Report On Consideration Of The Audited Accounts For The Judiciary Mortgage Scheme Fund For The Fys 2011/2012 To 2021/2022

REPUBLIC OF KENYA

THE NATIONALASSEMBLY

THIRTEENTHPARLIAMENTFOURTH SESSION

SPECIALFUND ACCOUNTS COMMITTEE

REPORT ON THE CONSIDERATION OFTHE AUDITED ACCOUNTS FOR THE JUDICIARY MORTGAGE SCHEME FUND FORTHEFINANCIAL YEARS2011/2012TO2021/2022

DIRECTORATEOFAUDITAPPROPRIATIONS &GENERALPURPOSECOMMITTEES,NATIONAL ASSEMBLY PARLIAMENTBUILDINGS NAIROBI

JULY2025

REPUBLIC OF KENYA

THENATIONALASSEMBLY

THIRTEENTH PARLIAMENTFOURTH SESSION

SPECIAL FUND ACCOUNTS COMMITTEE

REPORT ON THE CONSIDERATION OF THE AUDITED ACCOUNTS FOR THE JUDICIARY MORTGAGE SCHEME FUND FOR THE FINANCIAL YEARS 2011/2012 TO 2021/2022

DIRECTORATEOFAUDITAPPROPRIATIONS &GENERALPURPOSECOMMITTEES,NATIONAL ASSEMBLY PARLIAMENT BUILDINGS NAIROBI

JULY2025

| Tableof Contents IV 1.0PREFACE. | |--------------------------------------------------------------------------------------------------------------------------------------------| | 1.1EstablishmentandMandateofSpecialFundsAccountsCommittee IV | | 1.2 Committee Membership.... | | 1.3 CommitteeSecretariat.. EXAMINATIONOFAUDITEDACCOUNTSFORJUDICIARYCARLOANAND MORTGAGESCHEMEFUNDFORTHEFINANCIALYEARS2011/2012TO2020/2021 1 | | 2.1. Examination of the audited accounts for Judiciary Car loan and Mortgage Scheme Fund for the financialyear 2011/2012 | | 2.2.Examination of theAuditor General reportsJudiciary Carloan andMortgageScheme 6 Fundfor the financialyear 2012/2013 | | 2.3.Examination of theAuditor General reportsJudiciary Car loan and MortgageScheme .10 Fundforthefinancialyear2013/2014. | | 2.4.Examination of theAuditor GeneralreportsJudiciary Car loanandMortgageScheme 14 Fundforthefinancialyear2014/2015.. | | 2.5.Examination of theAuditor General reports Judiciary Car loan and Mortgage Scheme .18 Fundforthefinancialyear2015/2016 | | 2.6.Examination of the Auditor General reports Judiciary Car loan and Mortgage Scheme 22 Fund forthefinancialyear2016/2017 | | 2.7.Examination of theAuditor General reports Judiciary Car loan and Mortgage Scheme 26 Fundforthefinancialyear2017/2018.. | | 2.8.Examinationof theAuditor General reportsJudiciary Carloan andMortgageScheme ..30 Fundfor thefinancialyear2018/2019 | | 2.9Examination of theAuditor General reportsJudiciary Car loanandMortgageScheme .34 Fund for the financial year 2019/2020 | | 2.10Examination of theAuditor General reportsJudiciary CarloanandMortgageScheme ...38 Fundforthefinancialyear2020/2021. | | 2.11Examinationof theAuditor General reportsJudiciaryCarloan andMortgageScheme .42 Fundforthefinancialyear2021/2022.. |

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

ListofAbbreviationsandAcronyms

• 1)CoK

Constitution of Kenya,2010

• 2)FY

FinancialYear

• 3) MDAs

Ministries,Departments andAgencies

• 4) MOU

Memorandum of Understanding

• 5) PFM

Public Finance Management

• 6 OAG

Office of theAuditor-General

• 7) PSASB

PublicSectorAccountingStandardsBoard

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

CHAIRPERSON'SFOREWORD

Hon.Speaker, on behalf ofthe Special Funds Accounts Committee and under Standing Order 199, it is my pleasant duty and honour to present to the House the report of the Committee on consideration of thereports of the Auditor-General onthe auditedfinancialstatementsfor the JudiciaryMortgage SchemeFund for the financial years 2011/2012 to2021/2022.

Oversight over national revenue and expenditure is amongst theroles oftheNationalAssembly as stipulated under Article 95 (4) (c) of the Constitution of Kenya, 2010. Further, Article 226 of the CoKprovides that anAct of Parliament shall providefor the designation of anAccounting Officer in every public entity at the national level who is accountable to theNational Assembly for its financial management. In addition,Article 229(8) mandates this House to debate and take appropriate action on audit reportsfrom theAuditor-General.

Infulfilment of these constitutional provisions, the National Assembly established various Committees to examine reports of the Auditor-General to ascertain whether public funds are utilized in a lawful,authorized,effective,efficient,economical, and transparent manner. The Special FundsAccountsCommitteeis oneof the Committees thatwas established in theFifth Session of the Eleventh Parliament following the review of the National Assembly's Standing Orders.

The Committee received oral and written submissions from Mr.Paul Ndemo, the then Ag. Chief Registrar,JudiciaryMortgage Scheme Fund.The Committee alsoreceived oral andwritten submissions from Ms.Fridah Mokaya,the current Chief Registrar of the Fund, regarding the auditedfinancial statementsfortheFinancialYears2011/2012to2017/2018.Thesubmissions formed the basis ofthe Committee's observations,findings,and recommendations.These are also contained in the Minutes and Hansard Reports of Committee proceedings.

Hon. Speaker, I wish to express appreciation to the Honourable Members of the Committee, the Office of the Speaker, the Clerk of the National Assembly,the Parliamentary Liaison Offices of theAuditor-General and theNational Treasuryand the CommitteeSecretariatforfacilitatingthe Committeein theproduction of this report.

HON.FATUMAZAINABMOHAMMED,M.P. CHAIRPERSON,SPECIALFUNDSACCOUNTSCOMMITTEE

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

CHAPTERONE

1.0PREFACE

1.1 Establishment and Mandate of Special Funds Accounts Committee

1. The Special FundsAccounts Committee is one of the sixWatchdog Committees of the National Assemblyestablished under Standing Order 205.It is mandated toexamine thereports of the Auditor-General on the following:

• i) Funds established by statute orby subsidiary legislation,except Funds under Standing Order205B(DecentralizedFundsAccountsCommittee)

3. ii) TheEqualizationFund; 4. ii) TheEqualizationFundAdvisoryBoard; 5. iv) ThePoliticalPartiesFund;and

• v) Other funds as may be communicated by the HonourableSpeaker

1.2 CommitteeMembership

2. The Committee comprises the followingmembers:

| S/ N | Name | Constituency | Party | |--------|--------------------------------------------------|------------------|-------------| | 1 | Hon.Fatuma Zainab Mohammed, MP (Chairperson) | Migori (CWR) | Independent | | 2 | Hon.Dawood Abdul Rahim,HSC,MP (Vice Chairperson) | North Imenti | Independent | | 3 | Hon. Mary Emaase Otucho , MP | Teso South (CWR) | UDA | | 4 | Hon. Charles Ngusya Nguna | Mwingi West | Wiper | | 5 | Hon.Dr. Christine Ombaka Oduor, MP | Siaya (CWR) | ODM | | 6 | Hon. Erastus Kivasu Nzioka, MP | Mbooni | Wiper | | 7 | Hon. Eve Akinyi Obara, MP | Kabondo Kasipul | ODM | | 8 | Hon. Joseph Majimbo Kalasinga, MP | Kabuchai | FORD-K | | 9 | Hon. Tom Mboya Odege, MP | Nyatike | ODM | | 10 | Hon. Catherine Nakhabi Omanyo,MP | Busia (CWR) | ODM |

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

| 11 | Hon.Cecilia Asinyen Ngitit,MP | Turkana (CWR) | UDA | |------|---------------------------------|-----------------|-------| | 12 | Hon. Erick Kahugu Wamumbi, MP | Mathira | UDA | | 13 | Hon.JosephKimutai Cherorot,MP | Kipkelion East | UDA | | 14 | Hon.Onchokc CharlesMamwacha,MP | Bonchari | UPA | | 15 | Hon. Paul Kibichi Biego, MP | Chesumei | UDA |

1.3 CommitteeSecretariat

3. The Secretariat facilitating the Committee comprises the following staff:

| S/ N | NAME | DESIGNATION | |--------|---------------------|---------------------------------| | 1 | Mr.ErickNyambati | Senior ClerkAssistant | | 2. | Ms. Comfort Achieng | Clerk Assistant III | | 3 | Mr.Nimrod Mate | Clerk Assistant III | | 4 | Mr.Robert Ngetich | Fiscal Analyst II | | 5 | Ms. Judith Kanyoko | Legal Counsel II | | 6 | Ms.Bcvaline Mosoti | Research Officer III | | 7. | Mr.DerrickKathurima | Media Relations Officer III | | 9 | Ms.Felistus Muiya | PublicCommunications OfficerIII | | 10 | Mr.Peter Mutethia | Hansard Audio Officer III | | 11 | Mr.Joshua Lenambet | Serjeant At Arms |

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

CHAPTERTWO

EXAMINATIONOFAUDITEDACCOUNTSFORJUDICIARYCARLOANAND MORTGAGESCHEMEFUNDFORTHEFINANCIALYEARS2011/2012TO2020/2021

• Mr. Paul Ndemo, the Ag. Chief Registrar then appeared before the Committee on Tuesday 13thFebruary2024toadduce evidenceonthe auditedfinancial statementsfor theJudiciary Car loan and Mortgage Scheme Fund for the Financial Years 2018/2019 to 2021 /2022. During the meeting,the Accounting Officer was accompanied by:

5. Ms.Fridah Mokaya, the current Chief Registrar of the Fund, also appeared before the Committee on Tuesday 19thApril,2024 to adduce evidence on the audited financial statements for the Financial Year 2011/2012 to 2017/2018.During the meeting,the Accounting Officer was accompanied by:

• 1.Mr. Wycliffe Wanga

Fund Administrator

• 2.Ms. Domsiana Onyango

ChiefAccountant

3. Mr. Ken Ogutu

legal Counsel.

1. Mr. Paul Ndemo

Deputy Chief Registrar Judiciary.

2. Mr. Ken Ogutu

legal Counsel.

3. Mr. Wycliffe Wanga

FundAdministrator

4. Mr. Moses K. Serem

Registrar Court of Appeal

• Ms.Domsiana Onyango-

Chief Accountant.

2.1. Examination of the audited accounts for Judiciary Car loan and Mortgage Scheme Fund forthefinancialyear2011/2012

1.Inaccuraciesin theFinancialStatements

• 1.The statementoffinancialperformance did not disclose operating expensesincurred during the year including bank charges, commissions and expenses paid to the Scheme administrator. In addition, analysis of loan disbursement and repayment over the years was not provided in the notes to the financial statements.In the circumstances, the accuracy and completeness of thefinancial statementscouldnotbeconfirmed.

SubmissionsoftheAccountingOfficer

• 2.TheAccountingOfficersubmitted that
• It is correct that the statement of financial performance did not disclose bank charges, commissions and expensespaid to thescheme administrator.Thesewereretainedby the scheme administrator.The scheme administrator maintains financial records and only discloses theloans disbursed and thebankbalances.The MOUprovided for a 3%administrationfee to be charged by the scheme administrator.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

• 3.However, the scheme administrator was engaged on the disclosure of administrationfees and other charges and isnow disclosing the administration fees andother charges levied on the scheme asevidencedintheFinancialStatementsof2022/2023.Theloandisbursementand repayment schedules were provided to the auditor and annexcd in the Managemcnt responses.

FindingsandObservationsoftheCommittee

• 4.TheCommitteeobserved that
• ii. Theloan disbursementandrepaymentschedulessubmittedwerenot admissiblesince they were notcertified as true copies.
• i.Therewas nodisclosurefor scheme administrator expenses&chargesfor theyear 2011/2012contrary toNational GovernmentPFMRegulations101(4).
• ii.The matter is unresolved.

