 2019 could not be confirmed.

Management Response

• 104) In the financial year 2018/2019 there was a delay in issuing of the confirmation May 2019.
• 105) BRS management provided the auditor's bank statements showing the date of investment which is 3rd May 2019 and the date of maturity of its investments being 3rd August 2019. The instruction letter and Bank statements are hereby attached.
• 106) For the treasury bills totalling to Kshs.154,412,992, despite the delay the confirmation certificateswereeventuallyissuedtoOfficial Receiver.

CommitteeObservations

• 107) The Committee notes that the Accounting Officer failed to submit supporting documentationtotheAuditor-General ontime(during the auditcycle) asrequiredunder section68ofthePFMAct.

CommitteeRecommendations

• 108) The Committee recommends that Accounting Officers henceforth comply with Section d ((g Committee in subsequent audits will prescribe punitive measures to those accounting officers who fail to adhere to the requirements of the law in this regard.

4.1.3Unsupported OtherRevenues

• 109) Included in other revenues balance of Kshs.72,102,161 are other receipts not classified elsewhere totalling Kshs.58,532,994 for which only Kshs.53,658,278 has been supported leavingabalanceofKshs.4,874,715unsupported.

2. I10) In the circumstances, the accuracy, validity and completeness of other revenues balance of Kshs.72, 102,161 for the year ended 30 June 2019 could not be confirmed.

Management Response

• Ill) Other revenues for the year ended 30th June 2019 of Kshs. 72,102,161 included interests received of Kshs.13, 502,024, dividends of Kshs.67,143 and other receipts not classified elsewhere of Kshs, 58,532,994. During the audit process, some schedules were misplaced hence the auditor did not verify them. All schedules as per the analysis in the concludedandcertificateissued.

CommitteeObservation

• I12) The Committee observes that the matter had been resolved as the Auditor-General was satisfied with the management response having verified all the necessary documents.

Audited Statements for Financial Year 2019/2020(Qualified Opinion) 4.1.4 Budgetary Control and Performance

• I13) As reflected in the statement of comparison of budget and actual amounts, the Business RegistrationService'sactual expenditurefor theyearnetofdepreciationamountedto Kshs.270,123,992 against the budgeted expenditure of Kshs.331,170,000 resulting in an overall under absorption of Kshs.61,046,008 or 18%. The under-spending affected the

Management Response

• ao d a s to auditor includes anaccumulatedsurplus ofKshs.25,273,275.55forFY2018/2019which is for acquiring the Service assets. The total allocation for the period was Kshs.331,170,000 of which Kshs.30,000,000 was given under a supplementary budget to support personnel emoluments since the Business Registration Services (BRS) anticipated tofully delink by April2020.This then left a balance of Kshs.7,824,325which is 2.4% of under absorption.

CommitteeObservation

• I15) The Committee notes that Public Accounts Committee in their report states the issue asresolvedthusreiteratesthesameobservation.

4.1.5StaffEthnicComposition

• 116)TheServicehad a total of one hundred and thirty(l30) staff assigned to the Business RegistrationService from theState LawOffice.However,aspreviouslyreported,areview of the ethniccomposition report indicated thatout of the onehundred and thirty(130) staffassigned,forty-six(46)werefromthesameethniccommunityrepresenting35%of thetotal number of staff assigned.This is contrary toSection7(2)of the National Cohesion and Integration Act, Cap. 7N which states that no public establishment shall have more than one-third of its staff from the same ethnic community.
• I17) The Registration Service was therefore in breach of the law.

Management Response

• Il8) Business Registration Service as of 30th June 2020 had an establishment of 104 staff members.However,as statedby the auditor there is noethnicitybalancing of the staff which was majorly attributed to the no. of staff inherited by BRS from the Office of the staffbytheServicewhichstandsatI09currently.

CommitteeObservation

• I19) The Committee notes that the institution has exactly one-third of its staff from the same ethniccommunity therebyincompliancewiththelaw.

4.1.6 Lack of a Disaster Recovery and Continuity Plan

• resumption of operations quickly and effectively in case of an emergency or disaster custodyoftheinstitution.

Management Response

• 121) It is true that BRS had no Disaster recovery plan in the year under review. However, theServicereliedontheharddiskswhichwerestored infireproofcabinetswithlimited access to twopersonnel and it used toback up on a monthly basis since it was in the

same has since been developed and operationalized as the attached.

CommitteeObservation

• I22) The Committee observed that the institution did not provide an approved Disaster Recovery and Continuity Plan for verification.

CommitteeRecommendation

• 123) The Committee reprimands the Accounting Officer for not providing documents on time despite being reminded severally. This is contrary to Section 68 of the PFM Act.

4.1.7 Non-ProvisionofServiceProviders'Contracts

• providers to collect revenue onits behalf.The service providersinclude E-Citizen and by extension Safaricom and Kenya Commercial Bank among others.However, the respective contract agreements were not provided for audit review.
• 125) In this circumstance, it was not possible to establish the legality and performance of the service providers. Further, it was not possible to ascertain the basis of the revenue collected in the absence of supporting contracts.

Management Response

• 126) The Observation made by the auditor on the non-provision of the Service provider contract is true.

2. I27) Business Registration Services collects its revenue through the E-citizen platform as per the authoritiesprovidedbelow: 3. (i) The Government vide Gazette Notice Number 2725 dated 24th April 2014 appointed a task force to implement the Government Digital Payments with the mandate toimplement the GovernmentPayment Gateway and ensure thatindividualsandbusinessesareenabledtomakepaymentstothe Government electronically through all available channels. 4. (ii) The mandate of the task force was captured in the Kenya Gazette Special Issueno.9290of30thDecember2014throughwhichtheCabinet Secretary,National Treasuryintroducedthe GovernmentServices Digital Payments Programme.

• 128) At its 6th meeting held on the 25th of October 2016, the BRS Board approved BRS at the companies' registry.

CommitteeObservation

• 129) The Committee notes that the Accounting Officer failed to submit supporting documentation to the Auditor-General on time (during the audit cycle) as required under section68ofthePFMAct.

CommitteeRecommendation

• 130)TheCommitteerecommends thatAccountingOfficershenceforthcomplywithSection 68(2)(k) of the PFM Act 2012, by providing supporting documentation on time. The Committee in subsequent audits will prescribe punitive measures to those accounting officers who fail to adhere to the requirements of the law in this regard.

4.1.8 Lack of a Disaster Recovery and IT Business Continuity Plan

• I31) Business Registration Services does not have an approved Disaster Recovery Plan or IT Business Continuity Plan. This poses a significant threat to the core function of the Business Registration Services especially because it handles sensitive information about registration of Companies.

Management Response

• 132) It is true that BRS had no Disaster recovery plan in the year under review. However, theServicereliedontheharddiskswhichwerestoredinfireproofcabinetswithlimited access to two personnel and it used to back up on a monthly basis since it was in the samehassincebeendeveloped andoperationalized.

2. 133)A Disaster Recovery plan and an IT Business Continuity plan have been developed. An extracthasbeen attached.

CommitteeObservation

• 134) The Committee observes that the matter has been addressed in previous financial year andreiteratesitsrecommendations.

4.1.9 Lack of Medium-Term StrategicPlan

• 135) Business Registration Service does not have a Strategic Plan for the medium-term fiscal framework and the fiscal policy objectives in contravention of Section 68(2) (g) of the

prepare a strategic plan for the entity in conformity with the medium-term fiscal framework and fiscal policy objectives of the national government.

• 136) Under the circumstances, it was not possible to evaluate the performance of the Business Registration Service.

Management Response

• 137) By the time the audit was being carried out for the FY 2019/2020 BRS was in the process of developing its Strategic plan hence it relied on the approved work plans approved for po a pe aa a e s d s a is being implemented.

CommitteeObservations

• 138) The Committee observes that the matter had been resolved as the Auditor-General was satisfied with the management response having verified all the necessary documents.

4.1.l0UnconfirmedShort-TermDeposits

• 139) The statement of assets and liabilities as of 30 June 2020 reflects a nil balance under short-term deposits. However, as reported in the previous year, Management did not providebankconfirmationcertificatesfortheclosingbalanceofKshs.185,273,300as of 30 June 2019, held in seventeen (17) bank accounts as disclosed in Note 7(a) to the financialstatementsfor2018/2019.
• 140) In the circumstances, the accuracy and validity of the nil balance for short-term deposits as of 30 June2020 could notbeconfirmed.

Management Response

• 141) In the financial year 2019/2020 there was a delay in issuing of the confirmation Corticates for fixed deposits held by the National Bank of Kenya invested on the 2nd May 2019. BRS managementprovided the auditor'sbankstatementsshowing thedateofinvestment which is 3rd May 2019 and the date of maturity of its investments being 3rd August 2019.

CommitteeObservation

• 142) The Committee observes that the matter has been addressed in previous financial year andreiteratesitsrecommendations.

AuditedStatementsforFinancial Year2020/2021(Qualified Opinion)

4.l.lI InaccuraciesintheFinancialStatements

• 143) The following errors and omissions were noted in the financial statements and the

• 144) The statement of cashflows reflects nil increase/(decrease)inprior year balances on working capital adjustments. However, the statement of financial position reflectsbalances of Kshs.13,051,625 and Kshs.2,448,006 in respect of inventories and trade and other payables which have not been accounted for. Further, the purchase of intangible assets amountingtoKshs.1,588,400hasbeenomittedundercashflowfrominvesting activities. In addition, net cash flow from operating activities has a casting error amounting to Kshs.10,603,619.

2. of Kshs.29,108,571while the correspondingNote 18 to thefinancial statements reflects a balance of Kshs.30,532,980, resulting in an unexplained variance amounting to Kshs.1,424,409. 3. 146)As disclosed inNote 19 to the financial statements,the statementof financial position reflects anintangible assetsbalance of Kshs.l,424,409.However,note 19 omitted the dates, months and years against the description of balances at the beginning, and end of the years reported for the intangible assets. iv. The statement of financial position reflects long outstanding trade and other payables balance of Kshs.2,448,006. No explanation was

Management Responses

• I47) The omitted amounts in the cashflow for the prior year of Kshs. 13,051,625 relating to stock, Kshs.1,588,400 relating to intangible assets and Kshs.2,448,006 relating to gratuity payables have all been included in the revised cashflow statements hence there were no castingerrorofKshs.10,603,619.
• 148) As stated above in note(i) the statement of financial position and note I8 showing property plant and equipment of Kshs.29,108,571 has been corrected in revised financial statementhencenovarianceofKshs.1,424,409.
• 149) A figure of Kshs.1,424,409 relating to intangibles assets which was procured in January 2021 hence attracting half year amortization up to June 2021.
• 150) A figure of Kshs 2,448,006 was gratuity payable to BRS staff which was a provision which had not been transferred to the gratuity and retention account also not operational by then.The Service got approval from the National Treasury on I5th March and opened at KCB a gratuity and retention account number 1300691360 and the funds were transferred tothesameaccount.

CommitteeObservation

• 151) The Committee observes that the matter had been resolved as the Auditor-General was satisfied with the management response having verified all the necessary documents.

4.1.12 Staff Ethnic Composition

• 152) The Business Registration Service had a total of one hundred and thirty (l30) staff members as of 30 June 2021. However, as previously reported, a review of the ethnic composition of theService revealed that out of the one hundred and thirty(l30) staff members, forty-six (46) were from the same ethnic community representing 35% of the total number of staff. This is contrary to Section 7(2) of the National Cohesion and Integration Act, Cap. 7N which states that no public establishment shall have more than one-thirdofits staff from the same ethniccommunity and Article 232(l)(h)of the Constitution.
• 153) The Management was in breach of the law.

Management Response

• 154) Business Registration Service as of 30th June 202l had an establishment of 104 staff members.However,as stated by the auditor there is no ethnicity balancing of the staff whichwasmajorlyattributedtotheno.ofstaff inheritedbyBRSfromtheOfficeof the Attorney General. The problem has since been addressed following the replacement of staff by the Service which stands at I09 currently.

CommitteeObservation

• 155) The Committee observes that the matter has been addressed in previous financial year andreiteratesitsrecommendations.

4.1.13 Unauthorised GratuityPayment

• 156) As disclosed in Note 9 to the financial statements, the statement of financial performance reflects employee costs amounting to Kshs.216,287,446. Included in the expenditure is an amountof Kshs.17,266,503paidinrespectof staffgratuitythroughunauthorized and unnumberedvoucherandchequenumber00376lof30June2021.lnaddition,the payment was being held as unpresented cheque. No explanation was provided by Management for the irregularity.
• 157) Consequently, the regularity of the gratuity payment amounting to Kshs.17,266,503 couldnotbeconfirmed.

Management Responses

261

• 158) As stated, earlier BRS had not paid any gratuity to any staff as at June 30th 2021. The amount stated by the auditor of Kshs. 17,266,503 was a provision of the gratuity payable for the period which was already provided in the books awaiting to be banked. The Service managedtoopenaGratuity andretentionaccountno.1300691360withKCBBankand the same amount has alreadybeen transferred to the account.

CommitteeObservation

• 159) The Committee observes that the matter had been resolved as the Auditor-General

4.1.l4LackofaFixedAssetRegister

• 160) The statement of financial position reflects the property, plant and equipment balance of Kshs.29,108,571 (2020-Kshs.30,672,318).However,the Management did not maintain anassetregistercontrary toRegulation143of thePublicFinanceManagement(National Government) Regulations, 20l5. Further, the assets were not tagged for ease of traceability and accountability.

2. I61) Management was in breach of the law.

Management Responses

• 162)As not by the auditor,BRS had not transferred all the assets to the newly introduced asset register by the National Treasury. All the assets are now fully updated in the asset register.
• 163) On the issue of tagging for the ease of traceability and accountability of BRS assets, this exercisewasnotcarriedoutintheFYunderreviewduetoresourceconstraints. However,thesamehasbeennotedand all assetshavebeentagged.

