Some Sh1 billion paid to Kenya Revenue Authority (KRA) in the 2017/18 financial year was missing from its bank accounts, an Auditor General report shows.
In his audit report on the taxman’s revenue statements, outgoing Auditor General Edward Ouko noted that the cash and cash equivalents captured in the taxman’s accountability statement did not reflect in its bank accounts.
The bank account with the largest discrepancy was the one at the National Bank of Kenya (NBK) where Sh348 million was missing.
The discrepancy is replicated in all KRA’s 51 bank accounts.
“Cash and cash equivalent in the revenue accountability statement reflected a balance of Sh22,734,898,175. However, a comparison of the closing balances/banks statement as of 30 June 2018 amounting to Sh21,830,770,108 revealed variance of Sh904,128,067 whose reconciliations could not be adequately explained as at the close of the audit,” said Ouko in the report.
In response, KRA noted that the variance of Sh904,128,067 arose due to the cut-off procedures at the year end, with adjustments incorporated to the certificate of balance figures to take care of the timing differences.
“There is always timing difference as of June 30 of each year between receipt of revenue for the year (such as 2017/18) at agent commercial banks and their transfer and receipt at the Central Bank,” said KRA Commissioner for Domestic Taxes Elizabeth Meyo.
At the same time, Ms Meyo defended KRA against reports by the Auditor General’s office that some county governments had been deducting taxes from salaries of their employees and members of the county assemblies (MCAs) but not remitting the money to the taxman.
According to an audit report, some county governments were holding onto nearly Sh13 billion that their employees contributed during the 2017/18 financial year in Pay As You Earn (PAYE) tax.
Meyo noted that counties paid directly to the Central Bank of Kenya (CBK) and the amount appeared as an advanced tax in the taxpayers’ ledger balances.
Meyo explained that all the 12.9 billion was payment remitted directly to Central Bank through the Integrated Financial Management Information System (Ifmis) - the State’s public electronic procurement system.
“Since counties, county assemblies, ministries, and state departments make all payments through Ifmis, which is not fully integrated with iTax, their ledgers are updated through a continuous manual reconciliation process to reflect the credits when the payments are sighted in the CBK statements,” she said. In the report on KRA’s finances, Mr Ouko said that of the Sh364 billion the taxman collected as income taxes in 12 months to June 2018, PAYE totaling Sh12.9 billion was not paid.
Without records to prove payment of the taxes, the top auditor did not give KRA’s financial statement a clean bill of health and instead slapped it with a qualified opinion.
A qualified opinion is given by an auditor in the absence of financial records or where there is insufficient cooperation from an institution’s management.
Ouko said there is a reflection of income tax PAYE collected amounting to Sh364,103,621,093 in the revenue accountability statements.
Due to lack of revenue receipts to support the reconciliation with the taxpayers’ ledger said Ouko, the completeness and accuracy of the PAYE revenue collection for the year ended June 30, 2018, could not be ascertained.