Auditor General queries delay in hiring Kenya Power CEO

Auditor General Nancy Gathungu has raised concerns over Kenya Power's continued lack of a substantive chief executive officer (CEO) amid queries over governance issues at the utility firm.

Despite the firm going through the process to hire a replacement for Bernard Ngugi who quit in August last year, before the end of his tenure, it is yet to name a new boss.

Kenya Power hired a consultant in January this year to undertake the recruitment of a new chief executive.

The consultant - Deloitte - handed its report on the process to the board, including the recommended candidates. The Auditor General in a report auditing Kenya Power's financials for the year to June 2022 warned the exercise may not have been worth the resources since the company is yet to appoint a new chief executive.

"The company procured the consultancy for the provision of executive recruitment services of the managing director to Deloitte Consulting Ltd through a contract signed on January 27, 2022," said Ms Gathungu in the report that is set to accompany Kenya Power's annual report for the last financial year.

"The consultant on May 6, indicated that it had concluded the recruitment process and presented the results of screening, final interview and recommended candidates to the chairperson of the board of directors. The contractor was paid the full contract price of Sh2.99 million," she said.

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"However, no documentary evidence including reports of the consultant, evaluation results, recommendation of the consultant and board minutes and resolutions on the matter were provided for audit review."

Following the exit of Mr Ngugi, the company named Eng Rosemary Oduor as interim boss. In May this year, the firm replaced Ms Oduor with Eng Geoffrey Muli, also in an acting capacity.

Industry reforms

In August this year, the Energy Ministry during an update on power industry reforms said "the process of getting a new CEO for the company is almost complete." Kenya Power, while declining to comment on the issues raised by the Auditor General, explained that the report is still in its formative stages.

It said all the issues raised would be addressed in the final report that will accompany its annual report for the year to June 2022 which is set for publishing in the coming weeks.

"During (the audit) process, the OAG (Office of the Auditor General) may raise queries relating to, among others, business operations, compliance of policies and procedures, and financials which Kenya Power is required to respond to in a highly engaging and robust process," said the power utility firm. The audit report also raised issues with the number of meetings that the board had over the year.

The report notes that at the onset of the financial year, the board had in its approved calendar a total of 33 full board and committee meetings.

These, according to the Auditor General, exceeded a maximum of six recommended by the Office of the President, which in a March 2020 circular restricted full board meetings for State-owned entities to six every financial year.

The circular, however, provides for a process for more meetings should the board feel the need to meet more than the prescribed six times. The board and its five committees went on to have 89 meetings, higher than those in the approved calendar.

"During the year under review, the board held 89 committee meetings translating into a board meeting every four days... Out of the 89 board meetings, 45 were full board meetings while 44 were board committees' meetings," said Ms Gathungu.

The company had previously sought approval from the Cabinet Secretary (CS) for the additional meetings.

It explained that the ongoing sector-wide reforms as well as those within Kenya Power had necessitated a higher number of board meetings.

"The board only requested approval for excess meetings in the board calendar. In addition, the requests did not have justifications, source of funds and budget implications as required in the circular (by the Office of the President)," said the audit report.

"Further, six of the requests for extra meetings were approved by the Principal Secretary who is a member of the board instead of the CS."

The Auditor General noted that frequent meetings could see the board become operational in nature and interrupt the normal operations of the firm. She said there were instances where board committees were composed of more members than required.

Citing the code of governance for State corporations, the Mwongozo Code, she said the committees should not be more than four, but in the case of Kenya Power's board, there were five committees.

One committee should also limit its membership to at most, a third of the full board. In the case of Kenya Power where the board has nine directors, the committees should have a maximum of three directors.

"The audit committee had four members, while the strategy and innovation committee had five members," said the report.

In the audit report, the Auditor General also raised concerns about the company keeping suspended employees on full pay, contrary to Public Service Commission rules as well as Kenya Power's internal procedures.

Specifically, the report looked into 59 of the company's employees suspended to pave way for investigations on alleged procurement malpractices.

According to the Auditor General, the employees continued to receive full salaries, despite PSC and Kenya Power policies requiring the company to take away some of the benefits over the suspension period.

The firm had said it had asked a number of senior staff in its procurement department to step aside to give room for investigations as part of reforms that are being undertaken within the company as well as the sector.

The employees have since reported back to work after being cleared of any wrongdoing following the conclusion of the audit.