CommitteeObservation

• I64)TheCommittee observes that the matter hadbeenresolved as theAuditor-General

4.1.15IrregularProcurementofCloudHostingServices

• I65) The Business Registration Services (BRS) procured cloud hosting services from a firm ofcloud hosting services at a contract sum of Kshs.7,340,024.However,a review of tender documents revealed that the firm awarded the contract was not among the ten s n )

Information Communication and Technology for maintenance of cloud services under tendernumberMOlCT/SDICT/055/2018-2019.

• 166)Further,the contract document between BRS and the firmprovided for audit was not dated, signed and stamped. Records provided indicate that BRS had paid an amount of Kshs.6,606,022 or 90% of the contract sum to the firm.However,BRS is not benefiting from theproject due to unaddressed cyber security concerns on handling ofgovernment dataonprivateservers.
• 167) Consequently, value for money was not realized on the expenditure of Kshs.6,606,022 duetounaddressedcybersecurity.

ManagementResponses

• 168) It is true BRS procured cloud hosting services at a contract sum of Kshs.7,340,024 from MFI Angani which was amongst the prequalified suppliers for restricted tendering by the Ministry of Information Communication and Technology for maintenance of cloud services.
• 169) It is true by the time of the Audit, the signed contract between the MFl and BRSwas misplaced in the offices. The signed contract has since been traced and is hereby attached.
• 170) It is true BRS incurred an expenditure of KShs.6,606,022. The project was completed by MFI/Angani andwhen theservicewantedtomigratethedatafromtheE-citizenplatform to the newly acquired alternativehosting,theService contactedthe National Treasury a Treasury advised the Service to consult and seek approval and technical support from the Ministry of ICT and the Ministry of Interior and Coordination of National Government. The Ministry of ICTproceeded to have approval toBRS however,theMinistry of Interion and Coordination of National Government rejected the Service's request citing that personalidentifiableinformationcannot behosted on a privatecloud since it is a contravention with the National ICT Policy.
• 171) BRS was advised to set up a locally hosted data centre. This decision led to a halt on the alternativehostingproject andhad an impact on the activitiesthat theServicewasplanning to implement.
• 172) At the time the project was completed and before the advisory opinion from the Ministry of Interior and Coordination was received, BRS kept on utilizing the service by

hosting some of their services in the system such as ERP system, all internal read-only systemsPVT,BPMS,scanned images aswellas CCTVbackupwhileotherE-citizen services could not be hosted in the servers which led to discontinuation of the renewing of thecontact

CommitteeObservation

• 173) The Committee notes that:the Business Registration Service (BRS) irregularly procured cloudhostingservicesatacontractsumofKshs.7,340,024.
• 174) The firm awarded the contract was not among the ten (lo) prequalified suppliers under Tender No. MOlCT/SDICT/055/2018-2019, contrary to the requirements of Section 102 of the Public Procurement and Asset Disposal Act, 20l5 (PPADA) which governs restrictedtendering.ThisconstitutesabreachofSection3and44ofPPADA,2015,which require fairness, transparency, and accountability in procurement.
• 175) The contract was initially undated, unsigned, and unstamped, violating Regulation 6l of the Public Procurement and Asset Disposal Regulations, 2020, which requires proper execution and safekeeping of procurement contracts. Moreover, misplacement of the signed contract reflects poor records management, contrary to Section 68(2)(b) of PPADA,2015.

CommitteeRecommendation

• 176) WVithin three (3) months of the adoption of this report, the Accounting Officer (during the period under review)must provide an explanation for incurring expenditure of Kshs.6,606,022 and entering into a contract for procurement without lawful tender documents contrary to the provisions of section I96(l) of the Public Finance Management Act,2012.

2. 177)WheretheAccountingOfficerfails toprovide anexplanation,theAccountingOfficer (during the period under review) should be reprimanded for incurring Kshs.6,606,022 withoutlawfultenderdocuments.

4.1.16 Payment for Goods and Services from Unregistered Supplier

• Kshs.76,273,49lin the year under review from various suppliers who were not registered as required under Sections 56 and 57 of the Public Procurement and Asset Disposal Act, Cap.412C.

动

• 179) Consequently, it was not possible to confirm value for money in the award of the Public Procurement and Asset Disposal Act, Cap. 412C.

Management Responses

• theyearunderreviewsinceitwas intheprocessofdelinkingfrom the Office of the attached request letter.
• 181) Currently, the Service has its own prequalification list since it has been fully delinked.

CommitteeObservation

• 182) The Committee observes that the matter had been resolved as the Auditor-General was satisfied with the management response having verified all the necessary documents.

4.1.l7 LackofaDisasterRecovery andContinuityPlan

• 183) As previously reported, the Business Registration Service did not have an approved Disaster RecoveryPlan and IT Business ContinuityPlan in theyear under review.This posedasignificantthreat totheresumptionofoperationsquickly andeffectivelyincase of an emergency or a disaster. A lack of Business Continuity and Data Recovery Plan may affecttheoperationsof theentity.

Management Responses

• 184)It istrue thatBRShadnoDisasterrecoveryplan in theyear underreview.However, theServicereliedontheharddiskswhichwerestoredinfireproofcabinetswithlimited accesstotwopersonnelandit usedtobackuponamonthlybasis since itwas inthe process of developing its own disaster recovery and continuity plan after delinking.

CommitteeObservation

• 185)The Committee observes thatthematterhasbeen addressedinpreviousfinancialyear andreiteratesitsrecommendations.

4.1.l8Use of Unauthorised AccountingSystem forHandling Government Data

• 186) Business Registration Service (BRS) accounting information is being processed through quickbookswithout authority fromThe National Treasury.Further,there is no contract between the BRS and the supplier or developer of the system setting the terms for the useandupgradingofthesystem.

• I87) In the circumstances, management may have compromised the integrity of the BRS accounting data.

Management Responses

• 188)It is true BRS was using QuickBooks to maintain its records which was a replica of the manual records.
• 189) The quick book was a stop-gap measure as the service awaited the operationalization of ERP which has since been acquired. After the operationalization of the ERP system, all the accountingdatawhichwasinthequickbookwastransferredtothenewsystem.
• 190)It should benoted that theQuickBooks used byBRSwas customized and tailored to BRS needs.

CommitteeObservation

• 191) The Committee notes that the Business Registration Service (BRS) has been processing its accounting information using QuickBooks software without obtaining prior authority all public entities. By using QuickBooks without Treasury approval, BRS contravened this reporting.
• 192) Moreover, BRS violated Section 68(2)(b) of the Public Procurement and Asset Disposal data loss, unauthorized access, and lack of accountability in system support.

CommitteeRecommendation

• 193) BRS should immediately cease processing accounting data on QuickBooks until formal approval isobtainedfromtheNational Treasury.Within three(3) monthsof adoption of thisreport,BRSshouldsubmitto theCommittee awritten approvalfromtheNational Treasury authorizing the accounting system in use, a signed contract with the supplier/developer outlining terms of service, upgrades, and data protection measures and

4.1.19 Non-Provision ofServiceProviders'Contracts

• providers to collect revenue on its behalf. The service providers include E-Citizen and by

a

extensionSafaricom and theKenya Commercial Bank among others.However,the respective contract agreements were not provided for audit review.

• 195) In this circumstance, it was not possible to establish the legality and performance of the service providers. Further, it was not possible to ascertain the basis of the revenue collected in the absence of supporting contracts.

Management Responses

• 196) lt is true as reported by the auditor, in the previous year's BRS has been collecting revenue through E-Citizen,Safaricom and theKenya Commercial Bank

2. 197)BRSdoesnothaveacontractwiththeEcitizenwhichisawhollydomainofthe government and also serves as the government payment gateway which ensures that individualsandbusinessesareenabledtomakepaymentstotheGovernment electronicallythrough all availablechannels. 3. authoritiesprovidedbelow; 4. (i)The Government vide Gazette Notice Number 2725 dated 24th April 2014 appointed a task force to implement the Government Digital Payments with the mandate to implementtheGovernmentPaymentGatewayandensurethatindividualsand businesses are enabled to make payments to the Government electronically through all available channels. 5. (i)ThemandateofthetaskforcewascapturedintheKenyaGazettespecialIssue no.9290of 30thDecember 2014throughwhichtheCabinetSecretary,National 6. (ii)Atits6thmeetingheldonthe25thofOctober2016,theboardapprovedBusiness Registration Service management's request to move to the e-Citizen platform to improve efficiency in revenue collection at the companies' registry. 7. (iv) On Safaricom, BRS used to have a pay bill account no. 655650 which was opened by useof theNational Treasury authorityletter and domiciled atKCBBank. 8. (v)Please note,that thepay bill account has since been closed after BRS onboarded all theirmanualservicesto theE-citizenPlatform. 9. (vi) Business Registration Service has its revenue collection account with KCB Bank accountno.1252536569,whichwasopenedandoperated.

CommitteeObservation

321

• 199) The Committee observes that the matter has been addressed in previous financial year andreiteratesitsrecommendations.

4.1.20 Lack of a Disaster Recovery and IT Business Continuity Plan

• Servicesespeciallyduetothefactthatithandlessensitiveinformation aboutregistration of Companies.

Management Responses

• 201)It is true that BRS had no Disaster recoveryplan in theyearunder review.However, theServicereliedontheharddiskswhichwerestoredinfireproofcabinetswithlimited accesstotwopersonnel anditusedtobackupmonthlyBRShassincedevelopeditsown disaster recovery and continuity plan and approved by the board which is operational.

CommitteeObservation

• 202) The Committee observes that the matter has been addressed in previous financial year andreiteratesitsrecommendations.

4.1.21 Lack of Medium-TermStrategicPlan

• a ss ae d a a s (s year under review. Under the circumstances, it was not possible to evaluate the performance of the Board of Directors and Management of the Business Registration Service as regards the revenue targets, actual collection, accounting and systems.

Management Responses

• 204)By the time the auditwasbeingcarriedout for theFY 2020/202l,BRSwasin the process of developing its Strategic plan hence it relied on the approved work plan for the financial year 2020/2021. The strategic plan has already been developed and approved by the board.

CommitteeObservation

• 205) The Committee observes that the matter had been resolved as the Auditor-General

4.1.22 Non-Compliance with Reporting Templates and Guidelines

• 206) The summary statements of appropriation - recurrent, development and combined with andsubmittedaspartofthefinancialstatementsfortheyearended30June202l.Thisis contrarytotheguidelines andtemplateissuedby thePublicSectorAccountingStandards Board (PSASB).

Management Responses

• 207) The Official Receiver uses a cash basis of reporting template and guidelines. However, the OR processes are court-driven making it difficult for the OR to come up with forecast

2. 208)It is worth noting that the Official Receiver has written to the National Treasury and copied the office of the Auditor General seeking guidance on the proper reporting templatetousewhichwillbe abletocoverall itsofficeoperations.

CommitteeObservation

• 209) The Committee notes that the Official Receiver (OR) failed to prepare and submit the the year ended 30 June 2021. This omission contravenes the Public Finance Management Act, 2012 (PFMA), specifically Section 8l(3), which requires public entities to prepare financialstatementsinaccordancewithformatsprescribedbythePublicSector Accounting Standards Board (PSASB).

CommitteeRecommendation

• 2l0) The Committee recommends that the Official Receiver immediately adopt and inclusionof appropriation summaries andprogramme-basedbudgetexecutionstatements.
• 211) Within three (3) months of adoption of this report by the House, the BRS should submit totheCommitteeandtheAuditor-GeneralrevisedfinancialstatementsforFY2020/202l in compliance withPSASB guidelines.

4.1.23Lack of a Fixed Assets Register

• 212)AsdisclosedinNote6tothe financialstatements,thestatement ofreceiptsand payments for the year ended 30 June 202l reflects an expenditure on the acquisition of assets amounting to Kshs.603,600 (2020 -Kshs.3,751,000).However,it was observed that Official Receiver's assetswerenottaggedwhichcouldlead tolossof assets.

• 213) Under the circumstances, the existence and security of assets as of 30 June 2020 could notbe confirmed.

Management Responses

• 214) As noted by the auditor, BRS had not transferred all the assets to the newly introduced asset register by the National Treasury. All the assets are now fully updated in the asset register.

2. 215)TheOfficialReceiverisadepartmentunder theBusinessRegistrationServiceandthe assetsofbothORandBRShavebeentagged.

CommitteeObservation

• 216)TheCommitteeobserves thatthematterhadbeenresolved as theAuditor-General was satisfied with the management response having verified all the necessary documents.

4.1.24PaymentforGoodsandServicesfromUnregisteredSuppliers

• 217)Business RegistrationService-Official Receiverprocured andpaid forgoods andservices amountingtoKshs.41,335,674fromvarioussupplierswhowerenotregisteredas requiredunderSections56and57ofthePublicProcurement andAssetDisposalAct, Cap. 412C. It was, therefore, not possible to confirm whether the contracts were sourced competitively.

Management Responses

• 218) The finding is noted and is indeed true.

2. 219)TheOfficial ReceiverisadepartmentundertheBusinessRegistrationService

• 220) It is true Business Registration Service did not have a list of prequalified suppliers during theyearunderreviewsinceitwas intheprocessofdelinkingfrom theOfficeofthe AttorneyGeneral henceitreliedontheMinistriesregistered listofsuppliers asper the attached request letter.
• 221) Currently, the Service has its prequalification list since it has been fully delinked.

CommitteeObservation

• 222) The Committee observes that the matter had been resolved as the Auditor-General was satisfied with the management response having verified all the necessary documents.

5.0NAIROBICENTREFORINTERNATIONALARBITRATION(NCIA)

• 223) Mr. Lawrence Ngugi- Chief Executive Officer, accompanied by: -

2. i)Moses Ochieng'-Senior Accountant

• iAnneNjeri-SupplyChainOfficer
• i)ErickKipsat-InternalAuditor

Appeared before the Committee to adduce evidence on the audited accounts of Nairobi CentreforInternational Arbitration,on29thNovember2023.

