Electricity agency loses Sh11m to employee fraud

The Rural Electrification Authority (REA) lost more than Sh11 million through well executed schemes by members of staff and companies contracted to supply goods and services.

An audit report prepared by Auditor General Edward Ouko reveals how a section of the agency employees assisted companies to swindle the authority of millions of shillings by forging various documents.

"Looting of REA coffers has been professionally executed and culprits benefited from them," said Mr Ouko.

The culprits used Local Purchase Orders (LPOs), goods received notes (GRNs), delivery notes, tender committee minutes and ghost companies to steal taxpayers' money. And after doing so they discarded some of the documents, making it difficult for the auditors to unearth the mess the agency was subjected to.

Ouko last week filed a report with a parliamentary watchdog committee revealing how the staff used forged documents, stolen cheque books and took advantage of poor record keeping to swindle cash and goods worth millions of shillings.

The auditor general has now recommended that three suppliers be blacklisted and barred from ever dealing with the authority because of the fictitious documents and the devious schemes that were used to fleece REA.

The Auditor General says REA has in most cases been forced to pay millions of shillings to ghost firms while some employees forged signatures of senior officials to withdraw cash from the authority's bank account at Co-operative Bank in Nairobi.

Ouko notes that between July 6 and 29, 2011, unused cheque leaves were stolen from the REA offices and used by two officers to withdraw Sh1.7 million on various dates in July 2012 from the REA bank account number 01136125016300 in Co-operative Bank of Kenya.

Two officers

The two officers, a Mr Musili and Raymond Kiambati were employed on contract and were also less than two months old in the organisation at the time. "The two allegedly forged the signatures of Enoch Onchwari, Chief Finance Manager, and David Rogoncho, Chief Manager, Design and thus managed to cash the cheques on July 6, 2011 and July 29, 2011 without detection," he added.

The audit report blamed the chief finance manager for his failure to prevent the theft of the cash despite enjoying a delegated responsibility from the authority's CEO to formulate and implement sound financial policies, procedures, strategies and systems that ensure effective controls and accountability of company resources.

"New employees should not be allowed to deal with sensitive financial and other significant transactions without supervision from a senior officer," he added.

A storekeeper was fired because of accepting and logging in as legitimate a fictitious receipt from Diesel Care Limited, which had failed to supply material worth $905,170 (Sh81 million). The transaction was detected early and reversed.

Ouko also revealed that on October 3, 2012, Sh5.5 million was paid by REA to a ghost supplier.