RecommendationsoftheCommittee

5.The Committeerecommended that

• i.Within three months upon the adoption of this report the Accounting Officer must provide certified loan disbursements and repayment schedules to the Auditor Generalforauditverification.
• ii.TheAccounting Officermust ensure that all financial statements complywith the financial reporting guidelines issued by the Public Sector Accounting Standard Board inaccordancewithRegulation101(4)of thePublicFinanceManagement (National Government) Regulations,2015.

2.UndisclosedInterest onMortgageLoansDisbursed

6. The statement of financial performance reflects Interest income amount of Kshs. 17,950,106 as disclosed inNote3to thefinancialstatements.The amount wasin respect of accruedinterest on bank balances. However, interest earned from mortgage loans was not disclosed in the financial statements.Furthermore,amortization schedulesfor the mortgageloans to confirm interest earned during the year were not provided for audit verification.In the circumstances, the accuracy and completeness ofinterest income amounting toKshs.17,950,106 could not be confirmed.

SubmissionsoftheAccountingOfficer

• 7.The Accounting Officer submitted that— The sum of Kshs.17,950,106, being interest on undisbursed funds, were correctly disclosed in our financialreports as cited by the audit.The interest goes back to the revolving fund. The amortization formswhich indicated the interest and other chargeswere alsomaintained and provided by thescheme administrator.The charges indicated in the scheduleswere due to the

scheme administrator.Attached is a sample of the amortization schedules thatwereprovided for audit.

Findingsand ObservationsoftheCommittee

8.TheCommitteeobserved that-

• i. During thefinancialyeartherewasno disclosureforinterestearnedon the loansdisbursed.
• ii. TheAmortization scheduleswere not provided for audit verification.
• iii. The accounting officer was in breach of Section 66 (b) and (g) and Section 68 (1), (2)(c) of the PFM Act,2015.
• iv. The accuracy and completeness of interest income amounting to Kshs. 17,950,106 could not be confirmed.
• V. Thematterisunresolved.

RecommendationsoftheCommittee

9.TheCommitteerecommendedthat

• i.Within threemonths upon adoption of thisreport the Accounting Officer and the SchemeAdministrator should disclose the interest earned from themortgage loans and providethe amortization schedules to theAuditor-General for auditverification.
• ii. The Accounting Officer ensures that all applicable accounting and financial controls, systems, standards,laws,and procedures are followed in the preparation of Annual Reports and financial statements and in accordancewith the standards prescribed by the Public Sector Accounting Standards Board and in compliance with regulation 101 (4) of the public finance management (National Government) Regulations, 2015.

Unsupported Cash and CashEquivalent

• 10.TheStatement of financial position and as disclosed inNote 4 to the financial statements reflectscash and cash equivalents balance of Kshs.380,801,311.The balanceincludes current account and fixed deposit account balances of Kshs. 16,399,106 and Kshs.364,402,205 respectively.However,bankreconciliations,certificates offixed deposit and cashbookswere not provided to support thebalance.In the circumstances,the accuracy and completeness of cash and cash equivalents amounting to Kshs. 380,801,311could not be confirmed.

Submissions of theAccounting Officer

11. The Accounting Officer submitted the following; The Cash book and the bank reconciliation hadnot been prepared at the time of the audit in view of the scheme administratormaintaining the books of account.However, they extracted the cash books and bankreconciliation and samples provided in theManagement responses.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

Findingsand Observationsofthe Committee

• 12.The Committee observed that
• i. Bank certificates for fixed Deposits were not provided for audit verification
• ii. The matter is unresolved.

RecommendationsoftheCommittee

• (i) Within three months of the adoption of this report, the Accounting Officer to submitBank certificatesfor fixedDepositsfor auditverification.

The Committeerecommended that

• (i) The AccountingOfficershouldensuretimelysubmissionofaccounting documentationrequiredforauditverificationduringtheauditasperthe provisionsof Section31(4)ofthePublicAuditAct,2015.

6.LateSubmissionofFinancialStatements

• 13.The financial statements for the year ended 30 June,2012 were submitted for audit on 1 February,2023.This was contrary to Section 68(2) (k) ofthe Public Finance Management Act, 2012 which requires accounting officer for a national government entity, Parliamentary Service Commission and the Judiciary to prepare annual financial statements for each financial year withinmonths after the endof thefinancialyear and submit them totheAuditor-General for audit.In the circumstances,Management was in breach of the law

SubmissionsoftheAccountingOfficer

14. The Accounting Officer submitted the following; They did not prepare the financial accounts and acknowledgcd the omission. They endeavoredtoadhere tothe statutorytimelinesforsubmittingthefinancial statementsfor the schemeforaudit.

Findings and Observationsofthe Committee

• 15.TheCommitteeobserved that
• i. The Accounting Officer was in breach of Section 68(2)(k) of the PFM Act.
• ii. The matter is unresolved

RecommendationsoftheCommittee

• 16.The Committeerecommended that

The Accounting Officer should ensure timely submission of accounting documentationrequiredfor auditverificationduringthe auditasper theprovisions ofSection31(4)ofthePublicAuditAct,2015.

Lack of Enabling Legislation Establishing the Mortgage Scheme

17. Review of information and documents provided for audit revealed that the Judiciary Mortgage Schemedid nothave an enablinglegislation establishingtheFund.Management didnot provide asatisfactory explanationfor the operationalizationof theFundwithout the enabling

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

legislation. In the circumstances, the legality, name of the fund and its operations could not be confirmed.

SubmissionsoftheAccountingOfficer

18. The Accounting Officer submitted the following; 2. therewasnoenablinglegislationfor the schemewhich hadbeenoperatingunder a Memorandumof Understandingexecuted inNovember 20l1between theJudiciaryand the scheme administrator.However, theJudicial Service Commissionhad constituted a team to develop alegislativeframeworkforthescheme.

FindingsandObservationsof theCommittee

• 19.The Committeeobserved that
• (i)The Fund operated without regulations
• (ii) thelegality,name of the fund and its operations could not be confirmed.
• (iii)Thematterisunresolved.

RecommendationsoftheCommittee

• Within six months of the adoption of this report, the Accounting Officer must develop regulations tooperationalise theFund andsubmitthesame to theAuditor General for
• 20.TheCommitteerecommendedthat auditverification.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

2.2.Examination of theAuditor GeneralreportsJudiciary Carloan andMortgageScheme Fundforthefinancialyear2012/2013

1.InaccuraciesintheFinancial Statements

21. The statement of financial performance did not disclose operating expenses incurred during the year including bank charges, commissions and expenses paid to the Scheme administrator. In addition, analysis of loan disbursement and repayment over the years was not provided in the notes to the financial statements. In the circumstances, the accuracy and completeness of thefinancialstatementscouldnotbeconfirmed.

Submissionsof theAccounting Officer

• 22.TheAccountingOfficersubmitted that-it wascorrect thestatementof financialperformance did not disclose the figures of bank charges, commissions and expenses paid to the scheme administrator.These were retained by the scheme administrator.The scheme administrator maintainsfinancial records and only discloses the loans disbursed and the bankbalances.The MOUprovidedfor a3% administrationfeeswhich the scheme administratorwas to charge. We however engaged the scheme administrator who are now disclosing the administration fees and other charges leviedon thescheme as cvidcnccd in theFinancial Statementsof2022/2023 and alsoin theloan disbursement andrepayment schedules are available andwereprovided to the auditor and annexed in themanagementresponses.

FindingsandObservationsoftheCommittee

• i.There was no disclosure for scheme administrator expenses&charges for theyear 2011/2012contrarytoNational GovernmentPFMRegulations101(4).

23.The Committeeobserved that

• ii. Theloandisbursementandrepaymentschedulessubmittedwerenotadmissable sincetheywerenotcertified as truecopies.
• iii. The matter is unresolved.

RecommendationsoftheCommittee

24.TheCommitteerecommendedthat

• i.Within three months upon the adoption of this report the Accounting Officer must provide certified loan disbursements and repayment schedules to the Auditor Generalforauditverification.
• ii. TheAccountingOfficermustensurethatall financial statementscomplywith the financial reporting guidelines issued by the Public Sector Accounting Standard Board inaccordancewithRegulation101(4)of thePublicFinanceManagement (National Government) Regulations,2015.

Undisclosed Interest onMortgageLoansDisbursed

• 25.The statement of financial performance reflects interest income ok Kshs.18,308,078 and as disclosed in Note3totheFinancialStatements.The amountwas in respectofaccrued interest on bank balances. However, interest earned from mortgage loans was not disclosed in the

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

financial statements.Further,amortization schedulesfor the mortgageloans to confirm interest earned during the year were not provided for audit verification.In the circumstances,the accuracy and completenessof interest income amounting toKshs.18,308,078could notbe confirmed.

SubmissionsoftheAccountingOfficer

• 26.TheAccountingOfficersubmitted that
• Interest on undisbursed funds is correctly disclosed in our financial reports as cited by the audit,an amount of Kshs.18,308,078.This is the amount earned on unutilised funds and the samegoesbackto therevolvingfund.The amortizationformswhichindicate theinterest and other charges are alsomaintained and provided by the scheme administrator.The charges indicated in the schedules are due tothe scheme administrator.Attached is a sampleof the amortizationschedulesthatwereprovidedforaudit.

FindingsandObservationsoftheCommittee

27.TheCommitteeobserved that

• i. During thefinancialyeartherewasnodisclosureforinterestearnedonthe loansdisbursed.
• ii. TheAmortization scheduleswere not providedfor auditverification.
• ili. The accounting officer was inbreach of Section 66(b)and (g) and Section 68 (1),(2)(c)of the PFM Act,2015.
• iv. Thematterisunresolved.

RecommendationsoftheCommittee

28.TheCommitteerecommendedthat

• i.Within three months upon adoption of this report the Accounting Officer and the SchemeAdministratorshould disclose theinterest earned from themortgageloans and providethe amortization schedules totheAuditor-General for auditverification.
• ii. The Accounting Officer ensures that all applicable accounting and financial controls, systems, standards, laws, and procedures are followed in the preparation of Annual Reports and financial statements and in accordance with the standards prescribed by thePublicSectorAccounting StandardsBoard and in compliance with regulation101 (4) of the public finance management (National Government) Regulations, 2015.

Unsupported Cash and CashEquivalent

• 29.The Statement of financial position and as disclosed inNote 4 to thefinancial statements reflectscash andcashequivalentsbalanceofKshs.409,685,326.Thebalanceincludescurrent account and fixed deposit account balances of Kshs.20,881,714 and Kshs.388,803,612 respectively. However, bank reconciliations,certificate of fixed deposit account and cash

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

books were not provided to support the balance. In the circumstanccs, the accuracy and completeness of cash and cash equivalents balance amounting ofKshs.409,685,326 could not be confirmed.

SubmissionsoftheAccountingOfficer

• 30.The Accounting Officer submitted that—It is true the Cashbook and the bankreconciliation had notbeen prepared at the time of the

audit inview ofthescheme administrator maintainingthebooks of account.Wehoweverhave cxtractedthecashbooks andbankreconciliationand samples attached in theManagement Response.

Findingsand Observationsofthe Committee

31.The Committee observed that

• i. Bank certificates for fixed Deposits were not provided for audit verifieation
• ili. Thematterisunresolved.
• ii. The accuracy and completeness of cash and cash cquivalents balance amountingofKshs.409,685,326couldnot be confirmed.

RecommendationsoftheCommittee

The Committeerecommended that-

Within three months of the adoption of this report, the Accounting Officer to submit bank reconciliations,certificate offixeddepositaccountandcashbooks tosupport thebalance amountingtoKshs.409,685,326forauditverification

LateSubmissionofFinancialStatements

• 32.The financial statements for the year ended 30 June, 2013 were submitted for audit on 1 February, 2023.This was contrary to Section 68(2) (k) of the Public Finance Management Act, 2012 which requires accounting officer for a national government entity, Parliamentary Service Commission and the Judiciary to prepare annual financial statements for each financial year withinmonths after the end of thefinancialyear andsubmit them to theAuditor-General for audit.In the circumstances,Management was in breach of the law.