Audited Statements forFinancial Year2018/2019 (Unqualified Opinion)

5.1.IBudgetary Control andPerformance

• 224) The Statement of comparison of budget and actual amounts reflects a final revenues budget and actual revenue on comparable basis of Kshs. 195,904,845 and Kshs.115, 718,805 respectfully, resulting to an underfunding of Kshs. 80,186,040 or 41% of the budget. Similarly, the Centre expended Kshs.142,992,654 against an approved budget of Kshs.195,904,845 resulting to an under-expenditure of Kshs.52,912,191 or 27% of the budget. The underfunding and under-expenditure affected the planned activities and may

Management Response

• 225)TheCentreclarified thattheshortfall of incomewasbecauseof austeritymeasures and budgetary cuts introduced by the National Treasury & Planning on development expendituresinFY20l8-2019acrossallGovernmentagencies.FurtherNClAbeinga faithful custodian and trustee of public funds received from the Exchequer all resources received were applied for programmes intended as per approved annual workplan, procurement andbudget aligned to the NClAStrategicplan.
• monitorbudgetimplementation.
• 227) The Auditor General gave an unqualified opinion on the NClA Annual Report and Financial Statementsfor theYearended30th June2019.

CommitteeObservation

• 228) The Committee notes that the Institution is taking measures to ensure maximum expenditure as per the budget.

CommitteeRecommendation

• in the case of unforeseen circumstances, a supplementary budget should be made and adhered to.

Audited Statements for Financial Year 2019/2020 (Unqualified Opinion) 5.1.2BudgetaryControlandPerformance

• 230) As reflected in the statement of comparison of budget and actual amounts, the Centre incurred total actual expenditure of Kshs.134,840 175 against a budget of Kshs.181,189,737 resulting in an under expenditure of Kshs.46,349,562 or 25%. The under goals,activities,andobjectives.

Management Response

• 231) NClA is a faithful custodian and trustee of public funds received from the Exchequer and all resources are applied for programmes intended as per approved annual workplan, procurement andbudget aligned to theNCiAStrategicplan.
• 232) The under expenditure was because of the rationalization by the National Treasury and Planning throughguidelines and limiting expenditure toI/3of the financialyearbudget. Further,someplanned activitiessuchas theNationalAlternativeDispute Resolution Conference that required face to face interface was not possible due to Government Regulations on Covid-19.
• 233) Further, the Board is keen to ensure adherence with the approved budget and receives quarterly budget utilization reports from management to confirm compliance and to monitor budget implementation.

CommitteeObservation

• 234) The Committee observes that the matter has been addressed in previousfinancial years andreiteratesitsrecommendations.

Audited Statements for Financial Year 2020/2021(Qualified Opinion)

5.1.3 Unreconciled variances in the amount converted into Us Dollar (UsD)

• 235)Reviewof the cash andcash equivalentsbankbalancesrevealedthatthe Centres'USD accountbankreconciliationstatementreflectsbankbalanceasperbankstatementof USD 99,890whilethebankstatementinsupportofthesamereflectsbankstatementbalance of USD71,980 resulting tounreconciledvariance ofUSD27,910 orKshs.3,010,094when converted at the Central Bank of Kenya (CBK) indicative currency mean exchange rate of1USDtoKshs.107.85asatJune,2021.
• 236)In addition,note I6to thefinancial statements reflects NClA UsDbank accountbalance of Kshs10,928,432 against the cash book balance in the bank reconciliation statement of

USD 99,890. The latter when converted to the reporting currency (Kshs) at the Central Bank of Kenya currency mean exchange rate of Kshs. 107.85 to I USD as at 30 June 2021 results toKshs.10,773,137resultingtounreconciledvarianceofKshs155,341.00

• 237) The above variances were not explained or supported by documentary evidence. In the circumstances, the accuracy and completeness of the cash and cash equivalents of balance of Kshs.31,277,876 as at 30r June, 2021 could not be confirmed.

Management Response

• 238) The Centre provided clarity with regards to maintenance of its account in KCB Ltd and carries out online transactions via a portal provided by the bank.The amount of Kes.3,156,549 was transferred from the KCB Ltd Kenya Shillings Account to the KCB Ltd USDaccounton30thJune2021but itremainedontransit andwascredited totheUSD account on I' July 2021 as USD 27,909.36.
• 239) As at 30" June 2021 this money had not reflected in the USD account hence it formed part of reconciliation in thebankreconciliationstatement as of 30tJune202l,to this end the transactionhasbeencleared andcredited to theUsDbank account.
• 240) USD99,890 was translated based on transaction date of each transaction and not the base rate of Kshs.107.85. This translation was mainly for reporting purposes.

Committee Observation

• 241)TheCommittee observes that theInstitutionwasinbreachof thelaw as the exchange ofdollarswasnotdoneinaccordancewiththeregulations.

CommitteeRecommendation

• 242)TheCommitteerecommendsthattheAccountingOfficerensuresstrictadherenceto all financial regulations governing foreign currency management by strengthening internal controls overbankreconciliations,ensuringthat all UsDtransactions are translatedusing the prescribed Central Bank of Kenya indicative exchange rates, and instituting timely directs the Institution to develop clear internal guidelines for handling inter-account

5.1.4 IncorrectPresentationofTotal NetAssetsandLiabilities

• 243) The statement of financial position as at 30June 202l reflects total liabilities of Kshs. 17,319,717andnet assets ofKshs.60,725,430butreflects atthebottomtotal netassets and liabilities of Kshs. 60,725,430. Consequently, the total net assets and liabilities balance

is not correctly presented.In the circumstances,the accuracy and completeness of the total net assets and liabilities balance of Kshs.60,725,430 as at 30June 2021 could not be confirmed.

Management Response

• 244) The Centre aligned the presentation with the National Treasury IPSAS Reporting TemplateforFY2021-2022whichisissueduponconsultationwiththePSASBPublic Sector Accounting Standards Board (PSASB).

2. 245)WehavesincecorrectedthisissueintheAnnualReportandFinancialStatementsfor the periods mentioned. We also confirmed that total liabilities of Kshs.17,319,717 and net assets of Kshs.60,725,430 was the true position as of 30t June 2021.

CommitteeObservation

• 246)TheCommitteenotes thattheinstitutionhas subsequently adheredto thecorrect theissueisresolved.

5.1.5 Variance Between the Statement of Comparison of Budget and Actual Amounts and Statement ofFinancial Performance

• 247) The statement of comparison of budget and actuals amounts for the year ended 30th June 2021 reflects total income of Kshs.156,991,891 which is at variance with the total revenue of Kshs.105,404,617 in the statement of financial performance by Kshs.51,587,274 that is described as balance brought forward, no explanation was provided for the variance.

2. 248)Inthecircumstances,theaccuracy andcompletenessof thestatementof comparisonof budget and actual amounts as at 30th June, 2021 could not be confirmed.

ManagementResponse

• 249) Section I6 (3) of the NCIA Act, Cap. 49A provides that the Centre shall hold any financial balances atthe close of eachfinancialperiod and shall notberemitted intothe Consolidated Fund but to be retained for purposes of running programmes for the Centre.
• 250) During the year ended 30t June 202l, the balance brought forward from previous FY2019/20 was Kshs.51,587,274 which formed part of budget for the period ended 30th June 2021 hence total budget of Kshs.156,991,891.

• statement,and indoingthissomeofthecontractedservicescoveredtwodifferent financial periods and were carried forward from previous period to form part of current financial year, hence the balance brought forward in the budget.
• 252)In arriving at the total budget for theyear,the Centre has continued tofactor in balance brought forward from the previous year. This has been the practice over the years as toclarifythispositiontotheAuditorGeneral inthejustconcludedauditcycleforthe period ended 30th June 2022.

CommitteeObservation

• 253) The Committee notes that the institution has since reconciled their books of accounts thus the issue stands resolved.

5.l.6FinancialPerformance

• 254) During the year under review, the Centre reported deficit of Kshs.50,225,762 (2019/2020) a deficit of Kshs.592,994). The Centre had total revenue of Kshs.105,404,617 against total expenses of Kshs.155,716,525 resulting to a deficit of Kshs.55,225,792 caused mainlybyover-expenditureincompensationofemployeesanduseofgoodsandservices ofKshs.6,713,168and 4,404,576respectfully.

2. when they fall.

Management Response

• 256) In financial reporting, the Centre uses the accrual basis of accounting in the preparation of its financial statements,whichresults in either a surplus or a deficit at the end of a reporting period. In arriving at this, several non-cash items like depreciation, accrued expenses, provisions and prepayments are taken into consideration.
• 257) Additionally, in the prior years the Centre brought forward surpluses. This amount has overtheyearsreduced.
• 258) The Statement of Comparison of the Budget and Actual Amounts as contained in the NClAAnnualReportandFinancialStatementfortheYearEnded30thJune2021indicates that the Centre has not been operating on a deficit as an analysis of the same shows utilizationofresourcesinaccordancewith approvedbudget.

• 259) The Board is keen to ensure adherence with the approved budget and receives quarterly budget utilization reports from management to confirm compliance and to monitor budget implementation.

CommitteeObservation

• 260) The Committee observes that the Institution has since adhered to the budgets thus the issuestandsresolved as theAuditor General issatisfiedwith themanagement's responses.

5.1.7 IrregularProcurementofICT Infrastructure

• 26l) Review of procurement documents revealed that the Centre procured ICT contract for Kshs2,525,328 and Kshs2,626,951 all totallingKshs.5,152,279.However, the followingirregularitieswerenoted:
• (i) The Centre had eight (8) firms prequalified for Procurement of Supply, Installation and Configuration of Online Enterprise Mail System(Office 365)and selected only fivefirms to participate in supply, installation, and configuration of broadband internet services. This is contrary to regulation 89 (5), (6) and (8) of the Public Procurement and Disposal Regulations,2020 which states that, " (5) were restricted tendering is used pursuant to section 102(l) (b) of the Act, the procuring entity shall invite tenders from at least ten personsselectedfromthelistmaintained asprovidedundersection57and7lof theAct used pursuant to Section I02 (1) (c) of the Act, the procuring entity shall invite tenders from all the known suppliers of the goods works or services: (8) For greater certainty of Section 102 (1) (d) of the Act any procurement under section 102 (1) (c) of the Act, the procuring entity shall place an advertisement on its website or on State portal regarding their intention to procure through restricted tender for at least three days before inviting tenders andwhere anybidderoutsidetheknownsuppliersemergeheorsheshall be invitedtobid".
• (i) Although the Chief Executive Oficer signed the contract on 6th August 2020 the contract wasdrownedon21sAugust2020withcontractstartdateof31"July2020andenddate of 3I* July 2022.However, no explanation was provided why the contract was signed beforethedatedrown,andthestartdatewasretrospectivetothedateofthecontract.
• 262) In the circumstances, the regularity of the procurement for supply, installation and configuration of online enterprise mail system could not be confirmed.

Management Response

• 263) The procurement of ICT infrastructure entailed two different independent tenders i.e

2. for a period of two years at a total sum of Kshs.2,525,328. and

• 264) Tender for supply,installation and configuration of broadband internet services for a period of two years at a total sum Kshs.2,626,951.
• 265) WWhereas the PPADA, 2015 gives 4 options to choose while procuring through restricted tender,the Auditor relied on Section 102 (b) of the PPADA backed by tendersfromatleastI0personsselectedfrom theprequalifiedlist"
• 266) At the time of procurement, the Centre had no responsive prequalified list for provision of internet services and Microsoft 365 and therefore relied on section 71 (4) of PPADA,Cap.412Cwhich states that:"The head of procurement function shall maintain shallbe appliedon the alternative procurement methods as specified and appropriate,and the listshall-

6. (a)be generated through portal, websites and people submitting hard copies of their intentiontosupply. 7. (d) be generated through market knowledge and survey. 8. Telecommunications, Jami Telecom Ltd (JTL) and MTN) generated through market knowledge and on which the Centre acted as per Section I02 (l) (c) of the Act,which statesthat"restricted tendermaybe used if thereis evidence to theeffect that thereare only few known suppliers of the whole market for the goods, works and services". 9. market, the Centre also applied Section I02 (1) (d) of the Act states that "an advertisementisplaced,whereapplicableonProcuringEntitywebsiteregardingthe intention toprocure throughlimited tender.ThisisevidencedbytheCentre'snoticeof intention to procure through restricted tender as circulated on the NClA website and on thePublicProcurementInformationPortal(PPiP)andbyplacementofthesaid tender documents on the NCIA website and on www.tenders.go.ke

• 269) Noting the observations of the AOG, the notice of intention to procure through limitedtendercanbeaccessedontheCentre'swebsitewww.ncia.or.ke andonthe Government portal www.tenders.go.ke together with the tender documents solicited on both website platforms to confirm compliance with Section I02 (1)(d) of PPADA, Cap.412C.
• 270) WVhereas we note the observations made, the contract signed clearly indicates that the contractagreementisbetweenNairobi CentreforInternationalArbitrationandM/S online enterprise mail system, Contract No. NCIA/CONT/SICOEMS/002/2020-202I with all clearlystipulating all terms andcondition of the contract.
• 271) For the date discrepancies, the contract was signed by the Accounting Officer immediately after the lapse of the standstill period i.e., 6th August 2020. The service provider signed Contract on 25th August 2020 due to movement restrictions during the Covid-19 era but issued a letter for contract implementation as per the Contract date.
• 272) Noting the observations of the OAG, the letter notifying the commencement and implementation of the Contract on the date provided in the contract by the service provider M/S Liquid Telecommunication has been provided to be part of the contract.

CommitteeObservation

• 273) The Committee observed that the tenders were not procured as per the law of open tendering. The institution should have sought approval before engaging in an open tender.
• 274) Further, the Committee finds the CEO in breach of law in regard to an unauthentic contract.

CommitteeRecommendation

• 275) WWithin three (3) months of the adoption of this report, the Accounting Officer (during Kshs.5,152,279 and entering into a contract for procurement without lawful tender documents contrary to the provisions of section I96(l) of the Public Finance Management Act,2012.

