The National Youth Service is staring at collapse after a damning audit revealed deep-rooted financial mismanagement, abandoned projects, and serious land ownership issues, placing a huge burden on Public Service Cabinet Secretary Geoffrey Ruku.

An audit report by Auditor General Nancy Gathungu for the financial year ending June 30, 2024, has exposed glaring irregularities at NYS, painting a grim picture of a flagship institution once seen as central to youth empowerment.

The report raises concerns over unsupported assets, questionable procurement, missing funds, and deteriorating infrastructure, all pointing to serious governance failures.

Gathungu issued a qualified opinion on the NYS financial statements, citing significant accountability gaps. The agency reported assets worth Sh3.3 billion against liabilities of the same amount, leading to a negative working capital of Sh550.2 million.

This excludes Sh16.4 billion in historical pending bills, of which only Sh5 billion has been verified. The remaining Sh10.9 billion is under investigation.

“The service is therefore facing liquidity issues and may not be able to meet its short-term obligations as and when they may fall due. The financial statements have been prepared as a going concern assuming continued support from the government. In the circumstances, the service’s sustainability of service and meeting short-term obligations is therefore doubtful,” the report stated.

The report further reveals that NYS posted a deficit of Sh211.6 million during the period under review—an increase from Sh29.3 million in the previous year, signaling deteriorating financial health.

At the core of the crisis is the agency’s inability to account for Sh29.5 billion worth of property, plant, and equipment, which lack proper documentation.

The audit shows that NYS lacks a complete asset register and tagging system to track location, acquisition, or depreciation.

Even more alarming is the state of land records. The report shows that out of 58 parcels of land valued at Sh20.2 billion, only 16 have ownership documents.

The remaining 42 parcels, including prime plots in Yatta, Mavoloni, Athi River, Mombasa, and Mwatate, are undocumented and at risk of encroachment.

The report says: “Parcels of land have not been fenced and are encroached. Although management has initiated the process of demarcation of the respective parcels of land, the process has not been finalized.”

It also highlights that the Engineering Unit’s land in Nairobi and Mombasa has already been invaded by private developers who have erected structures, while parcels in Nyaki/laki/kburine and South Ugenya/Rangala are missing from the NYS asset register despite available title deeds.

The institution’s operational challenges are compounded by unaccounted refundable deposits totaling Sh315.4 million for youth who participated in a six-month programme between September 2014 and February 2015.

Although NYS claims some payments were made and others are being traced, auditors said no supporting evidence was provided.

“In the circumstances, the accuracy and completeness of the refundable deposits from customers totalling Ksh315,434,595 could not be confirmed,” the report noted.

Another red flag is the unsupported adjustment of Sh742 million made to asset values without any schedule or valuation reports. Similarly, trade payables totaling Sh500 million have remained outstanding for over three years, exposing the institution to possible lawsuits and withdrawal of services.

The audit also questioned an inventory balance of Sh419.7 million, which was not supported by schedules or board of survey certificates.

This contravenes a 2020 National Treasury directive that required pending bills to be treated as first charge on approved budgets.

Gathungu’s report catalogues stalled projects that have led to wastage of public funds. A Sh192 million kitchen and barracks project at the Ruaraka Engineering Institute has remained incomplete since 2011, despite 90 percent of payments having been made.

The structures have developed cracks, and no action has been taken against the contractor. Another Sh49 million housing project in Industrial Area was abandoned by contractors after receiving payment.

NYS also faces a governance vacuum. Gathungu pointed out that the NYS Council, responsible for strategic oversight, has vacancies in key positions and lacks members with relevant expertise, further weakening accountability.

She also flagged deplorable learning and working conditions, especially at engineering schools, where classrooms lack electricity and servicemen operate in poor environments. Most field units rely on firewood, posing health and environmental risks.

“The workforce may be exposed to frequent physical and psychological effects of an unfriendly working environment,” the report stated.

In response to the revelations, Ruku has begun implementing reforms. He has suspended officials, initiated investigations into procurement processes, and is pushing for amendments to the NYS Act.

He has also asked the Public Procurement Regulatory Authority to audit all NYS tenders since 2019, and pledged to revise the NYS procurement manual to align with the law.

“We are reorganising the institution. A commercialisation strategy is at an advanced stage in readiness for rollout,” the CS said, adding that a double intake of 40,000 recruits is planned starting January.

However, the institution’s deep financial and structural issues pose a serious challenge to the CS’s efforts, with success depending on how well the government supports the recovery plan and cracks down on individuals responsible for the current mess.