SubmissionsoftheAccountingOfficer

33.TheAccounting Officer submitted that The observation is correct. We did not prepare the financial accounts and we acknowledge the omission.Weshall endeavor toadheretothe statutorytimelinesforsubmitting thefinancial statementsfor the scheme.

FindingsandObservationsoftheCommittee

• 34.TheCommitteeobservedthat
• iii. TheAccountingOfficerwas inbreachofSection 68(2)(k)of thePFMAct.
• iv. Thematterisunresolved

Recommendationsofthe Committee

• 35.TheCommitteerecommendedthat

The AccountingOfficershouldensure timelysubmission ofaccounting documentationrequired for auditverification during the audit asper theprovisions of Section 31(4) of the Public Audit Act, 2015.

LackofEnablingLegislationEstablishingtheMortgageScheme

36. Review of information and documents provided for audit revealed that the Judiciary Mortgage Scheme did not have an enabling legislation establishing the Fund. Management did not provide asatisfactoryexplanationfor theoperationalizationof theFundwithout the enabling legislation.In the circumstances,the legality,name ofthefund and its operations could not be confirmed.

Submissions of the Accounting Officer

• 37.TheAccountingOfficersubmitted thefollowing; .scheme administrator.However,theJudicialService Commissionhasnow constituted a team

It is true that thereisnoenablinglegislationfor theschemewhichhasbeen operatingunder a Memorandumof Understanding executed inNovember 2011between theJudiciary and the todevelopalegislativeframeworkforthescheme.

Findings and Observations of the Committee

• 38.The Committee observed that;
• (i)TheFundoperatedwithoutregulations
• (ii) the legality, name of the fund and its operations could not be confirmed.
• (iii)Thematterisunresolved.

RecommendationsoftheCommittee

• 39.TheCommitteerecommended that

Withinsixmonthsof theadoption of thisreport,theAccountingOfficermust develop regulations to operationalise the Fund and submit the same to theAuditor General for auditverification.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

2.3.Examination of theAuditor GeneralreportsJudiciary CarloanandMortgageScheme Fundforthefinancialyear2013/2014

1.Inaccuracies in the Financial Statements

40. The statement of financial performance did not disclose operating expenses incurred during the year including bank charges, commissions and cxpenses paid to the Scheme administrator. In addition, analysis of loan disbursement and repayment over the years was not provided in the notes to the financial statements. In the circumstances, the accuracy and completeness of thefinancial statements could not be confirmed.

Submissions of theAccounting Officer

which the scheme administrator was to charge.

• 41.The Accounting Officer submitted that—; It is correct the statement of financial performance did not disclose thefigures of bankcharges, commissionsandexpensespaidtothescheme administrator.Thesewereretainedby the scheme administrator.The scheme administratormaintainsfinancial records and only discloses theloans disbursed and thebankbalances.The MOUprovided for a3% administrationfees

42. We howcver cngaged the schemc administrator who are now disclosing the administration fees and other charges levied on the scheme as evidenced in the Financial Statcmcnts of 2022/2023and alsoannexed.Theloandisbursement andrepayment schedules are available andwereprovidedtotheauditorandannexed.

FindingsandObservationsoftheCommittee 43.TheCommitteeobservedthat

• i.Therewas no disclosureforscheme administrator expenses&charges fortheyear 2011/2012contrary toNational GovernmentPFMRegulations101(4).
• ii.The loan disbursementand repayment schedulessubmitted were not admissable sincetheywerenotcertifiedastruecopies.
• ii.The matter is unresolved.

RecommendationsoftheCommittee 44.TheCommitteerecommended that

• i.Within three months upon the adoption of this report the Accounting Officer must providecertifiedloandisbursementsandrepaymentschedules tothe Auditor General forauditverification.
• ii. i.TheAccounting Officermustensure that all financial statementscomplywith the financial reporting guidelines issued by the Public Sector Accounting Standard Board inaccordancewithRegulation101(4)of thePublicFinanceManagement (National Government) Regulations,2015.

UndisclosedInterestonMortgageLoansDisbursed

• 45.statement of financialperformance and as disclosed in Note3 to theFinancial Statements reflects Interest income amount of Kshs. 30,501,202.The amount was in respect of accrued interest on balances.However, interest earned from mortgage loans was not disclosed in the financial statements.Further, amortization schedules for the mortgage loans to confirm interest earned during the year were not provided for audit verification.In the circumstances, the accuracy and completeness of interest income amounting toKshs.30,501,202 could not be confirmed.

Submissionsof theAccounting Officer

• 46.The Accounting Officer submitted that
• Interest on undisbursedfunds is correctly disclosed in our financial reports ascited by the audit,an amount ofKshs.30,501,202.This is the amount earned onunutilisedfunds and the samegoesbacktothe revolvingfund.The amortizationformswhich indicate theinterest and other charges are also maintained and provided by the scheme administrator.The charges indicated in the schedules are due to thescheme administrator.Attached is a sample of the amortizationschedulesthatwereprovidedfor audit.

FindingsandObservationsoftheCommittee

47.TheCommitteeobservedthat

• i. During the financialyear there was no disclosure forinterest earned on the loans disbursed.
• ii. The Amortization scheduleswerenot provided for auditverification.
• ili. The accounting officer was in breach of Section 66 (b) and (g) and Section 68 (1),(2)(c)of the PFM Act,2015.
• iv. Thematter is unresolved.

RecommendationsoftheCommittee 48.TheCommitteerecommendedthat-

• i.Within three months upon adoption of this report the Accounting Officer and the SchemeAdministratorshould disclose theinterest earned from themortgageloansand providethe amortization schedulestotheAuditor-General for auditverification.
• ii.The Accounting Officer ensures that all applicable accounting and financial controls, systems, standards,laws,and procedures are followed in the preparation of Annual Reports and financial statements and in accordance with the standards prescribed by the Public SectorAccounting StandardsBoard and in compliance with regulation 101 (4) of the public finance management (National Government) Regulations, 2015.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

Unsupported Cash and CashEquivalent

49. The Statement of financial position and as disclosed in Note 4 to the financial statements reflects cash and cash equivalents balance of Kshs.499,423,574 as at 30 June 2014.However, thebalance differswithKshs.512,383,104reflected inNote 4to thefinancial statements which includes current account and fixed deposit account balances of Kshs. 9,084,189 and Kshs.503,298,915 respectively.Further,bank reconciliations, certificates of fixed deposit account and cash books were not provided to support the balance. In the circumstances, the accuracy and completeness of cash and cash equivalents amounting to Kshs.499,423,574 couldnotbeconfirmed.

SubmissionsoftheAccountingOfficer

• 50.The Accounting Officer submitted that It is true theCashbook and thebankreconciliationhad notbeenpreparcd at the time of thc audit inview of thescheme administrator maintaining thebooks of account.Wehowever have extracted thecash books and bankreconciliation and samples attached intheMainagement Response.

Findings and Observations of the Committee

• i. Bank certificates for fixed Deposits were not provided for audit verification

2. 51.The Committeeobserved that

• ii. Theaccuracyandcompletenessofcashandcashequivalentsbalance amountingofKshs.499,423,574couldnotbeconfirmed.
• ili. The matter is unresolved.

RecommendationsoftheCommittee

• 52.Within three months of the adoption of this report, the Accounting Officer to submit bank reconciliations,certificateoffixed deposit account andcashbookstosupport thebalance amountingtoKshs.499,423,574forauditverification

The Committeerecommendsthat

LateSubmissionofFinancialStatements

• 53.The financial statements for the year ended 30 June, 2014 were submitted for audit on 1 February, 2023.This was contrary to Section 68(2) (k) of the Public Finance Managciment Act, 2012 which requires accounting officer for a national government entity, Parliamentary Service Commission and the Judiciary to prepare annual financial statements for each financial ycar within months after the endof thefinancialyear and submit them to the Auditor-General for audit.In the circumstances,Management was in breach of the law.

Submissionsof theAccounting Officer

• 54.The Accounting submitted that

The observation is correct.We did not prepare thefinancial accounts andwe acknowledge the omission.Weshallendeavor to adhereto the statutory timelinesforsubmitting thefinancial statementsforthescheme.

Findings and Observations of the Committee

• 55.TheCommitteeobserved that
• i. TheAccounting Officerwas inbreach of Section68(2)(k) of thePFM Act.
• ii. Thematteris unresolved

Recommendationsofthe Committee

• 56.TheCommitteerecommendedtthat

TheAccounting Officer should ensure timelysubmission of accounting documentation required for audit verification during the audit asper theprovisions of Section 31(4) of thePublicAuditAct,2015.

Lack of Enabling LegislationEstablishing theMortgageScheme

57. Review of information and documents provided for audit revealed that the Judiciary Mortgage Scheme didnothave an enablinglegislation establishing theFund.Managementdidnot provide a satisfactory explanation for the operationalization of the Fund without the enabling legislation.In the circumstances,the legality,name of the fund and its operations could not be confirmed.

Submissions of the Accounting Officer

• 58.TheAccountingOfficer that—
• It is true that there is no enablinglegislationfor the scheme which hasbeen operating under a Memorandum of UnderstandingexecutedinNovember2011between theJudiciary and the scheme administrator.However,theJudicial Service Commission has now constituted a team todevelopalegislativeframeworkforthescheme.

Findings and Observations of the Committee

• 59.TheCommitteeobserved that
• (i) The Fund operated without regulations
• (ii)thelegality,name of thefund and its operations could not be confirmed.
• (iii)Thematteris unresolved.

RecommendationsoftheCommittee

• 60.TheCommitteerecommended that:
• Within six months of the adoption of this report, the Accounting Officer must develop regulations to operationalise the Fund and submit the same to the Auditor General for auditverification.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

2.4.Examinationof theAuditor General reportsJudiciaryCarloan andMortgageScheme Fundforthefinancialyear2014/2015

1.InaccuraciesintheFinancialStatements

61. The statement of financial performance did not disclose operating expenses incurred during the year including bank charges, commissions and expenses paid to the Scheme administrator. In addition, analysis of loan disbursement and repayment over the years was not provided in the notes to the financial statements. In the circumstances, the accuracy and completeness of thefinancialstatementscouldnotbeconfirmed.

Submissions of theAccounting Officer

62.The Accounting Officer submitted that It is corrcct the statement of financial performance did not disclosc thefigures of bank chargcs, commissions and expensespaid tothe scheme administrator.Thesewere retained by the scheme administrator.Thescheme administrator maintainsfinancialrecords and only discloses theloansdisbursed and thebankbalances.The MOUprovided for a 3% administrationfees which the scheme administrator was to charge.We however engaged the scheme administrator who are now disclosing the administration fees and other charges levied on the scheme as evidencedin theFinancialStatements of2022/2023and alsoannexed.Theloan disbursement andrepayment schedules are available andwereprovided tothe auditor and annexed.

FindingsandObservationsoftheCommittee

• i.There was nodisclosure for scheme administrator expenses &chargesfortheyear 2011/2012contrary toNational GovernmentPFMRegulations101(4).
• 63.TheCommitteeobserved that
• i.The loan disbursement and repayment schedules submitted were not admissable since theywere not certified as true copies.
• iii.The matter is unresolved.

RecommendationsoftheCommittee

• i.Within three months upon the adoption of this report theAccounting Officer must provide certified loan disbursements andrepayment schedules to the Auditor General forauditverification.
• 64.TheCommitteerecommendedthat
• ii.TheAccounting Officermustensure thatall financial statements complywith the financial reporting guidelines issued by the Public Sector Accounting Standard BoardinaccordancewithRegulation101(4)of thePublicFinance Management (National Government) Regulations,2015.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

2.Undisclosed Interest on Mortgage Loans Disbursed

• 65.The statement offinancial performance and as disclosedinNote3 to theFinancialStatements reflects Interest income amount of Kshs.31,686,278. The amount was in respect of accrued interest on bank balances. However, interest earned from mortgage loans was not disclosed in the financial statements. Further, amortization schedules for the mortgage loans to confirm interest earned during the year were not provided for audit verification. In the circumstances, the accuracy and completeness of interest income amounting toKshs.31,686,278 could not be confirmed.