2. (during the period under review) should be surcharged Kshs.5,152,279 pursuant to the provisions of Section 202 of the PublicFinance Management Act, 2012.

5.1.8 Delays in Posting Transactions in the Cash Book

• 277) Bank reconciliation statements for Clients Trust Account reflect that the Centre received direct deposits of Kshs.236,000 in October 2020 and Kshs.190,000 in February 2021 from an Agency. However, these two transactions dated October 2020 and February 2021 were posted in the cash book in June 2021. No explanation was provided to support the delays in posting the transactions in the cash book.
• 278) Consequently, the regularity and fair presentation of the cash and cash equivalents of balance of Kshs.31,277,876 as at 30th June, 2021 could not be ascertained.

Management Response

• 279) Despite all the effort to identify the sources, the Centre did not have sufficient details
• 280) Moving forward, all direct deposits in the bank account are recorded in the cashbook the reconciliation statements as at 30th June2022.

CommitteeObservation

• 281) The Committee observed that the institution was in breach of law.

CommitteeRecommendation

• 282) The Committee recommends that the Accounting Officer strengthens internal controls over cashbook management by ensuring that all bank transactions, including direct deposits, are recorded promptly and supported with adequate documentation to prevent delays and enhance the accuracy of financial records; further, the Institution should withfinancialregulations,andsubmit evidenceofcorrectiveactionstakento avoid recurrence of suchlapses.

5.1.9 Irregular Operation of Foreign Currency Bank Account and Inter-Currency Transfers

• 283) Further, a review of bank statements revealed that the NClA transferred revenue through an unreferenced transaction dated 30 June 2021 from a Kenyan shilling designated bank to a USD designated bank account an amount of Kshs 3,156,549 to USD 27,909.36 without prerequisite authority. This is contrary to regulation 64 (3) of the Public Finance Management (National Government) Regulations, 2015 which

prohibits a receiver and collector of revenue from convertingpublicmoneys received in local currency into foreign currency and vice versa.

ManagementResponse

• 284)Thereasonfor the transferwastodelineatetheAppropriationinAid(AlA)amountof Kshs 3,156,549 from operational monies, the amount was transferred to the USD accountfromKenyaShillingsAccountattheendofthefinancialyear.
• 285)The USD account is a non-operational account, and this money was transferred in ordertopreserve the AlA until a guideline isissuedby the National Treasury as per our request letter Ref. NCIA/BD/12/3VOL/I(65) on Authority to utilize AlA. No money has sincebeentransferredfromKenyaShillingsaccounttoUsDollaraccount.
• 286)TheCentreaffirmsthattheseamountsremainsafeandunuseduntilsuchatimewhen regarding regulation 64(3) and has initiated the process to obtain National Treasury authority.

CommitteeObservation

• 287) The Committee observes that the matter has been addressed in previous financial yearsandreiteratesitsrecommendations.

6.0KENYAACCREDITATIONSERVICE

288) Mr. Martin Chesire- Chief Executive Officer, accompanied by; -

• i)Mr.Andabwa Henry-Accountant
• ii)Mr.John Kamau-Chief Manager,CorporateServices

Appeared before The Committee to adduce evidence on the audited accounts of Kenya Accreditation Service, on 6th March 2024.

Audited Statements for Financial Year 2018/2019 (Unqualified Opinion) 6.1.l Irregular Paymentof Medical InsuranceServices

• Jubilee Insurance(Group Life Insurance Scheme) and First Assurance Company at contract sum of Kshs.1,344,426 and Kshs.802,056 respectively. On 21 July, 2018, an amount of Kshs.641,035 was paid as part payment to Jubilee Insurance. However, the contractdocumentsavailedforauditreviewindicatedthattheInsuranceSchemewasto be effective between 15 February, 2018 to 14 February, 2019.The agreement was

however,signed on11July,2018,sixmonths after the coverwas effected contrary to withnotificationof theawardor acceptanceletter ofoffer.Further,thecontract agreementbetween theKENAS andFirstAssurance Company Tender No. KENAS/29/2018-2020wasenteredintoon23April,2018withtheeffectivedateof 2 135(3)of thePublicProcurementandAssetDisposalActwhichrequiresthatawritten contractshall beenteredintowithintheperiodspecifiedinthenotificationbutnot before fourteen days have elapsed following the giving of that notification, provided that a contractshall besignedwithin the tendervalidityperiod.

ManagementResponse

• a ou ue saon od aunsu aeias () oma pauasuo anb ane au (oe insurance, namely:
• i. Group Life Insurance cover awarded to Jubilee Insurance; and
• awardedtoFirstAssuranceCompany
• 291)TheauditqueryonGrouplifeinsuranceawardedtoJubileeInsurancewastwo-fold:(1) lackofsupportingdocumentsfor thepayments and(2) delayincontractexecution.
• 292) Lack of supporting documents for payment: at the time of the audit, the letter of notification award andthe acceptanceof theofferby JubileeInsurancewerenotmade availabletotheauditors.Theletterswerealsonotincludedasaccountabledocuments for processing payment.
• 293) To mitigate recurrence, the Supply Chain Staff were henceforth advised to attach letters of notification of award and acceptance of the offer as accountable supporting documents for payment approval. The Finance Staff examining payment vouchers were similarly advised to verify the enclosure of the two letters as supporting documents.
• 294) During the contract execution, unavoidable delays were occasioned by interparty negotiations,althoughJubileeInsuranceprovidedthepolicycoverageontime.
• 295)Tomitigaterecurrence,thePublicProcurementandAssetsDisposalRegulations2020 has provided an effective solution to prevent insurance providers from attempting to negotiate contract terms after the Tender award.After the award, the service provider accepted the offer.

296)TheauditqueryonPersonalAccident(GPA)andWorkInjuriesBenefitsInsurance(WIBA) awarded to First Assurance Company concerned timely contract execution delays.

• 297)Therewereunavoidable delays insigning thecontractwithin the tendervalidityperiod due to the interparty contract review, particularly on the Policy document. First AssuranceCompany took an extended time toreturn the contractforexecutionby the Service
• October 2019,theService introduced a contract tracking system to ensure that tenders are initiated early enough to allow for contracts to be executed within the validity period.
• 299)Thefollowingtwotoolswereputinplace:
• (i)Contract summary form as a quick reference for reviewing contract information for basis to monitor timelines for contract expiry and/or renewal (where applicable).
• track of all contracts, their validity, due dates for renewal and performance review

CommitteeObservation

• 300) The Committee observed that the institution failed to provide requisite documents on time as required by section 68(2) of the PFM Act.

CommitteeRecommendation

• 301) The Committee sites the CEO with non-compliance to laws and regulations stipulated.
• 302) Further, the Committee recommends that henceforth,Accounting Officers should complywithSection68(2)(k)ofthePFMAct.

6.1.2ProcurementofLowValueItems

• 303)TheServiceprocuredgoods/services ondiverse dates amounting toKshs.l08,852in requires that a procuring entity shall, pursuant to Section 26(3)(b) of the Act, undertake

procurement in accordance with the threshold matrix set out in the First Schedule of the regulations.

Management Response

• 304) The audit query concerned a repetitive quotation process undertaken for various stationeryitems,aslistedinthetablebelow.
• 306) Following the audit query, a review was undertaken on the stocking levels to determine high-consumption items and the frequency of these items. As a result, the stock replenishment levels were adjusted for some items. Furthermore, for stationery items procured more than once during that financial year, an evaluation criterion was introduced toestablishwhether theseitemsmustbestockedornot.

3. 307)From theFinancialYear2019/2020,theServiceintroducedcriteria torequire users to state if the new stationery item is to be purchased as a one-off or stocked. In addition, from the succeeding financial year, the Service introduced a categorization of stationery items to allow for awardsto fewer suppliers.As a result,there are now bulk annual purchases for stock items, but delivery is allocated quarterly.

| LPO No. | Details | Amount (KES) | Payment Voucher (Date) | Page | |-----------|----------------------------------------|----------------|--------------------------|--------| | 0414 | Design and supply of KENAS brandedpens | 17,069 | PV4725 (06-Aug-2018) | 124 | | 1144 | Purchaseofassortedstationery items | 25,584 | PV4741 (07-Aug-2018) | 138 | | 1145 | Purchase of assorted stationery items | 10,116 | PV4742 (07-Aug-2018) | 146 | | 0484 | Supply of brown envelopes | 18,965 | PV4831(20-Sep-2018) | 156 | | 0570 | Supply of stationeries | 13,030 | PV5048(04-Jan-2019) | 168 | | 1188 | Purchaseofassortedstationery items | 6,478 | PV5312 (24-Apr-2019) | 180 | | Cash | Purchaseofliteraturestand | 15,172 | PV5338(03-May-2019) | 189 | | 1189 | Purchaseofstationeries | 8,961 | PV5408 (27-May-2019) | 193 |

CommitteeObservation

• 308) The Committee observed that the Accounting Officer was in breach of the Procurement

CommitteeRecommendation

• 309)TheCommitteerecommends that theAccountingOfficerensuresfull compliancewith the Public Procurement and Asset Disposal Act and its Regulations by strengthening purchases outside the approved quotation and tendering procedures; further, the Service should streamline its procurement planning, enforce adherence to threshold limits, maintain adequate stock management systems, and ensure that all future procurement decisions are properly justified,documented, and subjected to competitive processes to enhancevalueformoneyandaccountability.

6.1.3ProcurementofPeerExpenses

• 3 10) Payment of Kshs.285,840 was made to Real Edge Africa Venture vide voucher No.5189 evaluatedthelowestbidder.TheevaluatorsweretoarriveinNairobion23and25 November,2018anddeparton1December,2018.Thelocalserviceorderwashowever raisedon13 December,20l8twoweeks after theevent tookplacebetween26 Novemberand30November,2018thusundertakingtheservicewithoutavalidcontract contrarytothePublicProcurementandAssetDisposalAct,2015Section135(4)which states that"No contract is formed between twopersonssubmitting the successful tender the parties" followed by issuance of an order.
• 31l) In the circumstances, Management if therefore in breach of the law.

Management Response

• 312)WeconcurwiththeAuditorGeneral'sreportthattheServicethattheLocalService between26thNovemberand30thNovember2018.
• 313) At the time of the audit query, the Service relied on manual issuance of LSO and LPO. TheServicehassinceautomatedtheprocessforissuanceofLPOswithdate andtime stamps.

CommitteeObservation

• 314) The committee observed that the CEOwas indeed in breach of the law

CommitteeRecommendation

• 315) The Committee reprimands and sites the CEO for non-compliance with the law.

6.1.4 Failure to Comply with Requirement to Implement IFMIS and e-ProMIS

• 316) The Service has not linked its Enterprise Resource Planning (ERP) with the Integrated Circular No.19/15of 18 December,2015underRef.No.DGIPE/A/1/10 Category 4Other Projects which states that State Corporations are required to ensure that capital Presidential directive dated August, 2014 which directed that all State Corporations like any other entities comply to full use of e-procurement. In the circumstances, Management is in breach of the law

ManagementResponse

• 317) At the outset in 2015, the Service engaged the National Treasury IFMIS department, whichundertookareadiness assessmentvisit after theServicesubmittedfeedbacktothe systems requirements questionnaire. In addition, the Service staff were trained on the eprocurement system, and the Service posts its tenders on the Tenders Portal.
• 318) At the time of the audit, the Service had not undertaken much work towards onboarding on the e-procurement(eProMiS)system.As a result of the audit query,theService 2020.

3. 3 19) On 23rd June 2020, the National Treasury IFMIS Department responded, informing the theServicetobepartof thepilotagenciesduringtheFY2020/202l.

• 320) Subsequently, a meeting was held on 7th July 2020 to assess the preparedness of the follow-up meeting was not possible until 29th April 2021.
• 321) On 3lst May 202l, the Service requested a readiness assessment to guide an Servicewroteareminderforthereadinessassessment.
• 322) On 10th March 2022, a meeting was held with the IFMIS Department team regarding understanding the e-procurement set-up (see minutes and attendance register on. A follow-upmeetingwasheldonl6thMarch2022todemonstrate thefunctionality of eprocurement(see minutes and attendance on.Atthe meeting,the IFMiS team realized that the Service could not onboard the Service on the e-procurement module, given that

50l IFMIS and e-procurement are designed for "cash-basis" accounting and not "accrual basis" accounting.

• 323) The final communication with the IFMIS department was done in October 2022, and the Service has yet to receive a way forward to allow it to comply with the Executive Order of 2015. As such, the matter is still outstanding on the IFMiS Department's ability to customize the e-procurement module for accrual accounting purposes.

CommitteeObservation

• 324)The audit established that theServicehadnotcompliedwiththerequirement to integrate its Enterprise Resource Planning(ERP) system with the Integrated Financial Management Information System (IFMiS) and e-ProMIS as mandated under National Treasury Circular No. 19/15 of 18 December 2015 and the Presidential directive of August 2014. Despite initial engagement with the National Treasury IFMIS Department in 2015 and subsequent interactions from 2020 to 2022, the Service had not onboarded due todelays inreadiness assessments,interruptionscausedby theCOViD-19pandemic, and the discovery that the current e-procurement module is designed for cash-basis accounting, whereas the Service operates on an accrual-basis framework. Consequently, and integration of procurement and financial management processes.

Committee Recommendation

• tofast-track aviable solution that enablesfullcompliancewithIFMlS ande-ProMIS integration requirements. In addition, Management should establish a structured implementation roadmap with clear timelines, escalate unresolved system-compatibility issues through the appropriate government channels, and ensure continuous follow-up to prevent further delays and sustain compliance with national financial management regulations.

6.1.5 Imprest Register

• properly updated and lacked columns for the imprest due/surrender dates hence making itdifficulttodeterminetheactualdateforsurrenderingtheimprests.

• 327) In the circumstances, the internal controls are weak and may not be effective. Management may not readily identify an imprest holder of a temporary imprest who has duty station.

