NAIROBI, Kenya – Auditor General Nancy Gathungu has urged Parliament to introduce legal consequences for public entities that ignore audit and parliamentary recommendations, warning that inaction is weakening accountability and placing Kenya’s fiscal future at risk.
Speaking before the National Assembly’s Budget and Appropriations Committee on Tuesday, Gathungu said the lack of punitive measures under the Public Finance Management (PFM) Act, 2012, has allowed persistent defiance of oversight findings, leading to wastage and inefficiency in public spending.
“There must be consequences for non-implementation. Without enforcement, audit findings are treated as suggestions, not requirements,” Gathungu told MPs, calling for urgent legal amendments to the PFM law.
She also proposed tighter reporting timelines, recommending that all public institutions be compelled to submit financial statements within one month of the close of the financial year.
This, she argued, would enhance transparency and enable real-time monitoring of state resources.
The Auditor General further asked Parliament to enforce its earlier resolution requiring the National Treasury to fund her office through a single-line budget—a change she said would give the institution the flexibility to respond swiftly to evolving audit needs.
Fiscal Red Flags
Gathungu painted a sobering picture of Kenya’s revenue outlook, revealing that the country’s ordinary revenue projections remain below international benchmarks despite optimistic estimates for the upcoming year.
The 2025/2026 budget anticipates Sh2.757 trillion in ordinary revenue, or 14.3 percent of GDP—up from the Sh2.581 trillion (14.8 percent of GDP) in the current fiscal year.
But Gathungu warned the figures still fall short of the 15 percent minimum recommended by the World Bank.
Even more troubling is the scale of tax arrears, which ballooned to Sh2.334 trillion as of June 2024, according to the Kenya Revenue Authority (KRA).
That’s more than double the Sh999.6 billion recorded just a year earlier—a 133.5 percent surge.
“These arrears—arising from compliance reviews, audits, unfiled returns, and unremitted deductions—are now equivalent to 91.8 percent of the total revenue collected by the Treasury in FY 2023/2024,” Gathungu said. “It indicates the tax system is yielding far less than its potential.”
She warned that persistent revenue shortfalls coupled with rising arrears could force the government into heavier borrowing, compounding fiscal strain.
“The problem is structural. We need a more evidence-based revenue forecasting model that takes into account past trends and real economic risks,” she said.
Donor Project Wastage
The Auditor General also flagged alarming inefficiencies in the implementation of donor-funded development projects.
Out of Sh515.1 billion allocated to 14 such projects in FY 2023/2024, Sh304.4 billion—nearly 60 percent—remained unutilised by the end of the fiscal year.
“These delays risk projects lapsing before their goals are met. In some cases, taxpayers are also footing the bill for commitment fees on funds that remain undrawn,” she said.
Between 2020 and 2024, Kenya paid Sh6.57 billion in such fees on unused foreign loans.
Gathungu challenged Parliament to spearhead reforms that would bolster fiscal discipline, standardise government asset valuation methods, and enforce accountability for failed implementation.
“Parliament must play a more active role in reviewing performance audits, identifying bottlenecks, and holding institutions accountable,” she said.