SubmissionsoftheAccountingOfficer

• 66.TheAccountingOfficersubmitted that— Interest on undisbursed funds is correctly disclosed in our financial reports as cited by the audit,an amount of Kshs.31,686,278.This is the amount earned onunutilised funds and the samegoesbacktotherevolvingfund.The amortizationformswhich indicate theinterest and other charges are alsomaintained and provided by the scheme administrator.The charges indicated in the schedules are due tothe scheme administrator.Attached is a sampleof the amortizationschedulesthatwereprovidedfor audit.

FindingsandObservationsoftheCommittee 67.TheCommitteeobservedthat

• i. Duringthefinancialyear therewasno disclosureforinterestearnedon the loansdisbursed.
• ii. TheAmortization scheduleswere not provided for auditverification.
• ili. The accounting officer was in breach of Section 66 (b) and (g) and Section 68 (1),(2)(c)of thePFMAct,2015.
• iv. Thematteris unresolved.

RecommendationsoftheCommittee 68.The Committeerecommendedthat

• i. Within three months upon adoption of this report the Accounting Officer and the SchemeAdministratorshoulddisclose theinterest earnedfromthemortgageloans and provide the amortization schedules totheAuditor-General for auditverification.
• ii. The Accounting Officer ensures that all applicable accounting and financial controls, systems,standards,laws,andprocedures arefollowedin thepreparationofAnnual Reports andfinancial statements andin accordancewith the standardsprescribedby the Public Sector Accounting Standards Board and in compliance with regulation 101 (4) of the public finance management (National Government) Regulations, 2015.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

3.Cash and Cash Equivalent

• 69.TheStatement of financial position and as disclosed inNote 4 to thefinancial statements reflects cash and cash equivalents balance ofKshs.731,813,479 as at 30June 2015.Thebalance includes current account and fixed deposit account balances of Kshs.11,275,458 and Kshs. 720,538,021 respectively.However,bank reconciliations,certificates of fixed deposit account and cash books were not provided to support the balance. In the circumstances, the accuracy and completeness of cash and cash equivalents amounting to Kshs. 731,813,479 could not be confirmed.

Submissions of theAccountingOfficer

audit inviewofthescheme administratormaintainingthebooks of account.Wehowever have extracted thecashbooks andbankreconciliation and samplesattached.

• 70.TheAccounting Officer submitted that It is true the Cash book and the bank reconciliation had not becn prepared at the time of thc

Findingsand Observationsof theCommittee

• (i)Bankcertificates forfixedDepositswerenot provided forauditverification
• 71.TheCommitteeobservedthat
• (ii)The accuracyand completenessofcashandcashequivalentsbalance amounting of Kshs.731,813,479 could not be confirmed.
• (iii)Thematterisunresolved.

RecommendationsoftheCommittee

Within three months of the adoption of this report, the Accounting Officer to submit bank reconciliations,certificateoffixeddepositaccount andcashbooks tosupportthebalance amounting toKshs.731,813,479 for audit verification.

The Committeerecommends that

4.LateSubmission ofFinancial Statements

72. The financial statements for the year ended 30 June, 2015 were submitted for audit on 1 February, 2023.This was contrary to Section 68(2) (k) of the PublicFinance Management Act, 2012whichrequires accounting officerfor a national government entity,ParliamentaryService Commission and the Judiciary to prepare annual financial statements for cach financial ycar within months after the end of the financial year and submit them to the Auditor- Genera! for audit.In the circumstances,Management wasin breach of the law.

Submissions of theAccounting Officer

73.TheAccounting Officer that The observation is correct.We did not prepare thefinancial accounts and we acknowledge the omission.We shallendeavor to adheretothestatutorytimelines forsubmittingthefinancial statementsfor thescheme.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

Findings and Observations of the Committee

• 74.The Committee observed that
• i. The Accounting Officer was in breach of Section 68(2)(k) of thePFM Act.
• ii. Thematteris unresolved

RecommendationsoftheCommittee

• 75.TheCommitteerecommendedthat

The Accounting Officer should ensure timely submission of accounting documentationrequiredfor auditverificationduring theaudit asper theprovisions of Section 31(4) of thePublic Audit Act,2015.

5.Lack of Enabling LegislationEstablishing theMortgageScheme

76. Review of information and documents provided for audit revealed that the Judiciary Mortgage provide a satisfactory explanationfor the operationalization of theFundwithout the enabling legislation. In the circumstances, the legality, name of the fund and its operations could not be confirmed.

Submissions of theAccounting Officer

• 77.TheAccountingOfficersubmitted that

It is true that thereisnoenablinglegislationfor theschemewhich has been operatingunder a MemorandumofUnderstandingexecutedinNovember2011between theJudiciary and the scheme administrator.However,theJudicial ServiceCommissionhas nowconstituted a team to developalegislativeframeworkfor thescheme.

Findings and Observations of the Committee

• 78.TheCommitteeobservedthat
• (i)TheFund operatedwithoutregulations
• (ii)the legality,name of thefund and its operations could not be confirmed.
• (ii)The matteris unresolved.

Recommendationsofthe Committee

• 79.The Committeerecommended that

Within six months of the adoption of this report, the Accounting Officer must develop regulationsto operationalisetheFund andsubmit thesametotheAuditor General for

• auditverification.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

2.5.Examination of theAuditor GeneralreportsJudiciary Carloan and MortgageScheme Fundforthefinancialyear2015/2016

1.Inaccuraciesin theFinancialStatements

80. The statement of financial performance did not disclose operating expenses incurred during the year including bank charges, commissions and expenses paid to the Scheme administrator. In addition, analysis of loan disbursement and repayment over the years was not provided in the notes to the financial statements.In the circumstances,the accuracy and completeness of thefinancial statementscould notbeconfirmed.

Submissions of the Accounting Officer

81. The Accounting Officer submitted that; It is correct the statement of financial performance did not disclose thefigures of bank charges, commissionsand expensespaid to the scheme administrator.Thesewereretainedby the schemeadministrator.Thescheme administratormaintainsfinancialrecords andonlydiscloses theloansdisbursed and thebankbalances.TheMOUprovided for a3% administrationfees which the scheme administrator was to charge.Wehowever engaged thescheme administrator who are now disclosing the administration fees and other charges levied on the scheme as evidencedin theFinancialStatements of2022/2023and annexed.Theloan disburscment and

repayment schedules are available and wereprovided to the auditor and annexed

FindingsandObservationsoftheCommittee

• 82.TheCommitteeobservedthat
• i.There was no disclosure for scheme administrator expenses & charges for theyear 2011/2012contrarytoNational GovernmentPFMRegulations101(4).
• iii. The matter is unresolved.
• i.The loan disbursement and repayment schedules submitted were not admissable sincetheywerenot certified as true copies.

RecommendationsoftheCommittee

83.The Committeerecommended that

• i.Within three months upon the adoption of this report the Accounting Officer must providecertifiedloandisbursementsandrepaymentschedulestotheAuditor Generalforauditverification.
• i.TheAccounting Officer must ensure thatall financial statements comply with the financial reporting guidelines issued by the Public Sector Accounting Standard Board inaccordancewithRegulation101(4)of thePublicFinanceManagement (National Government) Regulations,2015.

2.Undisclosed Interest on Mortgage Loans Disbursed

• 84.The statement offinancial performance and as disclosed inNote3 to theFinancial Statements reflects Interest income amount of Kshs.27,644,646. The amount was in respect of accrued interest on bank balances. However, interest earned from mortgage loans was not disclosed in the financial statements.Furthermore,amortization schedules for the mortgage loans to confirm interest earned during the year were not provided for audit verification. In the circumstances,the accuracy and completeness of interest income amounting to Kshs. 27,644,646 for the year ended 30 June 2016 could not be confirmed.

SubmissionsoftheAccountingOfficer

• 85.TheAccountingOfficersubmitted that Interest on undisbursed funds is Kshs. 27,644,646.This is the amount earned on unutilised funds and the same goesback to the revolvingfund.The amortizationforms which indicate theinterest and other charges are alsomaintained andprovided by thescheme administrator. Thechargesindicated in thescheduleswere due to the scheme administrator.Amortization
• scheduleswereprovidedfor audit.

FindingsandObservationsoftheCommittee

86.TheCommitteeobserved that

• i. During thefinancialyear therewasnodisclosureforinterestearnedon the loans disbursed.
• ii. TheAmortizationscheduleswerenotprovided for auditverification.
• ili. The accounting officer was in breach of Section 66 (b) and (g) and Section 68 (1),(2)(c)of thePFM Act,2015.
• iv. Thematterisunresolved.

RecommendationsoftheCommittee 87.TheCommitteerecommendedthat

• i.Within three months upon adoption of this report the Accounting Officer and the SchemeAdministratorshoulddisclose theinterest earnedfromthemortgageloans and provide the amortizationschedules to theAuditor-General for auditverification.
• ii.The Accounting Officer ensures that all applicable accounting and financial controls, systems,standards,laws,andproceduresare followed inthepreparation ofAnnual Reports andfinancialstatementsand in accordancewith thestandardsprescribed by the Public Sector Accounting Standards Board and in compliance with regulation101 (4) of the public finance management (National Government) Regulations, 2015.

3.Unsupported Cashand CashEquivalent

• 88.TheStatementoffinancialposition and asdisclosedinNote 4to thefinancial statements reflects cash and cash equivalents balance of Kshs.1,066,097,299 as at 30June 2016.However, the balance reflected in Note 4 includes only fixed deposit account balances of Kshs.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

1,066,097,299 while current account was reflected at nil balance.Further, bank rcconciliations, certificates offixed deposit account and cashbookswerenotprovided to support thebalance. In the circumstances, the accuracy and completeness of cash and cash equivalents amounting toKshs.1,066,097,299 as at 30 June 2016could not be confirmed.

SubmissionsoftheAccountingOfficer

• 89.TheAccountingOfficersubmitted that It is true the Cash book and the bankreconciliation had notbeenprepared at the time of the audit in view of the scheme administrator maintaining thebooks of account.Wehowever have cxtracted the cashbooks and bankreconciliation and samples attached in theManagement responses.

FindingsandObservationsoftheCommittee

• 90.TheCommitteeobserved that
• (i)BankcertificatesforfixedDepositswerenotprovided for auditverification
• (ii)Theaccuracyand completeness of cash and cash equivalentsbalanceamountingof Kshs.1,066,097,299 could notbe confirmed.
• (ii)Thematteris unresolved.

RecommendationsoftheCommittee

• TheCommitteerecommendsthat-

Within three months of the adoption of this report, the Accounting Officer to submit bank reconciliations,certificate of fixed deposit account and cash books to support the balance amounting toKshs.1,066,097,299 for audit verification

LateSubmissionofFinancialStatements

91. The financial statements for the year ended 30 June,2016 were submitted for audit on 1 February,2023.This was contrary to Section 68(2) (k) of the Public Finance Management Act, 2012 which requires accounting officer for a national government cntity, Parliamentary Service Commission and the Judiciary to prepare annual financial statements for each financial year within months after the end of thefinancialyear and submit them to the Auditor-General for audit. In the circumstances, Management was in breach of the law.

SubmissionsoftheAccountingOfficer

92. The Accounting Officer submitted the following; The observation is correct.We did not prepare thefinancial accounts and we acknowledge the omission.We shall cndeavor to adhere tothe statutorytimelinesfor submitting thefinancial statementsforthescheme.

FindingsandObservationsoftheCommittee

• 93.The Committeeobserved that
• i. The Accounting Officerwas inbreach of Section 68(2)(k) of the PFM Act.
• ii. Thematterisunresolved

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

RecommendationsoftheCommittee 94.TheCommitteerecommendedthat

The Accounting Officer should ensuretimelysubmissionofaccounting documentationrequiredfor auditverification duringthe audit aspertheprovisions ofSection31(4)ofthePublicAuditAct,2015.