Management Response

• 328) We concur with the Auditor General's report that the Service maintained an imprest dates.
• 329) The imprest register was configured to capture the date of the imprest surrender to ensurethataccountingisdoneontime.

Committee Observation

• 330) The Committee observes that the matter had been resolved as the Auditor-General was satisfied with the management response.

6.1.6InformationTechnology (IT Environment)

• 331) The Service does not have an approved Information Technology (IT) strategic plan that madetoall informationsystems.
• 332) Lack of an approved information technology Strategic Plan may expose the Service to the risk of non-alignment of IT operations with the overall business strategy. This may also lead to information security and systems development flaws due to lack of direction on information systemsmatters.

Management Response

• 333) The root cause is that the Service lacked the capacity of competent Staff to facilitate the formulation of a 3 to 5-year ICT Strategy as a result of the voluntary exit of the ICT Manager in May 2018.
• 334) Nevertheless, the Service relied on the assistance of the ICT Authority (ICTA) to undertakeanICTautomationsurveywhoserecommendationsfacilitatedtheService's establishmentofannualplanstoimproveitsICTenvironment.
• 335) In June 2022, the Service recruited and onboarded a Principal ICT Officer.Since then, ICTpolicieshavebeendevelopedtoenabletheICTenvironmentfully.

• 336) In October 2023, the Service contracted Jomo Kenyatta University of Science and Technology to facilitate the development of the Digitization Strategy. The Service is concluding the formulation of its five-year Digitization Strategy to be approved by the Board inJanuary2024.

CommitteeObservation

• 337) The Committee observes that the matter had been resolved as the Auditor-General

Audited Statements for Financial Year 2019/2020 (Unqualified Opinion)

6.1.7BudgetaryControlandPerformance

• 338) The statement of comparison of budget and actual amounts reflects an approved revenuebudget ofKshs.189,900,000 and actual revenue of Kshs.192,180,501resulting to a revenue surplus of Kshs.2,280,501. Similarly, the statement reflects an expenditure budget of Kshs.189,900,000 and an actual expenditure of Kshs.198,022,730 resulting to an over expenditure of Kshs.8,122,730. The over expenditure mainly occurred under remunerationofDirectorswithanactualexpenditureofKshs.ll,709,438againstthe budgeted expenditure of Kshs.4,252,000. An over expenditure also occurred under developmentexpenditurewithanactualexpenditureofKshs.6,802,775againsta Nil budgeted expenditure. However, no evidence was provided to confirm whether authority was sought from the parent Ministry and The National Treasury for the budget reallocation andoverexpenditure.

Management Response

• 339) The audit query concerned a lack of evidence to support the reallocations applied to the FY 2019/2020 Budget.As a result, the Service had an over-expenditure of Kshs.8,122,730 based against the budget in Supplementary No. I estimates of Kshs.l89,900,000 and an actual recurrent expenditureofKshs.198,022,730.
• 340) On 15th July 2019, through a Letter Ref: MOl/CONF/3/12/VOL 9/66, the State PrintedEstimates.
• 341) On 23rd July2019,the Head of PublicService,via Circular Ref.OP/CAB 18/19/10A conveyed the Cabinet's directive to all State Corporations, limiting the recurrent spending

• toone quarter (1/4)of the previous financialyear'sbudget(FY 2018/2019).Inaddition, the Circular required theBoardtoenforce compliancewith the directive.
• 342) On 31st July 2019, via Treasury Circular No. 12 of 2019, the Chairman of the Board, The Chair of the Board Finance Committee,the CEO,and two senior officers were invited to a review and rationalization meeting scheduled for 19th August 2019.
• 343) On 19th August 2019, the Service held a meeting with the National Treasury to team review the FY 2019/2020. At the end of the meeting, recommendations for amendments were made minutes of the meeting.
• 344) Subsequently, on 2nd September 2019, the Service submitted its rationalized FY budget had a ceiling of Kshs.216,309,721. The Service proposed increasing its Appropriation in Aid to Kshs.102,473,621 in the rationalized FY 2019/2020 budget.
• 345) Furthermore, in the rationalized FY 2019/2020 budget, the Service allocated Kshs.10,002,465 for Board expenses and Kshs.7,827,000 for capital expenditure. As such, theService implemented therationalizedFY2019/2020budget basedonits submission on 2ndSeptember 2019.
• 346) Although the FY 2019/2020 Supplementary No. 1 Estimates did not capture the rationalizedbudget,the communicationfrom the National Treasury on approval of the FY 2020/2021budget capturedtherationalizedFY2019/2020Budget as submitted in September 2019.
• 347) Following the audit query, the Service has consistently pursued approvals on any revision or adjustments of its budget.

CommitteeObservation

• 348) The Committee observed that there was no approval for budgets used by the institution.

CommitteeRecommendation

• 349) The Committee reprimands the Accounting Officer and recommends that he acts according to thelaws and regulationsstipulated.

6.1.8 Non-lmplementation of E-Procurement as per Government Directives

• 350) The Service has not linked its Enterprise Resource Planning (ERP) with the Integrated Treasury Circular No.19/15 of 18 December, 2015 which required State Corporations to ensure that capital projects are captured in the Plan-to-Budget in IFMIS and e-ProMIS as

appropriate.Further,contrarytoExecutiveOrderNo.6of2015andExecutiveOrder No.2 of 2018, the Service had not fully implemented e-procurement and continues to undertakeitsprocurementsmanually.TheManagementwasinbreachoftheguidelines.

Management Response

• 351) At the outset in 2015, the Service engaged the National Treasury IFMIS department, whichundertookareadiness assessmentvisit after theServicesubmittedfeedbackto the systems requirements questionnaire. In addition, the Service staff were trained on the eprocurement system, and the Service posts its tenders on the Tenders Portal.
• 352) At the time of the audit, the Service had not undertaken much work towards onboarding on the e-procurement (eProMis) system. As a result of the audit query, the Service requested the National Treasury IFMiS teamfor a meetingvia a Letter dated llIthJune 2020.
• 353) On 23rd June 2020, the National Treasury IFMIS Department responded, informing the Service that they were working on enhancing the e-procurement module. It also invited theServicetobepartof thepilot agencies duringtheFY2020/2021.

4. 354)Subsequently, a meeting was held on 7th July 2020 to assess the preparedness of the Service to be part of the pilot agencies. Given the continued resurgence of COVID-19, a follow-up meeting was not possible until 29th April 2021.

• 355) On 31st May 202l, the Service requested a readiness assessment to guide an implementation roadmap. The Letter remained unanswered, and on 31" January 2022, the Servicewrote a reminder for the readiness assessment.
• 356) On 1oth March 2022, a meeting was held with the IFMIS Department team regarding understanding the e-procurement set-up. A follow-up meeting was held on I6th March 2022 to demonstrate the functionality of e-procurement. At the meeting, the IFMIS team realizedthattheServicecouldnotonboardtheServiceonthee-procurementmodule, given that the design of IFMiS and e-procurement are for"cash-basis"accounting and not "accrualbasis"accounting.

7. 357)Thefinal communicationwith theIFMISdepartmentwasdone inOctober2022,and the Service has yet to receive a way forward to allow it to comply with the Executive Order of 20l5.As such, the matter is still outstanding on the IFMlS Department's ability to customize the e-procurement module for accrual accounting purposes.

CommitteeObservation

551

• 358) The Committee observes that the matter has been addressed in previous financial years andreiteratesitsrecommendations.

6.1.9 Information Technology (IT Environment)

• madetoallinformationsystems.LackofanapprovedInformationTechnologyStrategic Plan may expose the Service to the risk of non-alignment of IT operations with the overall business strategy. This may also lead to information security and systems development flawsdue to lack of directionon informationsystemmatters.

Management Response

• 360) The root cause is that the Service lacked the capacity of competent Staff to facilitate the formulation of a 3 to 5-year ICT Strategy as a result of the voluntary exit of the ICT Manager in May 2018.
• 361) Nevertheless, the Service relied on the assistance of the ICT Authority (ICTA) to undertake an ICT automation survey whose recommendations facilitated the Service's establishmentofannualplanstoimproveitsICTenvironment.

3. 362)EnclosedhereinaretheICTautomationsurveysfortheyear2019,2021and2023.

• 363) In June 2022,theService recruited and onboarded a Principal ICT Officer.Since then, ICT policies have been developed to enable the ICT environment fully.
• 364) In October 2023, the Service contracted Jomo Kenyatta University of Science and Technology to facilitate the development of the Digitization Strategy.
• 365) The Service is concluding the formulation of its five-year Digitization Strategy to be approved by the Board in January 2024

CommitteeObservation

• 366) The Committee observes that the matter has been addressed in previous financial years andreiteratesitsrecommendations.

AuditedStatementsforFinancialYear2020/202l(UnqualifiedOpinion)

6.1.l0 Property,PlantandEquipment

• 367) The statement of financial position reflects property, plant, and equipment of Kshs.9,516,539which,asdisclosedinNote21tothefinancialstatements,includesmotor vehicles with an original cost of Kshs.5,590,000 but which were fully depreciated.

• 368) Although the motor vehicles are still in use, no revaluation has been done contrary to theprovisionsofSection44of theInternationalPublicSectorAccountingStandards17 whichrequiressuchrevaluationtobecarriedout.
• 369) Consequently, the completeness and accuracy of the property, plant and equipment of Kshs.9,516,539 as at 30June,2021 could notbe confirmed.

Management Response

• 370) The audit query concerned the fact that the Service relied on a private insurance company'smotorvehiclesvaluationreport asthebasisforthevalueused toprepare Engineer.
• 371) Following the audit query, the Service immediately re-valued the motor vehicles by the Chief Mechanical Engineer.

3. 372)Subsequently,theServicehasreliedontherelevantGovernmentDepartmenttovalue itsassetseachyear.FortheFY2023/2024,thevaluationreportsforthemotorvehicles done by the Chief Mechanical Engineer are given. In addition, the valuation for fixtures and fittings is provided.

CommitteeObservation

• 373) The Committee observed that the matter had been resolved as the Auditor General wassatisfiedwiththemanagementresponse.

6.1.ll Material uncertainty relating to going concern.

• 374) The statement of financial performance reflects an operating loss for the period under review of Kshs.36,035,212; (2019/2020: loss of Kshs.5,842,229), resulting to increased accumulated deficit of Kshs.52,538,809;(2019/2020:Kshs.17,171,952).Further,the statement of financialposition reflects current assets andliabilities balances of Kshs.38,341,130 and Kshs.57,607,996 respectively, resulting to net liability position of Kshs.19,266,866 (2019/2020: net asset position of Kshs.11,296,815).
• 375) Management hasnot assessed the abilityof theService to continue as a goingconcern assumption that the Service will continue to get financial support from the National Government and creditors.

Management Response

• 376) The effects of the COVID-19 pandemic curtailed the overall financial performance of the Service, specifically the continued ban on in-person meetings and travel restrictions within Kenya and across borders.
• 377) It is recalled that in March 2020, at the outset of the pandemic, the Service suspended June2020.Asaresult,theServicecouldnotundertakeaccreditation assessmentsoutside Nairobi and in foreign countries until mid-February 2021.
• 378) Regarding assessing the Service's ability to operate as a going concern, in the May 2022 response,theBoardof theServicereviewed its currentbusinessmodel.It adopteda future business model to ensure its financial stability and as a pathway to sustainability. Basedonthe futurebusiness model,theServiceundertook several initiatives and measures, namely:

4. a)Alignmentofpaymentof annualfeestothefiscalyear 5. b)Transferof directcostsof assessments tobemetbyclientsdirectly andnotinvoiced by the Service to ease cashflow pressure by adoption of a travel and accommodation policy.

• c) Develop and adopt the policy of calculating person days for each client instead of thecurrentone-size-fits-allmodel.
• d) Implement the Enhancement of Accreditation Programme in Kenya (EAP-K) Project
• e) Initiatives on Rebranding,revamping of website and onboarding on eCitizen
• 379) As a result of the above, in FY 2022/2023, the Service reported an improved financial position at the end of June 2023, with an operational surplus of Kshs.13,381,124 and its current assets of improved to Kshs.127,059,238 against liabilities balances of Kshs.116,649,671.

CommitteeObservation

• 380) The Committee observed that the institution is operating with a negative working capital whichcouldnotablyleadtobankruptcyoftheinstitution.

CommitteeRecommendation

• 381) The Committee recommends that the Accounting Officer must ensure that the Kenya

6.1.12 Non-Compliance with Quorum for Board Meetings (Finance Meetings)

• 382) The statement of financial performance reflects an expenditure of Kshs.21,931,009 in respect of remuneration of Directors which, as disclosed in Note 12 to the financial statements includes sitting allowances of Kshs.6,894,770 out of which an amount of Kshs.120,000 was paid for three committee meetings.However,the meetings were attended by two (2) Members each and therefore there were no quorum. This is contrary quorumforBoard committee meetings shall be three(3) Members.

Management Response

• 383) The non-compliance with the Board Quorum was caused by the resignation of a Director that occasioned a lack of quorum. The Board subsequently assigned additional Directorswhenever therewas a vacancy to ensureBoardCommitteeswerequorateto transact business.

CommitteeObservation

• 384) The Committee observed that the Institution operated with fewer than the stipulated members of the board of governors, contrary to the provisions of the law to meet its required quorum.

CommitteeRecommendation

• lawful quorum and surcharges the Board members involved a total of Kshs.120,000. Going forward, the Accounting Officer should always adhere to the Mwongozo Code of GovernanceandensurethatfutureBoardandcommitteemeetingscomplyfullywith statutory quorumrequirements.

7.0NATIONALTRANSPORTANDSAFETYAUTHORITY

386) Mr. George Njao, Director General, accompanied by: -

• i)Mr. Jacob Sisey - Director Corporate Support Services
• i) Mr. Wycliffe Wasike- Deputy Director and Head of Finance
• ii)Ms. Elizabeth Mbatia- Finance Officer

Appeared before The Committee to adduce evidence on the audited accounts of National Transport and Safety Authority, on I5th November 2023.

