Auditor general queries accuracy of Sh22.5billion Kenya Railways property due to illegal allocations

Kikuyu Railway Station that was allegedly grabbed by a private developer is under construction. [Photo by Boniface Okendo/Standard]

The Auditor General cannot confirm the accuracy of property and equipment worth Sh22.5 billion booked in the books of Kenya Railways because of illegal allocations of land.

Edward Ouko says in his latest report that the parastatal’s financial accounts reflect a balance of Sh27.5 billion in respect of property, plant, and equipment for the year ended June 2016.

However, as reported the previous year, various parcels of land have been allocated to private developers by either the Commissioner of Lands or local authorities without the consent of the corporation.

For instance, Mr Ouko found that land measuring approximately three acres at the Limuru railway station that had industrial plots was allocated to private developers.

“Similarly, private buildings have been put up on another piece of land measuring approximately two acres within Kikuyu railway station. In Mombasa parcels of land measuring approximately one and 0.75 acres adjacent to Mombasa railway station have been allocated to private developers without the corporation’s consent,” he says.

Ouko issued a qualified opinion on Kenya Railway’s financial statements. An auditor issues a qualified opinion when there are questions that have not been sufficiently answered. This means that Parliament may use the queries as the basis for investigation before they approve the report.

“Consequently, the accuracy of the property, plant, and equipment balance of Sh22.57 billion as at 30 June 2016 could not be confirmed,” the audit report adds.

The other issue raised was a Sh800 million deposit in Chase Bank, which at the time of the review had been placed in receivership.

Kenya Railways included in its current assets of Sh79.4 billion short-term deposits amounting to Sh2.7 billion, out of which Sh800 million was held as a fixed deposit with Chase Bank at a rate of 12.5 per cent per annum.

“However, Chase Bank was placed in receivership and Kenya Deposit Insurance Corporation (KDIC) appointed to assume the management and control of the bank on April 7, 2016. In the circumstances, the recoverability of the total of Sh800, 000,000 is doubtful,” the report said.

This may not hold given that Chase Bank’s troubles have since reduced, though it is not yet out of the woods.

Another query raised by the auditor is on the firm’s inventories. The report says Kenya Railways booked inventories worth Sh3.4 billion. However, no stocktaking had been carried out as at June 30, 2016.

“In the circumstances, it was not possible to confirm the accuracy of the total inventories balance of Sh3, 471,628,460 included in the current assets as at June 30, 2016,” said Ouko.

Included in the payables and accrued balance of Sh2.1 billion is Sh742 million relating to payables, which had been outstanding for over a year.

“No satisfactory explanation was provided as to why the same had remained outstanding for over a year,” Ouko added.

The audit also revealed that Sh4.8 million was surrendered by officers to the corporation’s cashier, but never banked.

Further scrutiny revealed that a total of Sh1.9 million was collected as museum revenue and surrendered to the cashier for banking.