4.Lack of Enabling Legislation Establishing the Mortgage Scheme

95. Review of information and documents provided for audit revealed that the Judiciary Mortgage Scheme did not have an enabling legislation establishing the Fund. Management did not provide a satisfactory explanation for the operationalization of the Fund without the enabling legislation.In the circumstances,the legality,name ofthe fund and its operations could not be confirmed.

SubmissionsoftheAccountingOfficer

• 96.The Accounting Officer submitted that scheme administrator.However,theJudicial ServiceCommissionhasnowconstituteda team

It is true that there is no enablinglegislation for the scheme which has been operating under a Memorandum of Understanding executed inNovember 2011between theJudiciary and the to develop a legislativeframeworkfor the scheme.

FindingsandObservationsoftheCommittee

• 97.The Committeeobserved that
• (i)TheFund operatedwithoutregulations
• (ii) thelegality,name of the fund and its operations could not be confirmed.
• (iii)Thematterisunresolved.

RecommendationsoftheCommittee

• 98.TheCommitteerecommended that

Withinsixmonths of the adoptionof thisreport,theAccounting Officermustdevelop regulations tooperationalisetheFundandsubmitthe same totheAuditor General for auditverification.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

2.6.Examinationof theAuditor GeneralreportsJudiciary Carloan andMortgageScheme Fundforthefinancialyear2016/2017

1.InaccuraciesintheFinancial Statements

99. The statement of financial performance did not disclose operating expenses incurred during the year including bank charges, commissions and expenses paid to the Scheme administrator. In addition, analysis ofloan disbursement and repayment over theycars was not provided in the notes to the financial statements. In the circumstances, the accuracy and completeness of thefinancialstatementscouldnotbeconfirmed.

SubmissionsoftheAccountingOfficer

100.TheAccounting Officer submitted thatIt is correct the statement of financial performance did not disclose thefigures of bank charges, commissions and expenses paid tothe scheme administrator.These were retained by the scheme administrator.Thescheme administrator maintainsfinancialrecords and only discloses theloans disbursed and the bank balances.The MOU provided for a 3% administration fccs who are now disclosing the administration fees and other charges levied on the scheme as evidencedintheFinancialStatementsof2022/2023andalsoannexed.Theloandisbursement andrepaymentschedulesareavailableandwereprovidedtothe auditor andannexed.

FindingsandObservationsoftheCommittee

• 101.TheCommitteeobserved that
• i.Therewas no disclosureforscheme administrator expenses&chargesfor theyear 2011/2012contrarytoNationalGovernmentPFMRegulations101(4).
• ii.Theloan disbursementandrepaymentschedulessubmittedwerenot admissible since they were not certified as true copies.
• iii. The matter is unresolved.

RecommendationsoftheCommittee

• 102.TheCommitteerecommended that
• i.Within three months upon the adoption of this report the Accounting Officer must providecertifiedloandisbursementsand repaymentschedules tothe Auditor Generalfor auditverification.
• i.TheAccounting Officermust ensure that all financial statements comply with the financialreportingguidelinesissuedby thePublicSectorAccounting Standard BoardinaccordancewithRegulation101(4)of thePublicFinanceManagement (National Government) Regulations,2015.

2.Undisclosed Interest onMortgage LoansDisbursed

• 103.The statement of financial performance and as disclosed in Note 3 to the Financial Statements reflects Interest income amount of Kshs.13,025,919.However, interest earned from mortgage loans was not disclosed in the financial statements.Further, amortization schedules for themortgage loans to confirm interest earned during the year were not provided for audit verification.In the circumstances, the accuracy and completeness of interest income amounting toKshs.13,025,919 for theyear ended 30 June 2017 could not be confirmed.

Submissionsof theAccounting Officer

• 104.TheAccounting Officer submitted that—

Interest on undisbursed funds is correctly disclosed in our financial reports as cited by the audit,an amount of Kshs.13,025,919.This is the amount earned onunutilised funds and the samegoesback to therevolvingfund.The amortizationformswhichindicate theinterest and other charges are also maintained and provided by the scheme administrator.The charges indicatedin theschedulesareduetothescheme administrator.Attachedis a sampleof the amortizationschedulesthatwereprovidedforaudit.

FindingsandObservationsoftheCommittee

• 105.TheCommittee observed that
• i. Duringthefinancialyeartherewasnodisclosureforinterestearned on the loans disbursed.
• ii. TheAmortizationscheduleswerenotprovidedfor auditverification.
• ili. The accountingofficer was inbreach of Section66(b) and (g) andSection 68 (1), (2)(c) of the PFM Act,2015.
• iv. Thematterisunresolved.

RecommendationsoftheCommittee

• 106.TheCommitteerecommendedthat
• i.Within three months upon adoption of this report the Accounting Officer and the SchemeAdministratorshould disclose the interest earned from themortgageloans and provide the amortizationschedules to theAuditor-General for auditverification.
• ii.The Accounting Officer ensures that all applicable accounting and financial controls, systems,standards,laws,andproceduresarefollowedinthepreparationofAnnual Reports andfinancialstatementsand inaccordancewiththestandardsprescribedby thePublicSectorAccounting Standards Board and in compliance withregulation101 (4) of the public finance management (National Government) Regulations, 2015.

3.Unsupported Cash and CashEquivalent

• 107.TheStatement offinancialposition and as disclosed inNote 4 to thefinancial statements reflects cash and cash equivalents balance ofKshs.780,463,569 as at 30June 2017.The balance

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

includes current account and fixed deposit account balances of Kshs.1,944,780 and Kshs. 788,518,789respectively.However,bank reconciliations,certificates offixed deposit and cash books were not provided to support the balance. In the circumstances, the accuracy and completeness of cash and cash equivalents amounting toKshs.780,463,569 as at 30June 2017 couldnotbeconfirmed.

SubmissionsoftheAccountingOfficer

108.The Accounting Officer submitted that— It is true the Cash book and the bank reconciliation had not been prepared at the time of the audit in view of the scheme administrator maintaining the books of account.Wehoweverhave extracted the cashbooks andbankreconciliation and samples attached in theManagement response.

FindingsandObservationsoftheCommittee

• 109.The Committee observed that
• i. Bank certificates for fixed Deposits were not provided for audit verification
• ii. The accuracy andcompletenessof cash andcash equivalentsbalance amounting ofKshs.780,463,569could notbeconfirmed.
• iii. Thematteris unresolved.

RecommendationsoftheCommittee

• 110.TheCommitteerecommended that Within threemonthsofthe adoption ofthisreport,theAccountingOfficertosubmitbank

reconciliations,certificateoffixeddepositaccountandcashbookstosupportthebalance amountingtoKshs.780,463,569forauditverification

4.Late Submission ofFinancial Statements

• 111.The financial statements for the year ended 30 June,2017were submitted for audit on 1 February,2023.This was contrary to Section 68(2) (k) of thePublic Finance Management Act, 2012whichrequires accountingofficerfora national government entity,ParliamentaryService Commission and the Judiciary to prepare annual financial statements for each financial year withinmonths after the endof thefinancialyear and submit them to theAuditor-Generalfor audit. In the circumstances,Management was in breach of the law.

SubmissionsoftheAccountingOfficer

• 112.TheAccounting Officer submitted that— The observation is correct.Wedid not prepare thefinancial accounts andwe acknowledge the omission.We shall endeavor to adhere to the statutory timelines for submitting thefinancial statementsforthescheme.

FindingsandObservationsoftheCommittee

• 113.TheCommitteeobserved that
• i.TheAccounting Officer was in breach of Section68(2)(k)of the PFM Act.
• ii.The matter is unresolved.

RecommendationsoftheCommittee

• 114.TheCommitteerecommendedthat

The Accounting Officer should ensuretimelysubmission of accounting documentationrequiredfor auditverification during the audit asper the provisions of Section 31(4) of thePublicAudit Act,2015.

5.Lack ofEnablingLegislationEstablishing theMortgage Scheme

• 115.Reviewof information anddocumentsprovidedfor audit revealed that the Judiciary Mortgage Scheme did not have an enabling legislation establishing the Fund. Management did not provide a satisfactory explanationfor the operationalization of theFundwithout the enabling legislation.In the circumstances, the legality, name of the fund and its operations couldnotbeconfirmed.

SubmissionsoftheAccountingOfficer

• 116.TheAccountingOfficer submitted that

It is true that there is no enabling legislationfor the scheme which hasbeen operating under a Memorandum of Understanding executed in November 2011 between the Judiciary and the scheme administrator.However,theJudicial Service Commission has now constituted a team to develop alegislativeframeworkforthescheme.

FindingsandObservationsoftheCommittee

• 117.The Committeeobserved that
• (i)TheFundoperatedwithoutregulations
• (ii) the legality,name of the fund and its operations could not be confirmed.
• (iii)The matterisunresolved.

RecommendationsoftheCommittee

• 118.TheCommitteerecommendedthat

Within six months of the adoption of this report,the Accounting Officermust develop regulationstooperationalisetheFund andsubmitthesameto theAuditor General for auditverification.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

2.7.ExaminationoftheAuditorGeneralreportsJudiciaryCarloanandMortgageScheme Fundforthefinancialyear2017/2018

1.InaccuraciesintheFinancial Statements

• 119.7 The statement offinancial performance did not discloseoperatingexpensesincurred during the year including bank charges, commissions and expenses paid to the Scheme administrator. In addition, analysis of loan disbursement and repayment over the years was not provided in the notes to the financial statements.In the circumstances, the accuracy and completeness of thefinancialstatementscouldnotbeconfirmed.

Submissions oftheAccountingOfficer

• 120.The Accounting Officer submitted that It is correct thestatement offinancial performance did not disclosethefigures of bankcharges,

commissions and cxpenses paid to the scheme administrator.These were retaincd by the scheme administrator.Thescheme administratormaintainsfinancialrecordsandonlydiscloses theloans disbursed and thebankbalances.TheMOUprovidedfor a3% administrationfees which the scheme administrator was to charge. We however engaged the scheme administrator who are now disclosing the administration fees and other charges levied on the scheme as evidencedintheFinancialStatementsof2022/2023.Theloandisbursementandrepayment schedulesare availableandwereprovided totheauditor.

FindingsandObservationsoftheCommittee

• 121.The Committeeobserved that
• i.Therewasno disclosureforscheme administrator expenses&charges for theyear 2011/2012contrarytoNational GovernmentPFMRegulations101(4).
• ii. Theloandisbursementandrepaymentschedulessubmittedwerenotadmissable since theywerenotcertified as true copies.
• ii.The matter is unresolved.

RecommendationsoftheCommittee

• 122.TheCommitteerecommended that
• i.Within three months upon the adoption of this report the Accounting Officer must providecertifiedloandisbursementsandrepaymentschedulestotheAuditor Generalforauditverification.
• ii. TheAccountingOfficermustensurethatallfinancialstatementscomplywiththe financial reportingguidelines issuedby thePublicSectorAccounting Standard Board inaccordancewithRegulation 101(4)of thePublicFinanceManagement (National Government) Regulations,2015.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

2.Undisclosed Interest on Mortgage Loans Disbursed

• 123.The statement of financial performance and as disclosed in Note 3 to the Financial Statements reflectsInterest income amount ofKshs.9,611,785.However,interest earned from mortgage loans was not disclosed in the financial statements.Further, amortization schedules for themortgage loanstoconfirm interest earned duringtheyearwere not providedfor audit verification. In the circumstances, the accuracy and completeness of interest income amounting to Kshs. 9,611,785 for the year ended 30 June 2018 could not be confirmed.