AuditedStatementsforFinancialYear2020/2021

7.1.lUnreconciledCashandCashEquivalents

• 387) As disclosed in Note 16 to the financial statements, the statement of financial position reflects cash and cash equivalents balance of Kshs.155,693,271 as at 30 June, 2021. The balance includes an amount of Kshs.17,659,099 in respect of an operations account maintainedatKCBBankwhichwasatvariancewiththecashbookbalanceof Kshs.6,823,025. Further, the balance includes an unreconciled amount of Kshs.5,469,136.32thathasbeencarriedforwardsince2018.
• 388) Consequently, the accuracy of the cash and cash equivalents balance of Kshs.155,693,271 couldnotbeconfirmed.

Management Response

• 389) The Authority observes that reconciliation for the KCB Operations bank account was done except that there was a variance of Kshs. 5,469,136.32 which was brought forward from FY20l7/l8. The variance was a book entry occasioned by data entry during transitionof theAuthority's books of accounts from themanual system andprocessesto the automated processes under the ERP system.As at the time of audit for the FY2020/2l, the matter was under further review by the Board and the same was concluded and balances reconciled in the subsequent year.

CommitteeObservation

• 390) The Committee noted multiple errors from the institution's books of accounts which creates a loopholeforembezzlementoffundssincenoexplanationorreconciliationhas been made.

CommitteeRecommendation

• to adhere to Article 229(4) (h) of the Constitution of Kenya and section 8l(4) (a) of the Public Government) Regulations 2015.

7.l.2UnresolvedPriorYearMatters

• 392) Various prior year issues remained unresolved as at 30 June, 202l and were not disclosedundertheprogressonfollowupofauditor'srecommendationssectionofother information accompanying the financial statements as required by the Public Sector Accounting Standards Board.

Management Response

• 393) As at the time of reporting, the matters were under review by the PlC and the Authority was awaiting conclusion of the same. The conclusion of the same was subsequently provided as tabled by the PlC on 24th May 2022.

CommitteeObservation

• 394) The Committee observed that prior year matters had been resolved as the Auditor Generalwassatisfiedwiththemanagementresponseshavingverified all thenecessary documentations.

7.1.3ObsoleteSmartDrivingLicense

• 395)As disclosed inNote 2l tothefinancial statements,the statement of financialposition reflects abalanceofKshs.457,499,791inrespectof inventory.Theinventory includes an Kshs.395,576,537relatestosmartdrivinglicenses.Reviewofrecordsrelatingtothesmart drivinglicensesrevealedthattheAuthorityenteredintoa3-yearcontractcommencing on8March,2017with a localbankfor the supply,delivery,installation and maintenance of Second-Generation smart card-based driving licenses and associated services at a contractsumofUSD.21,094,282.41.Informationavailableindicatesthaton3March,2017, the bank entered into a subcontract with another firm for the supply, delivery, installation andmaintenanceofSecond-Generationsmartcard-baseddrivinglicenseandassociated servicespursuanttotheawardoftenderandexecutionofthecontractbetweenthe drivinglicensesandtheroleofthebank(maincontractor)wasnotclearlyspeltoutinthe contract.Further,under clause 9.0 of the sub-contract, the bankwas required to pay the sub-contractor all amounts paid to it by the Authority under the main contract with no deductions whatsoever.The subcontracted firmwas tosupply5,ooo,ooo smart cards driving licenses by 31 December, 2019 to the bank as outlined under clause 6.20 (the firm's obligations) of the sub-contract. However, as at 30 June, 202l,a closing balance of 1,273,174blanksmartdrivinglicensescardswerestillattheAuthority'sHeadOffice stores.Includedinthenumberof1,273,174are296,000blanksmartcardsvaluedat Kshs.91, 108,800 that have been rendered obsolete due to changes in printing technology. It was not explained how value for money would be derived in the receipt and continued storageofobsolete stocks ofblank smartdriving licensecards.According tothe

agreement, the contract was originally supposed to run up to 8 March, 2020, with an extension of twoyears ending8 March, 2022.The Authority Management has not justified the extension of the contract for two years and no evidence of contingency arrangements in place to ensure that service delivery is not disrupted in case the contract is discontinued.

Management Responses

• 396) Management observes that the Smart Driving License project is part of key Government transport sector reform initiative that commenced on 8th March 2017with the aim of redefining the then driving license management cycle and improve efficiency in service delivery. Historically, the Government of Kenya was previously issuing a manual driving license inform of a "red book". However, due to technological changes and critical security requirements, the Government was compelled to align the Kenyan driving license to conform to the provisions of the UN decade Action on Road Safety and International Standards, which included increasing security features and driver details.
• 397) In view of the above, the Government through this project anticipated to assist Kenya in achieving the UN Decade Action on Road Safety resolution which also required all East andCentralAfrican countries toensurestandardizationofDriversLicenses intheregion by adoptingDigital CardSmartDrivingLicenses.
• 398) To this end, the Government of Kenya sanctioned the Supply, Delivery, Installation and Maintenance of Second Generation Smart-Card Driving License project in 2015 at a contract cost of USD 21,094,282 (Kshs. 2.1Billion). The project was intended to curb insecurity and weed out criminal elements within the transport sector as well as align the driving license management to international standards. Moreover,the project was intended to instil discipline among drivers through the merit and demerit point system and limit road carnage and fatalities occasioned by unauthorized drivers.

CommitteeObservation

• 399) The Committee observed the commitments made by the institution for the utilisation ofthedeliveredblankcards.

CommitteeRecommendation

• 400) The Accounting Officer should, within three (3) months of the adoption of this report, submit to the National Assembly a comprehensive status update on the supply, delivery, installation,and maintenance of the Second-Generation smart card driving licenses. The

reportshoulddetailhowvalueformoneywillbeachieveddespitethecontinuedstorage ofobsoleteblanksmartcardsvaluedatKshs.91,108,800,andoutlinemeasurestaken to keep pace with technological advancements to prevent future obsolescence. Additionally, the AccountingOfficershould provide a justificationfor thetwo-year contractextension and present contingency plans to ensure uninterrupted service delivery should the contractbediscontinued.

7.1.4 Non- Maintenance of Retentions Register and Deposits Cash book

• 401) The statement of financial position reflects a balance of Kshs.29,202,557 in respect of retentionpayablewhich,as disclosed in Note I9 tothefinancial statements,represents funds held by the Authority on behalf of various service providers. However, the Authoritydidnotmaintainaretentionsordepositsregisterandadepositscashbook duringtheyearunderreview.Thiswascontrary toRegulationlooof thePublicFinance Officers to keep in all offices concerned with receiving cash or making payments a cash as may be necessary for the proper maintenance and production of the accounts of the Voteforwhichtheyareresponsible.

402) In the circumstances, the Authority was in breach of law.

ManagementResponse

• 403) Management acknowledges the lack of a separate and distinct retention bank account opened and operated for amounts payable to contractors after defects liability period. This was initially premised on the understanding that there were very few contracts with was thereforeprocessed throughthemainoperations account.
• 404) Management, cognizant of the growing value of the retention fee has initiated the process of approvaltoopen andoperateaseparateanddistinctbank accountfor theRetention Treasury for approval is in progress.

CommitteeObservation

• 406) The Committee observes that the matter had been resolved as the Auditor-General wassatisfiedwiththemanagementresponse.

7.1.5IrregularPaymentofBoardAllowances

• 407) The statement of financial performance and the corresponding disclosure Note 15 to the financial statements reflects an amount of Kshs.2l,178,452 inrespect of Board expenses. The Board expenses include an amount of Kshs.145,600 irregularly paid to two Board Members in form of per diem for participating in three meetings that were held virtually. The Board expenses of Kshs.2l,178,452 also includes an amount of Kshs.579,660 relates to mileage claims paid to Board Members who used their cars when of more thanI800cc contrary to Clause C(3)of the Office of thePresident Circular No.
• 408) In the circumstances, the regularity of the sitting and mileage allowances totalling Kshs.725,260paid to theBoard Members could notbe confirmed.

Management Response

• 409) Management notes that the payment of Kshs 72,800 paid to Mr. Francis Kiriinya Mwongo & Ms. Catherine Njeri Waweru respectively were for physically attended meetings. However, the meeting was a hybrid due to some members having been affected with Covid-l9 compelling the members to isolate themselves at the last minute. This necessitated their participation virtually.
• 410) The two members of the Board had already travelled to Nairobi for the meeting and therefore the Authority had to cater for their Daily Subsistence allowance as provided forintherelevantBoardremunerationprovisions.

3. paymentof mileage tomembersof theBoard basedonGuidelines onbenefits tomembers of the Board and supported by the details of the vehicles which they used to facilitate them attend the scheduled board meetings. The payments were processed based on the approvedprevailingAutomobileAssociationofKenya(AAK)ratesbasedtheengine capacity of their vehicles.

CommitteeObservation

• 412) The Committee observed that therewas irregular payment to board members of travel allowances above the stipulated rates as per the circular from the Office of the President.

CommitteeRecommendation

• 413) The Committee recommends that the Head of Finance for the period under review be reprimanded for the amounts irregularly paid.

7.1.6Audit Committeeand Internal AuditFunction

• 414) Review of the Authority's internal audit function revealed that although there was an Audit Committee, there were no approved Audit Committee and Internal Audit Charters. Inaddition,therewasnoevidencethattheinternalauditworkplanfortheyearunder reviewhadbeenapprovedbytheAuditCommittee.

2. been adequately addressed in absenceof the approvedcharters.

Management Response

• 416) The Audit Committee Charter was approved. The Internal Audit Department Charter is being reviewed by Audit committee and shall be approved in subsequent meetings. The delay in approval was occasioned by the changes in the board membership twice during the last financial year.
• 417) Every year on or before I5th February,Annual audit work plan is approved by the Audit Committee.

CommitteeObservation

• 418)The Committee observed that theinstitutionwas operatingwith anunapprovedAudit Committee Charter.

CommitteeRecommendation

• 419) The Committee recommends that the institution henceforth abides by the law and to ensure adherence to therequisitePFM Act.

AuditedStatementsforFinancialYear2021/2022

7.1.7 Non-Maintenance of Retentions Payable Bank Account

• 420) As disclosed in Note I8(ii) of the financial statements,the statement of financial position reflects Kshs.44,533,933 in respect of retentions payable. However, Management did not maintain a separate bank account to cater for payment of retentions at the end of the defects-liability period.

• 421) In the circumstances, the contractual obligations on the payable amount of Kshs.44,533,933couldnotbeconfirmed.

Management Response

• 422) Management acknowledges the lack of a separate and distinct retention bank account opened and operated for amounts payable to contractors after defects liabilityperiod. This was initially premised on the understanding that there were very few contracts with componentsofretention.Mostofsuchcontractswereone-off transactionsandretention was therefore processed through the main operations account.
• 423) Management, cognizant of the growing value of the retention fee has initiated the process of approval to open and operate a separate and distinct bank account for the Retention Treasury for approval is in progress.

CommitteeObservation

• 424) The Committee observes that the matter has been addressed in previous financial years andreiteratesitsrecommendations.

7.1.8UnexplainedReduction inE-StickerFees

• 425)Note7(i)tothefinancialstatementsshowthattherewasanotabledecreaseinrevenue from sale of sticker from Kshs.l12,666,100 collected in the year 2020/2021 to Kshs.56,232,450 collected in 2021/2022 representing 50% decrease. Although Management has explained that there was a possibility that some of the revenue earned mayhavebeenremittedtotheexchequer accountinsteadof theAuthority'saccount and thattheManagementhas escalatedthematter toTheNational Treasuryfor further analysis and ascertainment of the actual amount involved,no evidencehas beenprovided toshow that therewascommunicationbetween theAuthority andThe National Treasury or explanation relating to the drop in revenue.
• 426) In the circumstances, the accuracy and completeness of E-sticker fees amounting to Kshs.56,232,450 could not be confirmed.

Management Response

• 427) Management notes that indeed there was decline in revenues from the E-sticker stream during the year which was partly due to collections inadvertently remitted to the

exchequer account in addition to the diminishing collection on PSV and commercial vehicles throughmotor vehicle inspection services.

• 428) Management wishes to confirm that there was indeed correspondence between the between NTSA and The National Treasury to establish the correct value. As a result, a reconciled figure amountingtoKshs.35,096,720 was remitted to NTSA.

CommitteeObservation

• 429) The Committee observed that the matter had been resolved as the Auditor General wassatisfiedwiththemanagement responseshavingverifiedallthe necessary documentations.

7.1.9 Unresolved PriorYear Matters

• 430) In the audit report of the previous year, several issues were raised under Report on the FinancialStatements,ReportonLawfulness andEffectivenessinUseofPublicResources and Report on Effectiveness of Internal Controls, Risk Management and Governance. However, the Management had not resolved the issues or given any explanation for failure to adhere to the provisions of thePublicSector AccountingStandardsBoard template.

Management Response

• 431) As at the time of reporting, some of the matters were under review by the PIC and the Authority was awaiting conclusion of the same. The conclusion of the same was subsequently provided as tabled by the PIC on 24th May 2022.

CommitteeObservation

• 432) The Committee observes that the matter has been addressed in previous financial years andreiteratesitsrecommendations.

7.1.l0 Audit Committee and Internal Audit Function

• 433) As reported in the previous year, the Authority does not have an approved internal auditcharterdespiteexistenceofanAuditCommitteeof theBoardandafunctional Internal Audit unit.Although the Internal AuditCharter togetherwithAuditCommittee Charter, Internal Audit Manual and Standard Operating Procedures were presented to the Audit Committee through MIN.229/NTSAAC/2022 for review and onward approval, the same were not approved.
• 434) In the circumstances, risk management processes and governance checks might not have been adequately addressed during the year.

Management Response

• 435) The Audit Committee Charter was approved. The Internal Audit Department Charter delay in approval was occasioned by the changes in the board membership twice during the last financial year.
• 436) Every year on or before 15th February, Annual audit work plan is approved by the Audit Committee.

