The Auditor General reported irregular expenditures worth 2.5 billion shillings at Kenya Power in the year to June, including an expenditure of 1.2 billion shillings to cover salaries without l Treasury approval.
The latest audit questions suggest the state-backed power company has yet to resolve supply issues that have cost senior executives their jobs in recent years.
The bulk of the petitions relate to a supplementary budget of 2.06 billion shillings which was passed by the company’s board in May but not approved by the Treasury.
These funds were intended to strengthen company systems, transformer repairs and personnel costs.
“On May 4, 2022, the Board approved a supplementary budget of 2.06 billion shillings, comprising 860 million shillings for system hardening, trace maintenance and transformer repairs and 1.2 billion shillings for staff cost shortfall by June 2022,” the Auditor General says. in a report that has not yet been made public.
“However, there is no indication that management has sought approval from the National Treasury for the supplementary budget provided by law. There is a likelihood of incurring unauthorized expenditures contrary to public finance management laws,” add the report seen by Business daily.
The Auditor General further accuses the company of breaching public procurement rules by leasing generators for its Mandera and Lodwar power stations through a direct tender to power producer Aggreko Kenya for 185 million shillings.
Kenya Power argued that it had acted within the framework of the Public Procurement and Disposal of Assets Act in launching the direct tender, citing the need to ensure standardization and compatibility of generators in the within its system.
The Auditor General points out, however, that the generators could also have come from other suppliers. Other issues raised by the auditor relate to an expenditure of 114 million shillings paid to a consultant to provide legal services for the renegotiation of power purchase agreements.
Since the consultants were not asked to provide a performance bond, the Auditor General states that failure to perform the contract would expose the power company to losses.
The electricity distributor is also accused of overpaying for insurance services by 50.6 million shillings, having paid 810.6 million shillings against an approved budget of 760 million shillings.
In addition to questions about spending, the auditor put Kenya Power in the hot seat for keeping 59 procurement officers who were suspended in November 2021 pending an investigation into their full salaries during the duration of their stay in the cold. The employees remained suspended until October this year, when they were returned to the fold following the conclusion of investigations by the electricity distributor.
Company rules state that they should have been paid full pay for the first two months of the suspension, half pay for the next two months, and no pay thereafter until their case was resolved.
“The company may have overpaid employees on suspension and on mandatory leave, resulting in overstated payroll costs and misuse of public funds,” the report said.
The audit queries have once again shed light on potential revenue leakages from the utility, largely linked to irregular purchases.
The company was on the Nairobi Stock Exchange’s list of most liquid companies a decade ago, with large cash reserves that have enabled it to roll out major plans to expand its distribution network.
However, a series of procurement scandals and accusations of holding dead stock ate away at the company’s reserves and reduced its profitability.
The company has overhauled its processes to stop cash leaks, as it seeks to turn the situation around.
Kenya Power’s net income increased 27.6 times to 3.8 billion shillings in the six months to December, from 138 million shillings a year earlier, thanks to higher electricity sales and lower operating costs.
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