Submissionsof theAccountingOfficer

• 124.TheAccountingOfficer submitted that
• Interest onundisbursed funds is correctly disclosed in our financialreports as cited by the audit,an amount of Kshs. 9,611,785.This is the amount earned on unutilised funds and the samegoesbacktotherevolvingfund.Theamortizationformswhichindicatetheinterest and other charges are also maintained and provided by the scheme administrator.The charges indicated in the schedules are due to the scheme administrator.Attached is a sample of the amortizationschedulesthatwereprovidedforaudit.

FindingsandObservationsoftheCommittee

• 125.The Committee observed that
• i. Duringthefinancialyeartherewasnodisclosureforinterestearnedon the loans disbursed.
• ii. The Amortization schedules were not provided for auditverification.
• ili. The accounting officer was in breach of Section 66 (b) and (g) and Section 68 (1),(2)(c)of thePFMAct,2015.
• iv. Thematterisunresolved.

RecommendationsoftheCommittee

• 126.TheCommitteerecommended that
• i.Within three months upon adoption of this report the Accounting Officer and the SchemeAdministratorshould disclose theinterest earned fromthemortgageloans and providetheamortizationschedulestotheAuditor-Generalforauditverification.
• ii.The Accounting Officer ensures that all applicable accounting and financial controls, systems,standards,laws,and procedures are followed in the preparation ofAnnual Reports andfinancial statementsand inaccordancewith thestandardsprescribedby the Public Sector Accounting Standards Board and in compliance with regulation 101 (4) of the public finance management (National Government) Regulations,2015.

3.Unsupported Cash and Cash Equivalent

• 127.The Statement of financial position and as disclosed in Note 4 to the financial statements reflects cash and cash equivalentsbalance ofKshs.592,992,639 as at 30June 2018.The balance includes current account and fixed deposit account balances of Kshs. 1,479,236 and Kshs.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

591,513,403 respectively.Howevcr,bank reconciliations,certificates of fixed deposit and cash books were not provided to support the balance for an account held at the National Bank of Kenya.In the circumstances, the accuracy and completeness of cash and cash equivalents amounting toKshs.592,992,639 as at 30 June 2018 could not be confirmed.

SubmissionsoftheAccountingOfficer

128.The Accounting Officer submitted thatIt is true the Cash book and the bank reconciliation had not been prepared at the time of the audit inviewof thescheme administrator maintaining thebooksof account.Wehoweverhave cxtracted the cashbooks andbankreconciliation and samples attached in theManagement responses.

FindingsandObservationsoftheCommittee

• i.Bank certificates for fixed Deposits were not provided for audit verification
• 129.The Committee observed that
• ii. The accuracyandcompleteness ofcash and cashequivalentsbalanceamounting ofKshs.592,992,639couldnotbeconfirmed.
• iii. Thematterisunresolved.

RecommendationsoftheCommittee

TheCommitteerecommendedthat

• 130.Within three months of the adoption of thisreport,theAccounting Officer to submit bankreconciliations,certificateoffixed depositaccount andcashbooksto support the balance amounting toKshs.592,992639for auditverification

4.LateSubmission ofFinancial Statements

131. The financial statements for the year ended 30 June, 2018 were submitted for audit on 1 February, 2023.This was contrary to Section 68(2) (k) ofthePublic Finance Management Act, 2012which requires accounting officerfor a national government entity,Parliamentary Service Commission and the Judiciary to prepare annual financial statements for each financial year withinmonths after the end of thefinancialyear and submit them to theAuditor-General for audit.In the circumstances, Management was in breach of the law.

SubmissionsoftheAccountingOfficer

132.The Accounting Officer submitted that—The observation is correct.We did not prepare thefinancial accounts and we acknowledge the omission.We shall endeavor toadheretothe statutorytimelinesforsubmittingthefinancial statementsforthescheme.

Findingsand Observationsof theCommittee

• 133.TheCommitteeobserved that
• i. TheAccounting Officerwasinbreach of Section68(2)(k) of thePFM Act.
• ii. Thematterisunresolved.

RecommendationsoftheCommittee

• 134.The Committeerecommended that

The Accounting Officer should ensure timelysubmission of accounting documentationrequiredfor auditverification duringthe audit asper theprovisions of Section 31(4) of thePublic Audit Act, 2015.

5.LackofEnablingLegislationEstablishing theMortgageScheme

• 135.Reviewof information and documentsprovidedfor audit revealed that theJudiciary MortgageSchemedid not have an enablinglegislation establishing theFund.Management did enablinglegislation.In the circumstances,thelegality,name of thefund and its operations couldnotbeconfirmed.

Submissionsof theAccounting Officer

• 136.TheAccountingOfficersubmitted that scheme administrator.However,theJudicial Service Commissionhas now constituted a team

It is true that there isnoenablinglegislationforthe schemewhich hasbeen operatingunder a MemorandumofUnderstandingexecutedinNovember2011betweentheJudiciary and the to develop a legislative framework for the scheme.

Findingsand Observations of theCommittee

• 137.The Committee observedthat
• (i)TheFundoperatedwithoutregulations
• (ii)thelegality,name of thefund and its operations could notbe confirmed.
• (ili)Thematteris unresolved.

RecommendationsoftheCommittee

Within six months of the adoption of this report, the Accounting Officer must develop regulations to operationalise the Fund and submit the same to the Auditor General for

• 138.TheCommitteerecommendedthat auditverification.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

2.8.Examinationof theAuditor General reportsJudiciary Carloan and MortgageScheme Fundforthefinancialyear2018/2019

BasisforDisclaimer of Opinion

1.Inaccuracies in the Financial Statements

• 139.The statement offinancial performancedidnot disclose operating expenses incurred during theyearincludingbankcharges,commissions and expensespaid to theScheme administrator. In addition,analysis ofloan disbursement andrepaymentover theyearswasnotprovided in the notes to the financial statements. In the circumstances, the accuracy and completeness of thefinancialstatementscouldnotbeconfirmed.

SubmissionsbytheAccountingOfficer

• 140.The Accounting Officer submitted thatItiscorrect the statementoffinancialperformancedidnot disclose thefigures ofbank

charges,commissions and expenses paid to the scheme administrator.These were retained by the scheme administrator.Thc scheme administrator maintainsfinancialrecords and only disclosestheloansdisbursedandthebankbalances.TheMOUprovidedfora3% administrationfeeswhich thescheme administrator was to charge.Wehowever engaged the scheme administratorwhoarenowdisclosingthe administrationfeesandotherchargeslevied ontheschemeasevidencedintheFinancialStatementsof2022/2023andalsoinAnnex1. Theloandisbursementandrepaymentschedules are available andwereprovided to the auditor asshowninAnnex2.

FindingsandObservationsoftheCommittee

• 141.The Committeeobserved that
• i.There was no disclosure for scheme administrator expenses & charges for the year 2011/2012contrarytoNationalGovernmentPFMRegulations101(4).
• ii. Theloandisbursement andrepaymentschedulessubmittedwerenotadmissiblesince theywere not certified as true copies.
• ii.Thematterisunresolved.

RecommendationsoftheCommittee

• 142.TheCommitteerecommendedthat
• i.Within three months upon the adoption of thisreport the Accounting Officer must providecertifiedloandisbursementsandrepaymentschedules totheAuditor Generalforauditverification.
• ii.TheAccounting Officermust ensure that all financial statements complywith the financialreporting guidelines issued by the Public Sector Accounting Standard Board inaccordancewithRegulation 101(4)of thePublicFinance Management (National Government) Regulations, 2015.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

2.Undisclosed Interest onMortgage Loans Disbursed

• 143.The statement of financial performance and as disclosed in Note 3 to the Financial Statements reflects Interest income amount of Kshs.8,056,202.The amount was in respect of accrued interestonbankbalances.However,interest earnedfrom mortgageloanswas not disclosed in thefinancial statements.Furthermore, amortization schedulesfor themortgage loans to confirm interest earned during the year were not provided for audit verification. In the circumstances,the accuracy and completeness of interest income amounting to Kshs. 8,056,202 for the year ended 30 June 2019 could not be confirmed.

SubmissionsbytheAccountingOfficer

• 144.TheAccounting Officer submitted that

Interest on undisbursedfunds is correctly disclosed in ourfinancial reports asas citedby the audit,anamountofKshs.8,056,202.Thisisthe amountearnedonunutilisedfundsand the samegoes back to therevolving fund.The amortizationforms which indicate the interest and other charges are alsomaintained and provided by the scheme administrator.The charges indicatedintheschedulesareduetotheschemeadministrator.

FindingsandObservationsoftheCommittee

• 145.The Committee observed that
• i. During thefinancialyear therewasno disclosureforinterestearnedonthe loansdisbursed.
• ii. The Amortization scheduleswere notprovided for auditverification.
• ili. The accounting officer was in breach of Section 66 (b) and (g) and Section 68 (1),(2)(c) of thePFM Act,2015.
• iv. Thematterisunresolved.

RecommendationsoftheCommittee

146.TheCommitteerecommended that

• i.Within threemonths uponadoption of this report the Accounting Officer and the SchemeAdministratorshould disclose theinterest earnedfromthemortgageloansand provide the amortization schedules to theAuditor-General for auditverification.
• ii. The Accounting Officer ensures that all applicable accounting and financial controls, systems, standards,laws,and procedures are followed in the preparation of Annual Reports and financial statements and in accordance with the standards prescribed by thePublicSectorAccounting StandardsBoard and in compliance with regulation101 (4) of the public finance management (National Government) Regulations, 2015.

3.Unsupported Cashand CashEquivalent

• 147.TheStatement of financial position and as disclosed inNote 4 to thefinancial statements reflects cash and cash equivalents balance ofKshs.712,291,341 as at 30June 2019.The balance includes current account and fixed deposit account balances of Kshs.2,345,308 andKshs.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

709,946,033 respectively. However, bank reconciliations, certificates of fixcd deposit and cash books were not provided to support the balancc. ln thc circumstances, the accuracy and completeness of cash and cash equivalents amounting toKshs.712,291,341 as at 30 June 2019 could notbeconfirmed.

Submissionsby theAccounting Officer

• 148.The Accounting Officer submitted that—It is true theCashbook and thebankreconciliation had notbeenprepared at the time of the

auditinviewofthescheme administratormaintainingthebooksofaccount.Wehoweverhave extractedthecashbooksandbankreconciliationandsamplesattachedintheManagement response.

Findingsand ObservationsoftheCommittee

• 149.The Committee observed that
• i. Bank certificates for fixed Deposits were not provided for audit verification
• ii. The accuracy andcompleteness ofcash and cash equivalentsbalanceamounting of Kshs.712,291,341could not be confirmed.
• ili. Thematteris unresolved.

RecommendationsoftheCommittee

• 150.The Committeerecommended that Within threemonths ofthe adoption ofthisreport,theAccountingOfficertosubmitbank reconciliations,certificateoffixed deposit account and cashbooks tosupport thebalance

amountingtoKshs.712,291,341forauditverification

LateSubmissionofFinancialStatements

• 151.The financial statements for the year ended 30June, 2019 were submitted for audit on 1 February,2023.This was contrary toSection 68(2) (k) of the Public Finance Management Act, 2012 which requires accounting officer for a national government entity, Parliamentary Service Commission and the Judiciary to prepare annual financial statements for each financial year withinmonthsafter theend of thefinancialyear andsubmit them totheAuditor-General for audit.In the circumstances,Management was in breach of the law.

Submissionsby theAccountingOfficer

152. The Accounting Officer submitted that The observation is correct.Wedid not prepare thefinancial accounts and we acknowledge the omission.We shall endeavor to adhereto the statutorytimelines for submitting thefinancial statementsforthescheme.

Findingsand Observations of theCommittee

• 153.The Committee observed that
• i. TheAccountingOfficerwas inbreachofSection68(2)(k)of thePFMAct.

ii. The matter is unresolved

RecommendationsoftheCommittee

154. The Committeerecommendedthat:

The Accounting Officer should ensure timely submission of accounting documentationrequired for auditverification during the auditasper theprovisions ofSection31(4)of thePublicAuditAct,2015.

