The Auditor General wants the legal framework governing the spending of public funds changed to prevent looting of taxpayers’ money when State agencies are responding to emergencies.
Auditor General Nancy Gathungu said that the response to the outbreak of the Covid-19 pandemic by governments globally – including Kenya – resulted in huge losses of public funds as State officials bypassed the normal public finance management systems.
She noted that this has brought about the need to review the public finance law to cater for spending during crises to reduce and eliminate money lost to corruption during such periods. The country lost billions in 2020 as the government responded to the outbreak, with reports that firms hired and paid to deliver such items as personal protective equipment did not deliver anything.
Other than the billions of shillings that were lost as government attempted to provide essential care, medicine and personal protective equipment following the outbreak of Covid-19, Gathungu noted that the country has had to deal with a number of emergencies in the recent past including the multiyear drought.
This, she noted, had given state agencies leeway to go around the public finance management (PFM) systems but also created loopholes for corrupt government officials and private businesses to steal public funds.
“Covid-19 was an eye-opener for audit institutions all over the world. In Kenya, (in addition to Covid-19) we have had drought, locust infestation and other crises. And what we have discovered is that when governments are responding to these crises, there is a tendency to override the controls already in place. There is also a tendency to ignore the PFM systems ad frameworks in the name of emergency response,” she said.
“We need to look at our PFM frameworks to strengthen them and ensure that embedded in them is emergency response. If we have that, then we will not need to go out of the systems to respond to emergencies, and we will not have funds getting lost or wasted because the public finance management systems will be strong enough to accommodate emergencies.”
Gathungu spoke on Monday at the sidelines of a meeting of auditors-general from Africa on illicit financial flows.
“As SAIs (Supreme Audit Institutions), through our audits on Covid-19 and other related crises, we have observed that responses to disasters increase the opportunities for corruption and illicit financial flows (IFFs) due to the more relaxed safeguards and override of controls,” she said, adding that illicit financial flows will remain a key impediment to Africa attaining its development goals.
“The prevention and disruption of IFFs is critical to sustainable development in Africa ... Indeed it is a matter of survival for Africa’s development to curb IFFs. In this meeting, experts will share further on the effects of IFFs on development in Africa.” In Kenya, The Auditor General has recently said she is undertaking a special audit on the money spent that the government has spent in the recent past when responding to emergencies.
The audit is expected to largely cover money spent without parliamentary approval under Article 223 of the Constitution. The Article gives the National Treasury leeway to spend on emergencies without having to first seek parliamentary approval but later get the approval through a Supplementary Budget.
It was using this leeway that Treasury spent Sh6 billion to buyout Helios Investments out of Telkom Kenya as well as Sh4 billion on the maize flour subsidy in the dying days of the Jubilee Administration.
The audit is also expected to cover the early days of the Kenya Kwanza government which also spent Sh10 billion to operationalise the Hustler Fund and another Sh4 billion for the fertiliser subsidy.
The special audit on government invoking Article of the Constitution is part of the agreement between Kenya and the International Monetary Fund (IMF) and the office of the Auditor General is expected to hand in the report by June 30 this year.