CommitteeObservation

• 437) The Committee observes that the matter has been addressed in previous financial years andreiteratesitsrecommendations.

FB 2026

SIGNED..

DATE

HON.WANAMIWAMBOKA,M.P.

CHAIRMAN,PUBLICINVESTMENTS COMMITTEE ON GOVERNANCE ANDEDUCATION

AGENDA:

| | HON.MEMBER | SIGNATURE | |-----|--------------------------------------------|-------------| | 1. | Hon.WanamiWamboka,CBS,MP-Chairperson | | | 2. | Hon.Mark Murithi Mwenje, CBS,MP | | | 3. | Hon. (Dr.) Shadrack Mwiti Ithinji, OGW, MP | | | 4. | Hon.Moses Kirima Nguchine, MP | | | 5. | Hon. Wamacukuru Githua Kamau, CBS, MP | | | 6. | Hon.Alfa Ondieki Miruka,CBS,MP | | | 7. | Hon. Bonaya Mumina Gollo, MP | | | 8. | Hon. Chiforomodo Mangale Munga, MP | | | 9. | Hon.Daniel KarithoKiili,M.P | | | 10. | Hon. Francis Sigei Kipyegon, EBS, MP | | | 11. | Hon. Joseph Tonui Kipkosgei, MP | | | 12. | Hon. Maurice Kakai, Bisau, MP | | | 13. | Hon.Rebecca Tonkei Noonaishi,MP | Koakin | | 14. | Hon.Thuddeus Nzambia Kithua,MP | | | 15. | Hon. Ong'ondo, Boyd Were, MP | |

THENATIONALASSEMBLY

13THPARLIAMENT-FIFTHSESSION(2026) PUBLICINVESTMENTSCOMMITTEEONGOVERNANCE&EDUCATION

ADOPTIONREGISTER

DATE

MINUTES OF THE10THSITTINGOFTHEPUBLICINVESTMENTS COMMITTEEON GOVERNAN &EDUCATIONHELDONWEDNESDAY25TH,FEBRUARY2026COMMITTEER0OM265THFLOC BUNGETOWERAT10:00AM

PRESENT

• 1.Hon.Wanami Wamboka, CBS, MP

2. Hon.Alfa Ondieki Miruka, CBS, MP

• 3.Hon.(Amb.) Sigei Francis Kipyegon, EBS, MP

4. Hon. Moses Kirima Nguchine, MP

• 5.Hon.Daniel KarithoKili,MP
• 6.Hon. Rebecca Tonkei Noonaishi, MP
• 8.Hon. Chiforomodo Mangale Munga, MP

7. Hon. Joseph Tonui Kipkosgei, MP

• 9.Hon. Thuddeus Nzambia Kithua, MP

APOLOGIES.

1. Hon. Mark Murithi Mwenje, CBS, MP 2. Hon. (Dr.) Shadrack Mwiti Ithinji, OGW, MP 3. 3.Hon.Bonaya Mumina Gollo,MP 4. 4.Hon. Maurice Kakai Bisau, MP 5. 5.Hon.Wamacukuru Githua Kamau, CBS, MP

INATTENDANCE

COMMITTEESECRETARIAT

• 1.Ms.Ruth Mwihaki

ClerkAssistant I

2. Ms. Winny Awino

ClerkAssistantIII

• 3.Mr.Enock Manwa

ClerkAssistantIII

• 4.Ms. Noel Amutabi

Legal Counsel II

5. Mr. Stephen Otieno

Sergeant at Arms

• 6.Mr. Derrick Kathurima

Media Relations Officer

• 7.Mr.PeterMuthethia

Audio Recording Officer

• 8.Ms.Mary Kamande

Protocol

OFFICEOFTHEAUDITORGENERAL

• 1.Mr. Felix Itonge

Principal Auditor/Liaison Officer

MIN.NO.NA/DAAGPC/PIC-G&E/2026/034: PRELIMINARIES

The Chairperson called the meeting to order at 10:20am followed by a word of prayer from the Chairperson: thereafter a round of introduction. The agenda was confirmed as listed hereunder on the proposal of Hon. Daniel Kari Kiili, MP and seconded by Hon. Thuddeus NzambiaKithua, MP.

AGENDA:

1. Prayers; 2. 2.Preliminaries/Introduction 3. 1.Adoption of the Agenda; 4. 3.Consideration of the Committee report on the examination of the reports of the Auditor General on finan statements of state corporation on (Western,RiftValley Regions,State Corpora and Egerton University FinancialYear2016/2017-2022/2023.) 5. 2.Confirmation of minutes of previous sittings and matters Arising 6. Chairperson 7. 4.Any Other Business; and 8. 5.Adjournment.

MIN.NO.NA/DAAGPC/PIC-G&E/2026/035:CONFIRMATIONOFMINUTES

Confirmation of the Minutes of the previous meeting was deferred to the next sitting.

| MIN.NO.NA/DAAGPC/PIC-G&E/2026/036:CONSIDERATIONOFTHEFIFTHREPORTONT | |----------------------------------------------------------------------| | EXAMINATIONOFTHEREPORTSOFTHEAUDIT | | GENERALON FINANCIALSTATEMENTSOFSTA | | CORPORATIONON(WESTERNREGION) |

The Committee considered and adopted the fifth Report, having been proposed by the Hon. (Amb.) Sigei Fra Kipyegon, EBS, MP and Seconded by Hon. Rebecca Tonkei Noonaishi, MP

ThesecretariattooktheCommittee throughadraftreportontheexaminationbytheAuditorGeneralforFY2018/2( 2020/21 for the following agencies from Western Region.

• 1.Kibabii university

2. KitaleNationalPolytechnic 3. Musakasa Technical TrainingInstitute 4. Wanga Technical and Vocational College

• 5.St. Augustine Teachers Training College
• 6.Alupe University College
• 7.Bunyala Technical and Vocational College
• 8.Sirisia Technical and Vocational College
• 9.Sigalagala National Polytechnic

11. Kiminini Technical and Vocational College 10. St. Paul's Kibabii Diploma Teachers' Training College 12. Chanzeywe Technical and Vocational College 14. Ebukanga Technical and Vocational College 13. Webuye West Technical and Vocational College 15. Sabatia Technical and Vocational College

• 16.OkameTechnicalandVocational College

17. Bungoma North Technical and Vocational College

• 18.Bungoma National Polytechnic
• 19.Kisiwa Technical TrainingInstitute
• 20.BumbeTechnical TrainingInstitute

21. Navakholo Technical and Vocational College 22. Mumias West Technical and Vocational College 23. Matili Technical Training Institute

• 24.Shamberere Technical TrainingInstitute
• 25.MasindeMuliroUniversityofScienceand Technology
• 26.Bushiangala Technical TrainingInstitute

TheCommitteemadethefollowingrecommendationsonthereport;

In consideration of reports ofvarious state agencies,the Committee encountered cross-cutting and at times,persistent matters that informed the general observations and recommendations. Specific observations andrecommendations are,however,madeinrelation totherespective agency.

1.Understaffing in the TVET institutions

The Committee observed that the majority of institutions in the region are TVETs and are significantlyunderstaffed.Manyof theissues in thefinancial statements stemfrom thefact thattheseinstitutionslackessentialpersonnelin critical departments suchasfinance.Insome cases, the situation is so severe that institutions rely on interns to prepare their financial statements,which is contrary tothe Accountants Act,Cap.531.This Act establishes the Institute of Certified Public Accountants of Kenya (ICPAK) as the regulatory body overseeing the profession.According to ICPAK regulations and guidelines, financial statements,particularly those that are audited,must be signed by a Certified Public Accountant(CPA)whois a memberingoodstandingwith theInstitute.

The Committeerecommended Government should allocate adequate resources toenable TVET institutions to recruit and retain qualified personnel. Furthermore, institutions must adhere to the Accountants Act, Cap.531,by hiring Certified Public Accountants (CPAs) to oversee financial reporting. To enhance financial reporting standards, the Ministry of Education and ICPAK should establish capacity-building programs and financial management training for existingstaff.

2.Poor accounting standards and the general incapacity of some accounting officers

The Committee observed that, due to a lack of prior exposure to the audit process and subsequent parliamentaryreview,some accounting officerswere either unaware oforfailed to comply with various provisions of the Public Finance Management (PFM) Act, Cap.412A and the Public Audit Act,Cap.412BAudit queries datingback toFY 2018/19 remained unaddressed by certain agencies, which only took action after being summoned by the Committee.

To address theseissues,theNational Treasury and the OfficeoftheAuditor-General should officers and finance staff in State Corporations, to ensure compliance with audit requirements

3.Late submission of supporting documentation

Some accounting officers failed to submit supporting documentation to the Auditor-General ontime(duringthe audit cycle)asrequiredundersection68ofthePFMAct.Thisinvariably led to the Committee discussing matters that should ordinarily not feature in the final report, someasmundaneasaccountsnotbalancing.

TheCommitteerecommendsthatAccountingOfficershenceforthcomplywithSection 68(2)(k) of the PFM Act 2012, by providing supporting documentation on time. The Committeein subsequent auditswill prescribepunitive measures to those accountingofficers whofail to adheretotherequirementsofthelawinthisregard.

Moreover,the Committee exercised a degreeof leniencytowardscertain institutions by affording them an opportunity to submit supporting documentation that remained in their possession but had notbeen presented to the Office of theAuditor General,even after the conclusionoftheauditcycle.However,theseinstitutionsfailedtocomplywiththecommittee's directive.

4.Unsecured/untitledlandholdings

TheCommitteenoted severalinstanceswherelandowned byvariousinstitutionsremained unsecured andlackedproper titledocumentation.The absence of legal ownershiprecords exposes these institutions to risks,includingland disputes,encroachment,andpotential loss of property. In some cases, institutions were occupying land without formal titles, making it difficult to undertake development projects.

The Ministry of Lands, and the relevant government agencies, should fast-track the titling and registration of allinstitutional land holdings to ensurelegal ownership andsecurity.Institutions shouldconductland audits andmaintain anupdatedassetregisteroftheirland tofacilitate accountabilityandprotectionagainstencroachment.

The Government should allocate resources for surveying, demarcation,and documentation of institutional land to prevent disputes and legal challenges.Institutions facing land disputes should seek legal intervention promptly and engage with relevant authorities to resolve ownershipissues efficiently.

5.Failure to adhere to gender, ethnicity and regional balance

Someinstitutions had skewed ethnicdiversitywithin theirstaff complement especially at the senior management level.This was especially manifested in those agencies domiciled in areas predominantlyinhabited byaparticular ethniccommunity.Thesereportshighlightconcerns about the underrepresentation of certain ethnic groups, unfair employment practices, and potential discrimination in recruitment,promotion,and other employment-related processes DespiteexplanationsfromAccountingOfficersthatthelackofdiversitywasprevalentinthe lower cadres,the Committee is of theviewthatwith therifeunemploymentcountrywide, attracting an ethnicallydiversepoolof applicantsfor advertised jobswas tenable.

The Committeerecommendsthatallpublicagenciesmustcomplywiththeconstitutional provisiononequityandinclusivenessbuttressedbytheNationalCohesionand Integration Act, Cap, 7N. in two (2) years Further, The National Cohesion and Integration Commission together with the Inspectorate of State Corporations conduct biannual examination of ethnic composition in these state-owned enterprises,to confirm incrementaladdress ofthematter.

MIN.NO.NA/DAAGPC/PIC-G&E/2026/037:CONSIDERATIONOFTHESEVENTH

REPORTONTHEEXAMINATIONOF THEREPORTSOFTHEAUDITOR GENERAL ON FINANCIAL STATEMENTS OF STATE CORPORATION IN NAIROBI REGIONFORTHEFINANCIAL YEARS2018/19,2019/20,&2020/21.

The Committee considered and adopted the Tenth Report, having been proposed by the Hon.

Thuddeus Nzambia Kithua, MP and Seconded by Hon. Joseph Tonui Kipkosgei, MP.

Thesecretariat took the Committee through a draft report on the examination by theAuditor GeneralforFY 2018/2019-2020/21for thefollowing agenciesKenya

• 1.Law Reforms Commission (KLRC)
• 2.Kenya Copyright Board

3. National Cohesion and Integration Commission (NCIC)

• 4.Business Registration Service
• 5.Nairobi CentreFor International Arbitration (NCIA)
• 6.Kenya Accreditation Service
• 7.National Transport and Safety Authority

The Committee made the following recommendations on the Report.

In consideration of reports of various state agencies, the Committee encountered cross-cutting and at times,persistentmatters that informed thegeneral observations and recommendations. Specificobservationsandrecommendationsare,however,madeinrelationtotherespective agency

1.Understaffing

TheCommitteeobservedthatmostinstitutionsacrossthecountryaresignificantly understaffed.Forinstance,theKenyaLawReform Commissionhas only65employees against an approved staff establishment of 240,resulting in a shortfall of175personnel.Similarly,the 74 staff members. These staffing deficits severely hinder the institutions' capacity to deliver services effectively.

To address the significant staffing gaps undermining institutional performance, the government shouldimplementaphasedandwell-coordinatedstrategythatprioritizesaccelerated recruitmentforcriticalroles,establishesmedium-termworkforceplansalignedwithevolving mandates,andprovidesadequatebudgetaryallocationstosupport sustainedhiring and retention.This should be complemented by targeted capacity-building initiatives, including training and digital modernization, to enhance operational efficiency, alongside the creation of a clear monitoring framework totrack progress and ensure accountabilityin restoring institutionstooptimalstaffinglevels.

2.Failure to adhere to gender, ethnicity and regional balance

TheCommitteeobservedthatsomeinstitutionsexhibitedaskewedethnicdiversitywithintheir staffcomplement,particularlyattheseniormanagementlevel.Thesereportsraiseconcerns regarding the underrepresentation of certain ethnic groups,potential discriminatory practices in recruitment and promotion, and broader issuesrelated tofairness in employment processes. Notably, the composition of the Kenya Copyright Board reflects gender imbalance, with only onefemaleamongitsninemembers.