• 4.Lack of Enabling LegislationEstablishing theMortgage Scheme

155. Review of information and documents provided for audit revealed that the Judiciary MortgageSchemedid not have an enablinglegislation establishing theFund.Management did notprovide a satisfactoryexplanationfor the operationalizationof theFundwithout the enabling legislation. In the circumstances,the legality, name of the fund and its operations could notbe confirmed.

Submissionsby theAccounting Officer

156.The Accounting Officer submitted that

It is true that there is no enabling legislature for the scheme, but the Judicial Service Commissionhasconstituted ateam toreviewtheMoUbetweentheschemeadministratorand the Judiciary that has been the guiding policy document. The guiding principle has been the MOU thatwehavewith the administrator,andwenote theinadequaciesin theMOU that do not provide for financial reporting.

FindingsandObservationsoftheCommittee

• 157.TheCommitteeobserved that
• (i)TheFund operatedwithoutregulations
• (ii) thelegality,name of thefund and its operations could not be confirmed.
• (iii)Thematterisunresolved.

RecommendationsoftheCommittee

158.The Committeerecommended that

Within six months of the adoption of this report, the Accounting Officer must develop regulations to operationalise theFund andsubmit the same to theAuditor General for auditverification.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

2.9.Examinationof theAuditorGeneral reportsJudiciaryCarloan andMortgageScheme Fundforthefinancialyear2019/2020

Basis forDisclaimer of Opinion

1.Inaccuracies in the Financial Statements

159. The statementoffinancialperformance didnot disclose operatingexpensesincurred during theyearincluding bank charges,commissions and expenses paid to theScheme administrator. In addition, analysis of loan disbursement and repayment over the years was not provided in the notes to the financial statements. In the circumstances, the accuracy and completeness of thefinancial statements could not be confirmed.

SubmissionsbytheAccountingOfficer

• 160.The Accounting Officer submitted that It is correct the statement of financial performance did not disclose thefigures of bankcharges,

commissionsandexpensespaid totheschemeadministrator.Thesewereretainedbythc scheme administrator.The scheme administratormaintainsfinancial records and only discloscs theloans disbursed and thebankbalances.TheMOUprovidedfora3% administrationfees which thescheme administrator was to charge.We however engaged the scheme administrator who are now disclosingthe administration fees and other chargeslevied on the scheme as evidencedintheFinancialStatementsof2022/2023.Theloandisbursementandrepayment schedulesareavailableandwereprovidedtotheauditor

FindingsandObservationsoftheCommittee

• 161.TheCommitteeobserved that
• i.Therewasno disclosure for scheme administrator expenses&charges for theyear 2011/2012contrarytoNational GovernmentPFMRegulations101(4).
• i.The loan disbursement and repayment schedules submitted were not admissible since theywere not certified as true copies.
• ii.The matteris unresolved.

RecommendationsoftheCommittee

• 162.The Committeerecommended that
• i.Within three months upon the adoption of this report the Accounting Officer must providecertifiedloandisbursementsandrepaymentschedules totheAuditor General for auditverification.
• ii.The Accounting Officer must ensure that all financial statements comply with the financial reportingguidelines issued by thePublic Sector Accounting Standard Board inaccordancewith Regulation101(4)of thePublicFinanceManagement (National Government)Regulations,2015.

2.Undisclosed Interest onMortgageLoansDisbursed

• 163.The statement of financial performance and as disclosed inNote 3 to the Financial Statements reflects Interest income amount of Kshs.12,504,513. However, interest earned from mortgage loans was not disclosed in the financial statements.Further, amortization schedules for the mortgage loans to confirm interest earned during the year were not provided for audit verification. In the circumstances, the accuracy and completeness of interest income amounting toKshs.12,504,513 for the year ended 30 June 2020 could not be confirmed.

SubmissionsbytheAccountingOfficer

• 164.TheAccountingOfficersubmitted that—;

Interest on undisbursed funds is correctly disclosed in our financial reports as as cited by the audit, an amount of Kshs.12,504,513.This is the amount earned on unutilised funds and the samegoes back to the revolvingfund.The amortizationforms whichindicate theinterest and other charges arealsomaintained and provided by the schemeadministrator.The charges indicatedintheschedulesareduetotheschemeadministrator.Sampleof theamortization scheduleswereprovidedforaudit.

FindingsandObservationsoftheCommittee

165.TheCommitteeobserved that

• i. Duringthefinancialyear therewasnodisclosure forinterest earned on the loans disbursed.
• ii. TheAmortization scheduleswerenotprovided for auditverification.
• iii. The accounting officer was in breach of Section 66 (b) and (g) and Section 68 (1), (2)(c) of the PFM Act,2015.

4. iv.The matter is unresolved.

RecommendationsoftheCommittee

• 166.TheCommitteerecommendedthat
• i.Within three months upon adoption of this report the Accounting Oficer and the SchemeAdministrator should disclose theinterest earned from themortgageloans and provide the amortization schedules to the Auditor- General for audit verification.
• ii. The Accounting Officer ensures that all applicable accounting and financial controls, systems, standards, laws, and procedures are followed in the preparation of Annual Reports andfinancialstatementsand in accordancewiththestandardsprescribedby thePublicSectorAccountingStandardsBoard and in compliancewith regulation101 (4) of the public finance management (National Government) Regulations, 2015.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

3.Unsupported Cash and Cash Equivalent

• 167.TheStatement of financial position and as disclosed in Note 4 to the financial statements reflectscashandcash equivalentsbalanceofKshs.1,020,946,351as at 30June2020.The balance includes current account and fixed deposit account balances of Kshs.3,206,663 and Kshs.1,017,739,688respectively.However,bank reconciliations, certificates of fixed deposit and cash books were not provided to support the balance for an account held at the National Bank of Kenya. In the circumstances, the accuracy and completeness of cash and cash equivalents amounting toKshs1,020,946,351 as at 30June 2020 could not be confirmed.

SubmissionsbytheAccountingOfficer

168.TheAccountingOfficer submitted that It is true the Cashbook and the bank reconciliation had not been prepared at the time of the auditinviewoftheschemeadministrator maintainingthebooksof account.Wehoweverhave extracted thecashbooks andbankreconciliation and samples attached intheManagement Responses.

FindingsandObservationsoftheCommittee

• 169.The Committee observed that
• i. BankcertificatesforfixedDepositswerenotprovided for auditverification
• ii. Theaccuracyandcompletenessofcashandcashequivalentsbalance amounting ofKshs1,020,946,351couldnotbeconfirmed.
• ili. Thematterisunresolved.

RecommendationsoftheCommittee

170.The Committeerecommended that Withinthreemonths of the adoption ofthis report,theAccounting Officerto submit bank reconciliations,certificateof fixed deposit account and cashbookstosupport thebalance amountingtoKshs1,020,946,351auditverification

4.LateSubmissionofFinancialStatements

171. The financial statements for the year ended 30 June, 2020 were submitted for audit on 1 February,2023.This was contrary to Section 68(2) (k) of the Public Finance Management Act, 2012 which requires accounting officer for a national government entity, Parliamentary Service Commissionand theJudiciary toprepare annualfinancial statementsfor eachfinancialyear withinmonths after the endof thefinancial year and submit them to the Auditor-General for audit.In the circumstances,Management wasinbreach of thelaw.

SubmissionsbytheAccountingOfficer

• 172.The Accounting Officer submitted that— The observation is correct.We did not prepare thefinancial accounts and we acknowledge the omission.Weshallendeavor to adheretothestatutorytimelinesforsubmittingthefinancial statementsfor thescheme.

Findings and Observationsof the Committee

• 173.The Committee observed that
• i. TheAccounting Officer was in breach of Section 68(2)(k) of thePFMAct.
• ii. Thematter is unresolved

RecommendationsoftheCommittee

• 174.TheCommitteerecommendedthat

The Accounting Officer should ensure timelysubmission of accounting documentation required for audit verification during the audit as per the provisions of Section 31(4) of the Public Audit Act,2015.

• 5.Lack of Enabling LegislationEstablishing theMortgage Scheme
• 175.Review of information and documents provided for audit revealed that the Judiciary Mortgage Scheme did not have an enabling legislation establishing the Fund. Management did notprovide asatisfactoryexplanationfor theoperationalization of theFundwithout the enabling legislation.In the circumstances,the legality, name of the fund and its operations couldnotbeconfirmed.

SubmissionsbytheAccounting Officer

• 176.TheAccounting Officer submitted that
• It is true that there is no enabling legislature for the scheme but the Judicial Service Commissionhasconstituted a teamtoreviewtheMOUbetween thescheme administrator and the Judiciary that has been the guiding policy document. The guiding principle has been the MOU thatwehavewith the administrator andwenote theinadequaciesintheMOU that do

not provideforfinancial reporting

Findings and Observations of the Committee

• 177.The Committee observedthat
• i. The Fund did not have an operational Legislation but a guiding policybetween theschemeadministratorandtheJudiciary
• ii. Therewere on going plans to reviewtheMoUwith thebank.
• iii. The draft regulations of the Judiciary Mortgage Scheme were developed in 2012 but have not been operationalized.
• iv. The matteris unresolved.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

2.10.Examination oftheAuditor General reportsJudiciaryCarloan and MortgageScheme Fundforthefinancialyear2020/2021

BasisforDisclaimer of Opinion

1.Inaccuraciesin theFinancialStatements

• 178.The statement of financial performance did not disclose operating expenses incurred during theyear including bank charges, commissions and expenses paid to the Scheme administrator. In addition, analysis ofloan disbursement and repayment over the years was not provided in the notes to the financial statements.In the circumstances,the accuracy and completeness of thefinancial statementscouldnotbeconfirmed.

SubmissionsbytheAccounting Officer

• 179.The Accounting Officer submitted that

It iscorrect the statement offinancial performance did not disclose thefigures ofbank charges, commissions and cxpenses paid to the scheme administrator.These were rctained by the schemeadministrator.Theschemeadministratormaintainsfinancialrecords andonlydiscloscs theloans disbursed and thebankbalances.TheMOUprovided for a3% administrationfees which thescheme administrator wasto charge.Wehowever engaged thescheme administrator who arenowdisclosing the administrationfees andother charges leviedon the scheme as evidencedin theFinancial Statements of 2022/2023.Theloan disbursement and repayment scheduleswereprovidedtotheauditor.

FindingsandObservationsoftheCommittee

• 180.TheCommitteeobservedasthat
• i.There was no disclosurefor scheme administrator expenses&charges for theyear 2011/2012contrary toNational GovernmentPFM Regulations101(4).
• ii.The loan disbursement and repayment schedules submitted were not admissable sincetheywerenotcertifiedastruecopies.
• ii.The matter is unresolved.

RecommendationsoftheCommittee

• 181.TheCommitteerecommendedthat
• i.Within three months upon the adoption of this report the Accounting Officer must providecertifiedloandisbursements andrepaymentschedules totheAuditor Generalforauditverification.
• ii.The Accounting Officermust ensure that all financial statements complywith the financialreportingguidelines issued by the Public Sector Accounting Standard Board in accordance withRegulation 101(4)of thePublic Finance Management (National Government)Regulations,2015.

2.Undisclosed Interest on Mortgage Loans Disbursed

• 182.The statement of financial performance and as disclosed in Note 3 to the Financial Statements reflects Interest income amount of Kshs.19,030,368. However, interest earned from mortgage loans was not disclosed in the financial statements.Further,amortization schedules for the mortgage loans to confirm interest earned during the year were not provided for audit verification.In the circumstances,the accuracy and completeness of interest income amountingtoKshs.19,030,368couldnotbeconfirmed.

SubmissionsbytheAccountingOfficer

• 183.The Accounting Officer submitted that

Interest on undisbursedfunds is correctly disclosed in our financial reports as cited by the audit,an amount ofKshs.19,030,368.This is the amount earned onunutilisedfunds and the samegoesbackto the revolvingfund.The amortizationformswhichindicate theinterest and other charges are also maintained and provided by the scheme administrator.The charges indicatedintheschedules aredue tothescheme administrator.A sample of the amortization scheduleswereprovidedfor audit.

