Auditor General accused of overlooking fuel fraud

Auditor-General Nancy Gathungu takes notes after holding a consultative meeting with the Nyeri County Assembly Public Accounts Committee, on March 1, 2023. [Mose Sammy, Standard] 

A petitioner has claimed that the office of the Auditor General failed to report fraud involving former President Uhuru Kenyatta’s fuel subsidy programme.

Fraud examiner Bernard Muchere argues that a special audit by Nancy Gathungu team “avoided addressing the real issues on the oil price stabilisation contained in the Recurrent Supplementary Expenditure Estimates I&II of the financial years 2021/2022 and 2022/2023 in the Ministry of Petroleum and Mining.”

This and other claims are contained in a petition submitted to Parliament and copied to National Treasury and Office of the Auditor General that is due for tabling when the House resumes next week. Muchere faults the audit report of supplementary expenditures issued in November last year, claiming that Sh144 billion worth of fuel subsidies was siphoned out “to unnamed Financial Private Enterprises.”

The anti-fraud expert’s breakdown of the figures claims that Sh81 billion was “siphoned out” in the 2021/2022 financial year, with another Sh63 billion in the 2022/2023 financial year.

“The Ministry of Petroleum and Mining’s Recurrent Supplementary Estimates I&II for the financial year 2022/2023 and 2021/2022 were at the disposal of the Auditor General at the time of undertaking the special audit on the supplementary budget,” Muchere says of a requirement that the National Treasury notifies the Auditor General and the Controller of Budget of approvals for supplementary expenditures.

The report "avoided confirming to me and other Kenyans whether the subsidies to the unnamed Financial Private Enterprises of approximately Sh144.11 billion was lawful and effective as required of her under Article 229(6) of the Constitution,” adds Muchere.

In the report, Sh139 billion was incurred in the subsidy programme, introduced to cushion Kenyans during the Covid-19 pandemic, with an additional Sh5.3 billion paid as stabilisation for advance sales of local volumes. The Auditor General notes that the latter amount was paid out without an existing legal framework for advance payments to oil marketing companies.

“There was no evidence of recovery of this advance in subsequent payments to the oil marketing companies. Further, an amount of Sh2,205,915,489 was paid as administration costs for the period ended June 30, 2023. However, there was no justification for including the stabilisation administration costs in the pump price build-up,” concludes Gathungu.

The report recommended a legal framework to guide advance payments and provision of evidence of recovery of the advance payments. Muchere argues that the Auditor General's office failed to confirm whether the advance compensation was “lawful and effective” and did not recognise that fuel price stabilisation was governed under the Petroleum Development Fund Act, 1991, “which should have guided the audit.”

When The Standard contacted the office of the Auditor General we were advised to email the said allegations. However, none of the questions was answered.