Rerec given five days to provide details on Sh8.59b audit queries

Rural Electrification and Renewable Energy Corporation CEO Dr.Rose Mkalama, addresses the press during the signing of an MOU regarding the implementation of rural electrification project between Lamu County and REREC,on 7th February 2024 at Kawi house located in South C, Nairobi. [Edward Kiplimo,Standard]

A parliamentary committee has given the Rural Electrification and Renewable Energy Corporation (Rerec) five days to provide the Auditor General with documents to clear Sh8.59 billion queries.

This was after a sitting on Tuesday was called off due to Rerec’s unpreparedness in addressing queries on unexplained and unreconciled variances of Sh8.59 billion in its books of accounts.

The National Assembly’s Public Investment Committee on Energy and Commercial Affairs directed that Rerec Chief Executive Officer Rose Mkalama, provides documents to the Nancy Gathungu-led team by Friday and subsequently appear before the committee next week, on Tuesday.

“You should not be washing your dirty linen before us. You must make sure the office of the Auditor General receives your final audit responses two days before you appear before this committee,” said committee chair David Pkosing.

Proceedings of the committee had come to a halt after the MPs were unable to interrogate Rerec’s books of accounts for the financial years 2022/23 to 2024/2025 after Mkalama tabled new documents not scrutinised by the Auditors. This prompted the committee to adjourn for two and a half hours – a period during which Rerec’s management and the Auditors took to go through the documents.

However, when the committee resumed its sitting at 2.30pm, the officers from the office of the Auditor General said it would be impossible to proceed due to the unavailability of some documents. They noted that for them to ascertain the information provided by Rerec, they needed more documents.

Ms Mkalama also asked for more time to avail the documents. “We have certain documents and schedules that we need to retrieve from the office to enable auditors to verify and clear some audit queries,” she said.

Key among the audit queries is the comparison of balances reflected in the financial statements with those in ledgers, which reflect unexplained and unreconciled variances of Sh8,595,681,628. In the Auditor General’s report for the period under review, Gathungu brought to the fore that financial statements reflect a computer’s net book value of Sh59,307,000 while re-computation revealed Sh55,483,000. This resulted in an unexplained and unreconciled variance of Sh3,824,000.

She also noted that the financial statements reflect intangible assets' net book value of Sh61,212,00 while re-computation revealed Sh37,981,000, resulting in an unexplained and unreconciled variance of Sh23,231,000. Gathungu also highlighted that the corporation’s Escrow US Dollar cash book was adjusted by Sh46,172,436 to cater for exchange rate gain, which was not reported as exchange gain in the statement of financial performance.

“In the circumstances, the accuracy and completeness of the financial statements could not be confirmed,” read the report in part. “Note 32 to the financial statements reflects capital work in progress balance of Sh16,252,778,000, which includes misclassified amounts of Sh419,290,463 for staff costs, Sh48,406,107 for rent and Sh20,521,543 for security of yards.”

At the same time, the Auditor General flagged an amount of Sh571,062,727 paid to three firms for land survey services to unspecified projects. “In addition, there was no evidence of budgeting for the services, their inclusion in the annual procurement plan and competitive procurement. This was contrary to Section 45(3)(a) of the Public Procurement and Asset Disposal Act, 2015, which states that all procurement processes shall be within the approved budget,” stated Gathungu.

“Further, the services were not supported by local services orders, contract agreements and reports by the three firms indicating the topographical maps and way leaves. In the circumstances, the regularity of the expenditure of Sh571,062,727 paid to three firms for land survey services could not be confirmed.”