FindingsandObservationsoftheCommittee

• 184.The Committee observed that
• i. Duringthefinancialyear therewasno disclosureforinterestearned on the loansdisbursed.
• ii. TheAmortization scheduleswere not provided for auditverification.
• ili. The accounting officer was in breach of Section 66 (b) and (g) and Section 68 (1),(2)(c)of thePFMAct,2015.
• iv. The matter isunresolved.

RecommendationsoftheCommittee

185.TheCommitteerecommended that

• i.Within three months upon adoption of this report the Accounting Officer and the SchemeAdministratorshoulddisclose theinterest earnedfrom themortgageloans and provide the amortizationschedules to theAuditor-General for auditverification.
• ii. The Accounting Officer ensures that all applicable accounting and financial controls, systems, standards, laws, and procedures are followed in the preparation of Annual Reportsandfinancial statements and in accordancewith thestandardsprescribedby thePublicSectorAccountingStandardsBoard and incompliancewithregulation101 (4) of the public finance management (National Government) Regulations, 2015.

3.Unsupported Cashand CashEquivalent

• 186.TheStatement of financial position and as disclosed inNote 4to the financial statements reflects cash and cash equivalents balance of Kshs.1,458,958,842 as at 30 June 2021.The

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

balance includes current account and fixed deposit account balances of Kshs.92,600,716 and Kshs.1,366,358,126 respectively.However,bank reconciliations,certificates of fixed deposit and cash books were not provided to support the balance for an account held at theNational Bank of Kenya.In the circumstances,the accuracy and completeness of cash and cash equivalentsamountingtoKshs1,458,958,842asat30June2021couldnotbeconfirmed.

SubmissionsbytheAccountingOfficer

• 187.TheAccountingOfficer submitted that It is true theCashbook and thebankreconciliationhadnotbeenprepared atthe time of the

auditinviewoftheschemeadministratormaintainingthebooksofaccount.Wehoweverhave extracted thecashbooksandbankreconciliationandsamplesattachedintheManagement Responses.

Findings and Observations of the Committee

• 188.The Committee observed that
• i. BankcertificatesforfixedDepositswerenotprovidedforauditverification
• ii. The accuracyand completenessofcash andcash equivalents balance amountingofKshs1,458,958,842couldnotbeconfirmed.
• ili. Thematterisunresolved.

RecommendationsoftheCommittee

• 189.TheCommitteerecommendedthat

Withinthreemonthsofthe adoption of thisreport,theAccountingOfficertosubmitbank reconciliations,certificateoffixeddepositaccountandcashbookstosupportthebalance amountingtoKshs1,458,958,842auditverification

LateSubmissionofFinancialStatements

• 190.The financial statements for the year ended 30 June, 2020 were submitted for audit on 1 February,2023.This was contrary toSection 68(2) (k) of thePublicFinance Management Act, 2012which requires accounting officer for a national government entity,Parliamentary Service Commission and the Judiciary to prepare annual financial statements for each financial year within months after the end of thefinancialyear and submit them to theAuditor-General for audit.In the circumstances,Management was in breach of thelaw.

SubmissionsbytheAccountingOfficer

The observation is correct. We did not prepare the financial accounts and we acknowledge the omission.Weshallendeavor to adheretothestatutory timelinesfor submittingthefinancial

• 191.The Accounting Officer submitted that— statementsforthescheme.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

FindingsandObservationsoftheCommittee

• 192.TheCommitteeobserved that
• i。. TheAccounting Officer was in breach of Section 68(2)(k) of thePFMAct.
• ii. Thematterisunresolved

RecommendationsoftheCommittee

• 193.The Committeerecommended that The Accounting Officer should ensure timely submission of accounting

documentationrequiredforauditverificationduringtheauditaspertheprovisions of Section31(4)ofthePublicAuditAct,2015.

• 4.Lack of Enabling Legislation Establishing the Mortgage Scheme
• 194.Review of information and documents provided for audit revealed that the Judiciary Mortgage Scheme did not have an enabling legislation establishing the Fund. Management did notprovideasatisfactoryexplanationfor theoperationalizationof theFundwithout the enabling legislation.In the circumstances,the legality,name of the fund and its operations could notbe confirmed.

SubmissionsbytheAccountingOfficer

195.TheAccountingOfficersubmittedthat

It is true that thereisnoenablinglegislaturefor theschemebut theJudicialServiceCommission hasconstitutedateamtoreviewtheMOUbetweentheschemeadministratorandtheJudiciary that has been the guiding policy document. The guiding principle has been the MOU that we have with theadministrator andwenote theinadequaciesin theMOU that donot provideforfinancial reporting.

Findingsand Observationsof theCommittee

• 196.TheCommitteeobservedthat
• (i) The Fund operated without regulations
• (ii) the legality,name of the fund and its operations could not be confirmed.
• (ili)The matter isunresolved.

RecommendationsoftheCommittee

• 197.TheCommitteerecommendedthat

Within six months of the adoption of this report,theAccounting Officer must develop regulations to operationalise the Fund and submit the same to the Auditor General for auditverification.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

2.11.ExaminationoftheAuditor GeneralreportsJudiciaryCarloanandMortgageScheme Fundforthefinancialyear2021/2022

1.Inaccuracies in the Financial Statements

• 198.The statement offinancial performance did not disclose operatingexpensesincurred during theyear including bank charges,commissions and expenses paid to the Scheme administrator. In addition, analysis of loan disbursement and repayment over the years was not provided in the notes to the financial statements. In the circumstances, the accuracy and completeness of thefinancialstatementscouldnotbeconfirmed.

SubmissionsoftheAccountingOfficer

• 199.The Accounting Officer submitted that

Itiscorrectthestatementoffinancialperformancedidnotdisclosethefiguresofbankcharges, commissions andexpensespaidtothescheme administrator.Thesewereretained by the schemeadministrator.Thescheme administratormaintainsfinancialrecordsandonlydiscloses the loans disbursed and thebankbalances.TheMOU provided for a 3% administrationfees which thescheme administratorwas tocharge.Wehoweverengaged the scheme administrator whoarenowdisclosingthe administrationfeesand other chargesleviedonthescheme as evidenced intheFinancialStatementsof2022/2023 and also annexed.Theloan disbursement andrepaymentscheduleswereprovidedtotheauditor.

FindingsandObservationsoftheCommittee

• 200.The Committeeobservedthat
• i.Therewas no disclosure for scheme administrator expenses&chargesfor theyear 2011/2012contrarytoNationalGovernmentPFMRegulations101(4).
• ii.Theloan disbursement and repayment schedules submitted were not admissible since theywerenotcertified astrue copies.
• iii.The matteris unresolved.

RecommendationsoftheCommittee

• 201.TheCommitteerecommendedthat
• i.Within three months upon the adoption of this report the Accounting Officer must providecertifiedloandisbursementsandrepaymentschedules totheAuditor Generalforauditverification.
• ii.TheAccounting Officermustensure that all financial statements complywith the financial reporting guidelines issued by the Public Sector Accounting Standard Board inaccordancewithRegulation101(4)of thePublicFinanceManagement (National Government) Regulations,2015.

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

• 202.The statement of financial performance and as disclosed inNote 3 to theFinancial Statements reflects Interest income amount of Kshs. 19,884,109.However, interest earned from mortgage loans was not disclosed in the financial statements.Further, amortization schedulesfor themortgageloans toconfirm interest earned during theyear were not provided for auditverification.In the circumstances,the accuracy and completeness of interest income amountingtoKshs.19,884.109couldnotbeconfirmed.

SubmissionsoftheAccountingOfficer

• 203.TheAccountingOfficer submitted that—

Interest onundisbursedfunds is correctly disclosed in ourfinancial reports as cited bythe audit, an amount of Kshs.19,884,109.This is the amount earned on unutilised funds and the same goes back to therevolvingfund.The amortization forms which indicate theinterest and other charges are also maintained and provided by the scheme administrator. The charges indicated in theschedules are dueto thescheme administrator.A sample of the amortization scheduleswereprovidedforaudit.

FindingsanidObservationsoftheCommittee

204.TheCommitteeobservedthat

• i. Duringthefinancialyear therewasnodisclosureforinterestearnedonthe loans disbursed.
• ii. TheAmortizationschedules were notprovided for auditverification.
• ili. The accounting officer was inbreach of Section 66 (b) and (g) and Section 68 (1),(2)(c)of thePFM Act,2015.
• iv. Thematterisunresolved.

RecommendationsoftheCommittee

205.TheCommitteerecommended that

• i.Within three months upon adoption of this report the Accounting Officer and the SchemeAdministratorshould disclose theinterestearnedfrom themortgage loans and provide the amortizationschedules to theAuditor-General for auditverification.
• ii.TheAccounting Officer ensures that all applicable accounting and financial controls, systems, standards, laws, and procedures are followed in the preparation of Annual Reportsandfinancialstatementsandinaccordancewiththestandardsprescribedby the Public Sector Accounting Standards Board and in compliance with regulation 101 (4) of the public finance management (National Government) Regulations, 2015.

2.Unsupported Cashand CashEquivalent

• 206.The Statement offinancial position and as disclosed in Note 4 to thefinancial statements reflects cash and cash equivalents balance of Kshs.1,203,040,510 as at 30 June 2022.The balance includes current account andfixed deposit account balances of Kshs.4,968,062 and

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

Kshs. 1,198,072,448 respectively. However, bank reconciliations, certificates of fixed deposit and cash books were not provided to support the balance for an account held at the National Bank of Kenya. In the circumstances, the accuracy and completeness of cash and cash equivalents amounting toKshs.1,203,040,510as at30June2022could notbe confirmed.

Submissionsof theAccounting Officer

207.The Accounting Officer submitted that— It is true the Cash book and the bank reconciliation had not been prepared at the time of the auditinview of thescheme administrator maintaining thebooksof account.Wehoweverhave extracted the cash books and bankreconciliation and samples attached in theManagement Response.

Findings and Observationsof theCommittee

• 208.TheCommitteeobserved that
• i.Bank certificates for fixed Deposits were not provided for audit verification
• ii. The accuracy and completeness ofcashandcash equivalentsbalance amounting ofKshs1,203,040,510 couldnotbeconfirmed.
• ili. Thematteris unresolved.

RecommendationsoftheCommittee

209.The Committee recommended that Within three months of the adoption of this report, the Accounting Officer to submit bank reconciliations,certificateoffixeddeposit accountandcashbookstosupportthebalance amounting toKshs 1,203,040,510 auditverification

Lack of Enabling Legislation Establishing the Mortgage Scheme

• 210.Review of information and documents provided for audit revealed that the Judiciary Mortgage Scheme did not have an enabling legislation establishing the Fund. Management did notprovide a satisfactoryexplanationfor the operationalizationof theFundwithout the enabling legislation.In the circumstances,the legality,name of the fund and its operations couldnotbe confirmed.

Submissions of theAccounting Officer

• 211.The Accounting Officer submitted that— It is true that there is no enabling legislature for the scheme but the Judicial Service

CommissionhasconstitutedateamtoreviewtheMOUbetweenthescheme administratorand the Judiciary that has been the guiding policy document. The guiding principle has been the MOU thatwehavewith the administrator andwe note the inadequacies in theMOU that do not provideforfinancialreporting

Findingsand ObservationsoftheCommittee

SPECIALFUNDACCOUNTSCOMMITTEE-JUDICIARYCARLOANANDMORTGAGESCHEMEFUND

212.The Committee observed that

• (i)TheFundoperatedwithoutregulations
• (ii) thelegality,name of the fund and its operations could not be confirmed.
• (iii)The matterisunresolved.

RecommendationsoftheCommittee

• 213.TheCommitteerecommendedthat

Withinsixmonthsof the adoptionof thisreport,theAccountingOfficermust develop regulations tooperationalise theFund andsubmit the sametotheAuditor General for auditverification.

Signature

Date:

Qα/0712S

HON.FATUMAZAINABMOHAMMED,M.P.

CHAIRPERSON,SPECIALFUNDSACCOUNTSCOMMITTEE