The Committee recommends that all public agencies must comply with the constitutional provision on equity and inclusiveness buttressed by theNational Cohesion and Integration Act, Inspectorate of State Corporations conduct bi-annual examination of ethnic composition in thesestate-owned enterprises,toconfirmincremental addressof thematter.TheCommittee furtherrecommendsthatinstitutionstakedeliberate andproactivemeasurestoincludePersons with Disabilities (PWDs)in their workforce,in accordance with the provisions of the Constitution.

3.LateSubmissionofsupportingdocumentation

Some accounting officers failed to submit supporting documentation to the Auditor-General on time (during the audit cycle) as required under section 68 of the PFM Act. This invariably led to the Committee discussing matters that should ordinarilynot featurein thefinalreport, some asmundane as accountsnotbalancing.

TheCommitteerecommendsthatAccountingOfficers henceforthcomplywithSection 68(2)(k) of the PFM Act 2012, by providing supporting documentation on time. The Committeein subsequent auditswill prescribepunitivemeasuresto those accountingofficers whofail to adhereto therequirements of thelawin thisregard.

4. Unsecured/untitled landholdings

The Committee noted several instances where land owned byvarious institutions remained unsecured and lacked proper title documentation.The absence of legal ownership records exposes these institutions torisks,including land disputes,encroachment,and potentialloss of property.In some cases, institutions were occupying land without formal titles,making it difficulttoundertakedevelopmentprojects.

TheCommitteerecommends that theAccountingOfficersfor theaffectedinstitutionsmake deliberateeffortstoobtain ownershipdocumentsforuntitledland holdingsinconsultationwith therelevantParentMinistryandMinistryofLands andensurethatthelandholdingwhichthey have ownership documents are secured.

REPORTONTHEEXAMINATIONOF THEREPORTSOFTHEAUDITOR GENERAL ON FINANCIAL STATEMENTS OF STATE CORPORATIONONRIFTVALLEY REGIONFORTHE FINANCIAL YEARS 2018/19, 2019/20, 2020/21, 2021/2022,2022/2023&2023/2024

The Committee considered and adopted the seventh Report, having been proposed by the Hon. Chiforomodo Mangale Munga, MP and Seconded by Hon.Daniel KarithoKili, MP ThesecretariattooktheCommitteethroughadraftreportontheexaminationbytheAuditor General for FY 2018/2019-2020/21 for the following agencies from Rift Valley regionAldai

Technical Training Institute

1. Turbo Technical and Vocational College 2. 2.Baringo National Polytechnic 3. 3.Narok West Technical Training Institute 4. 4.1 Naivasha Technical and Vocational College 5. UniversityofEldoret 6. Ol'lessos Technical Training Institute. 7. 7.Kajiado West Technical and Vocational College

• 8.Rift Valley Institute of Science and Technology
• 9.Eldoret National Polytechnic

10. Bomet University College 11. University of Kabianga

• 12.MoibenTechnical andVocational College

13. Bureti National PolytechnicRift Valley Technical Training Institute.

The Committeemade thefollowingrecommendationsontheReport.

In consideration of reports ofvarious state agencies,the Committee encountered cross-cutting and at times,persistent matters thatinformed thegeneralobservations andrecommendations. Specific observations and recommendations are,however,made inrelation totherespective agency.

1.Understaffing in the TVET institutions

The committee observed that the majority of institutions in the region are TVETs and are significantly understaffed.Many of theissuesin thefinancial statements stemfrom thefact that these institutions lack essential personnelin critical departments such as finance.In some cases, the situation is so severe that institutions rely on interns to prepare their financial statements, which is contrary to the Accountants Act, Cap. 531. This Act establishes the Institute of Certified Public Accountants of Kenya (ICPAK) as the regulatory body overseeing the profession. According to ICPAK regulations and guidelines, financial statements,particularly those that are audited, must be signed by a Certified Public Accountant(CPA)whoisamemberingoodstandingwiththeInstitute.

Thegovernmentshould allocate adequateresourcestoenableTVETinstitutionstorecruit and retain qualified personnel.Furthermore,institutions must adhere to theAccountantsAct, Cap. 531, by hiring Certified Public Accountants (CPAs) to oversee financial reporting. To enhance financial reporting standards, the Ministry of Education and ICPAK should establish capacity-

2. Poor accounting standards and the general incapacity of some accounting officers

The Committee observed that,due to a lack of prior exposure to the audit process and subsequent parliamentary review, some accounting officers were either unaware of or failed to comply with various provisions of the Public Finance Management (PFM) Act, Cap. 412A and thePublicAuditAct,Cap.412.Auditqueriesdatingback toFY2018/19remained unaddressed by certain agencies, which only took action after being summoned by the Committee.

Toaddresstheseissues,theNationalTreasuryandtheOfficeoftheAuditor-Generalshould continue conducting annual sensitization and capacity-building programs for all accounting officers andfinancestaffinStateCorporations,toensure compliancewith audit requirements andadherencetoInternationalPublicSectorAccountingStandards(IPSAS).

3.Late submission of supporting documentation

• i. .Some accounting officers failed to submit supporting documentation to the AuditorGeneral on time (during the audit cycle) as required under section 68 of thePFM Act. ThisinvariablyledtotheCommitteediscussingmattersthatshouldordinarilynot feature in the final report, some as mundane as accounts not balancing.

The Committee recommends that Accounting Officers henceforth comply with Section 68(2)(k)of thePFMAct,Cap.412A byprovidingsupportingdocumentationontime.The Committeein subsequent auditswill prescribepunitive measures tothose accounting officers whofail to adhere to therequirements of thelawin this regard.

• ii. Moreover,theCommitteeexercised a degree ofleniencytowardscertain institutionsby affording them an opportunity to submit supporting documentation that remained in their possession but had not been presented to the Office of the Auditor General, even after theconclusion ofthe audit cycle.However,these institutionsfailed tocomplywith the committee's directive.

4. Unsecured/untitledlandholdings

The Committeenoted severalinstanceswhereland owned byvariousinstitutionsremained unsecured and lacked proper title documentation. The absence of legal ownership records exposes these institutions to risks, including land disputes, encroachment, and potential loss of property. In some cases,institutions were occupying land without formal titles, making it difficulttoundertakedevelopmentprojects.

The Ministry of Lands, and the relevant government agencies, should fast-track the titling and registration of all institutionalland holdings to ensure legal ownership and security.Institutions should conduct land audits andmaintain an updated assetregister of theirland tofacilitate accountabilityandprotectionagainstencroachment.

Thegovernment should allocate resourcesfor surveying,demarcation,and documentation of institutional land to prevent disputes and legal challenges. Institutions facing land disputes should seek legal intervention promptly and engage with relevant authorities to resolve ownershipissuesefficiently.

5.Failure to adhere to gender, ethnicity and regional balance

Some institutionshadskewed ethnic diversitywithin theirstaff complementespecially at the senior management level. This was especially manifested in those agencies domiciled in areas predominantlyinhabited by a particular ethnic community.Thesereportshighlight concerns about the underrepresentation of certain ethnic groups, unfair employment practices, and potential discrimination in recruitment, promotion,and other employment-related processes Despite explanations from Accounting Officers that the lack of diversity was prevalent in the lowercadres,theCommitteeisoftheviewthatwiththerifeunemploymentcountrywide, attracting an ethnically diversepool of applicants for advertised jobs was tenable.

The Committee recommends that all public agencies must comply with the constitutional provision on equity and inclusivenessbuttressedby theNational Cohesion and Integration Act, Cap. 7N. Further, The National Cohesion and Integration Commission together with the Inspectorate ofStateCorporationsconductbi-annualexamination of ethnic composition in these state-owned enterprises, to confirm incremental address of the matter.

MIN.NO.NA/DAAGPC/PIC-G&E/2026/039:CONSIDERATIONOF\_THETENTH

REPORTONTHEEXAMINATIONOF THEREPORTSOFTHEAUDITOR GENERAL ON FINANCIAL STATEMENTSOF EGERTON UNIVERSITYFORTHEFINANCIAL YEARS 2018/19, 2019/20, 2020/21, 2021/2022,2022/2023&2023/2024

The Committee considered and adopted the ninthReport,having beenproposed by the Hon. Joseph Tonui Kipkosgei, MP and Seconded by the Hon. (Amb.) Sigei Francis Kipyegon, EBS, MP.

The secretariat took the Committee through a draft report on the examination by the Auditor Generalfor FY 2018/2019-2020/21for EgertonUniversity.In its examination of thefinancial and audit reports ofEgerton University covering the six(6) financial years up to and including the2023/2024FinancialYear,theCommitteereviewed a totalof ninety-five(95) audit queries raised by the Auditor General.Of these, seventeen (17)had been fully resolved,forty-eight (48)were recurring,and thirty(30)remained unresolved.TheCommittee did not issue additional recommendations with respect to matters already resolved. For the recurring issues, the Committeereiterates theobservations andrecommendationsmadeinpreviousfinancial years.Regardingtheunresolvedqueries,theCommitteehassetoutdetailedobservations and recommendationswithintherelevantsectionsof this report.

In relation to the cross-cutting and persistent audit concerns identified, the Committee highlights the following six (6)issues on which it makesgeneralobservations and recommendations:

a)Going Concern and Financial Deficits

In all the 6 FYs covered, the University has faced persistent going concern challenges and recurringdeficits.These trendsraisesignificantdoubts about theentity's abilitytosustain operations andmeetitsobligations.Thelackofdisclosureofmaterialuncertaintyrelated to going concern further compounds the risk,as stakeholdersmay not have a clear picture of the financialhealthoftheinstitution.

The Committee recommends that Management should, within 60 days, prepare and submit a formal Going-Concern Recovery Plan that includes specific cost-cutting measures, revenue enhancement strategies, debt restructuring actions, and clear implementation timelines.In addition, Management must consistently disclose any material going concern uncertainties in the notes to the financial statements in compliance with IPSAS 1. To ensure sustainability, the Ministryof Education andNationalTreasuryshouldjointlyconduct afinancial sustainability

b)ReceivablesManagement

Receivables,including student debtors and imprests,haveremained unresolved across multiple FYs. This persistent issue points to weaknesses in debt recovery processes and ineffective cash flow management.Failure toinvoice students promptly after registration and inadequate follow-up mechanisms exacerbate the problem, leading to liquidity constraints and increased financial strain.

The Committee recommends that Egerton UniversityManagement should implement stringent credit control policies and leveraging technology for automated billing and collection. Moreover,the Council should approve thewrite-off ofirrecoverablestudentdebts.

c)LateSubmission ofsupportingdocumentation

Some accounting officers failed to submit supporting documentation to the Auditor-General on time(during the audit cycle)as requiredunder section 68of thePFM Act.Thisinvariably led to the Committee discussingmatters that should ordinarilynotfeature inthefinalreport, some as mundane as accountsnot balancing.

The Committee recommends that Accounting Officers henceforth comply with Section 68(2)(k) of the PFM Act 2012, by providing supporting documentation on time. The Committeein subsequent auditswill prescribepunitivemeasures tothose accountingofficers whofail to adhere to therequirements of thelaw in this regard.

d)UnremittedStatutoryDeductionsandPayables

The recurring failure to remit statutory deductions and settle payables, observed in multiple FYs exposes the University to significant compliance risks and potential penalties.Nonremittance of statutory obligations notonly attractslegal consequences but also damages the entity's reputation and credibilitywithregulators and employees.This issue reflects poor financialdiscipline and inadequate internal controls,necessitating immediate corrective measurestoensuretimelycomplianceandavoidlitigation.

The Committeerecommends that:-

• (i)TheUniversityto develop and implement a phased plan to remit all outstanding statutorydeductionstorelevantauthorities.
• (ii) Ensure all future deductions are remitted promptly and supported by detailed schedules and adherestrictlytoIncomeTaxActSection37(1) and otherstatutory requirements.
• (i)Hold responsible officers accountable for non-compliance.

e)StalledProjects

Stalled projects have been a recurring concern from across the 6 FYs, signaling inefficiencies in project planning,execution,and monitoring. These delays not only result in cost overruns but alsohinder the achievementofstrategicobjectives andservicedelivery.Thelackoftimely decision-making and inadequate resource allocation appear to be key contributing factors.

The Committeerecommends that:-

• (i)Special audit takingstock of theirvalues,completion status and thelegality tobe done for the stalled projects in three months upon adoption of this report by the House and submit areporttothecommittee.
• thatprioritizes stalled projectsbased on criticality and availableresources.This can be achieved through aformalrequestofsupplementarycapitaldevelopmentfundingfrom the National Treasury through the Ministry of Education,accompanied by audit findings and a prioritized project completion plan.
• (ii)Clear with the pendingprojects before undertakingany newproject.

f)IrregularUse of University Land byUndisclosed PrivateInvestors

The Committee notes that the process surrounding the allocation and use of a substantial portion of Egerton University land (2,0o0 acres) for purposes related to the Presidential Directive on National Food Security was marked by significant procedural, governance, and compliance shortcomings that disadvantaged the University and exposed it to a risk of losing theirlandtoillegalparties.

The Committee recommends that management immediately regularize the use of the land by obtaining requisite approvals from the National Land Commission and the National Treasury and ensure that any engagement with private entities is formalized through legally binding lease agreements. Otherwise, the Accounting Officer should have full proper and full control of the land pursuant to Regulation 139 of the PFM (NG) Regulations, 2015 by implementing strict access controls and monitoringmechanisms,including CCTV surveillance andperiodic submitted to the Committeewithin3monthsupon the adoption of thisreport by theHouse.

MIN.NO.NA/DAAGPC/PIC-G&E/2026/040:ADJOURNMENT/DATEOFNEXT

MEETING

There being no other business the meeting was adjourned at 13:25hrs. The next meeting will be on notice.

F<BoQ6,

SIGNED: ..

..DATE:..

Hon.WanamiWamboka,CBS.MP(CHAIRPERSON