REPUBLIC OF KENYA KENYA NATIONAL AUDIT OFFICE REPORT OF THE AUDITOR–GENERAL ON THE FINANCIAL OPERATIONS OF THE COUNTY GOVERNMENT OF NAKURU AND ITS DEFUNCT LOCAL AUTHORITIES FOR THE PERIOD I JANUARY TO 30 JUNE 2013 TABLE OF CONTENTS 1.0 EXECUTIVE SUMMARY ......................................................................................... 1 Introduction .............................................................................................................................................. 1 1.1 Audit Objectives ....................................................................................................................... 1 1.3 KEY AUDIT FINDINGs ................................................................................................................ 2 1.3.1 Nakuru County Government Executive.................................................................................... 2 1.3.1.1 Failure to Take Over The Defunct Local Authorities ................................................................ 2 1.3.1.2 Utilization of Allocated Funds – Kshs.367,286,765.00 ............................................................. 2 1.3.1.3 Failure to Maintain a Fixed Assets Register ............................................................................. 2 1.3.1.4 Purchase of ICT Equipment – Kshs. 8,662,964.00 .................................................................... 2 1.3.1.5 Unaccounted for Fuel – Kshs.5,062,973.00 ............................................................................. 2 1.3.1.6 Unrecorded Purchase of Motor Vehicle Spare Parts - Kshs. 2,343,292.00 .............................. 2 1.3.2 Nakuru County Assembly ..................................................................................... 3 1.3.2.1 Irregular Contract Payments-Kshs.28,999,926.34 ................................................................... 3 1.3.2.2 Payment for Uncertified Civil Works – Kshs.1,861,200.00 ...................................................... 3 1.3.2.3 Irregular Accounting System for Issuing Imprests–Kshs.347,503.00 ....................................... 3 1.3.2.4 Irregular Payment of Night-Out Allowance – Kshs.320,000.00. .............................................. 3 1.3.2.5 Irregular Procurement of Stores- Kshs. 2,781,780.00 .............................................................. 3 1.3.2.6 Weak Controls in Asset Register Maintenance ........................................................................ 3 1.3.3 The Defunct Municipal Council of Nakuru ........................................................... 4 1.3.3.1 Cash and Bank Balances ...................................................................................... 4 1.3.3.3 Failure to prepare Bank Reconciliation Statements ................................................................ 4 1.3.3.4 Unauthorised Bank Overdrafts ................................................................................................ 4 1.3.3.5 Long Outstanding Imprests – Kshs 2,585,688.00 ..................................................................... 4 1.3.3.6 Outstanding Property Rates- Kshs.1,984,989,766.00 .............................................................. 4 1.3.3.7 Unconfirmed Creditors Balances – Kshs.619,187,050.00 ........................................................ 5 1.3.3.8 Unauthorised re-allocation of LATF Cash – Kshs.170,683,643.00 ........................................... 5 1.3.3.9 Non-Disposal of Grounded Vehicles ........................................................................................ 5 1.3.4 The Defunct County Council of Nakuru ............................................................... 5 1.3.4.1 Cash at bank .......................................................................................................... 5 1.3.4.2 Cash Shortages from Revenue Collectors - Kshs 1,831,749.00 ......................... 5 1.3.4.3 Unconfirmed Debtors’ Balance ............................................................................. 5 1.3.4.4 Failure to Maintain a Creditors’ Ledger ................................................................................... 6 1.3.4.5 Human Resource ...................................................................................................................... 6 1.3.4.6 Failure to Maintain an Assets Register..................................................................................... 6 1.3.5 The Defunct Municipal Council of Naivasha ........................................................ 6 1.3.5.1 Bank Accounts Balances ...................................................................................... 6 1.3.5.2 Unaccounted for Imprests – Kshs.736,887.00 ......................................................................... 6 1.3.5.3 Non - Collection of Cess Revenue - Kshs. 5,931,650.00 ........................................................... 6 1.3.5.4 Irregular Expenditure on Temporary/Casual Staff Employment ............................................. 7 1.3.5.5 Stationery not taken on Charge ............................................................................................... 7 1.3.5.6 Debtors ..................................................................................................................................... 7 1.3.5.7 Unconfirmed Creditors Balance – Kshs. 91,441,990.00 ........................................................... 7 1.3.5.8 Unimplemented LATF Projects - Kshs 10,500,000.00 .............................................................. 7 1.4 Conclusion ................................................................................................................................ 7 1.2 Audit Objectives .................................................................................................... 9 2.0 KEY AUDIT FINDINGS ................................................................................................................ 9 2.1 Nakuru County Government Executive.................................................................................... 9 2.1.1 The taking- over of the former Local Authority ....................................................................... 9 2.1.2 Utilization of Allocated Funds – Kshs. 367,286,765.00 ...................................... 10 i 2.1.3 Failure to Maintain a Fixed Assets Register. .......................................................................... 10 2.1.4 Unrecorded Purchase of ICT Equipment – Kshs. 8,662,964.00 .............................................. 10 2.1.5 Unaccounted for Fuel – Kshs. 5,062,973.00 .......................................................................... 10 2.1.6 Unrecorded Purchase of Motor Vehicle Spare Parts - Kshs. 2,343,292.00 ............................ 11 2.2 Nakuru County Assembly ................................................................................... 11 2.2.1 Irregular Contract Payments ............................................................................... 11 2.2.2 Payment for Uncertified Civil Works – Kshs.1,861,200.00 .................................................... 12 2.2.3 Irregular Accounting System for Issuing Imprests – Kshs. 347,503.00 .................................. 12 2.2.4 Irregular Payment of Night-Out Allowance – Kshs.320,000.00. ............................................ 12 2.2.5 Irregular Procurement of Stores - Kshs.2,781,780.00 ............................................................ 12 2.2.6 Weak Controls in Asset Register Maintenance ...................................................................... 13 2.3 The Defunct Municipal Council of Nakuru ......................................................... 13 2.3.1 Cash and Bank Balances ......................................................................................................... 13 2.3.3 Long Outstanding Imprests – Kshs.2,585,688.00 ................................................................... 14 2.3.4 Outstanding Property Rates- Kshs.1,984,989,766.00 ............................................................ 14 2.3.5 Estate Rent Arrears – Kshs. 223,274,097.60 .......................................................................... 14 2.3.6 Unconfirmed Creditors Balances – Kshs.619,187,050.00 ...................................................... 15 2.3.7 Unauthorised re-allocation of LATF Cash – Kshs.170,683,643.00 ......................................... 15 2.3.8 Non-Disposal of Grounded Vehicles ...................................................................................... 15 2.4 The Defunct County Council of Nakuru.................................................................................. 16 2.4.1 Status of the Bank Accounts .................................................................................................. 16 2.4.2 Failure to Prepare Bank Reconciliation Statements .............................................................. 16 2.4.3 Failure to avail Documents for Audit ..................................................................................... 16 Recommendations.................................................................................................................................. 16 2.4.4 Cash Shortages from Revenue Collectors – Kshs.1,831,749.00 ............................................. 16 2.4.5 Unconfirmed Debtors Balance – Kshs. 1,361,988,983.85 ...................................................... 17 2.4.6 Irregular Employment of Staff – Kshs.754,230.00 ................................................................