Sh5.7 billion down the drain as audit flags donor project failures

A new audit by Auditor General Nancy Gathungu has revealed that delayed payments and failure to provide local counterpart funds have caused millions of shillings in losses and stalled progress in donor-funded projects.

The report covering the year ending June 30, 2024, shows that interest payments of Sh4.4 billion were incurred because ministries, departments, and agencies failed to settle debts on time.

These delays increased costs unnecessarily and slowed down critical projects meant to benefit the public.

Additionally, the audit found that state agencies and county governments did not provide the required Sh3.5 billion in counterpart funding, further slowing project progress.

For example, Kenya Power withheld Sh1.1 billion for the Last Mile Connectivity project, while Kenha delayed Sh663 million for a trade facilitation project.

Among the projects with heavy delays were those in the Ministry of Health, which owes Sh930 million in interest over late payments for Covid-19 vaccine supplies.

The Kenya Urban Roads Authority and the State Department for Infrastructure were also noted for their slow payments, resulting in millions in penalties.

Kenha faces several interest claims, including Sh856 million on the Mombasa-Mariakani highway, Sh657 million for delayed contractor payments on the Isebania-Kisii-Ahero junction road, and Sh615 million related to the World Bank-funded transport sector support project.

The audit also highlights poor financial controls, such as mixing donor funds with other agency accounts in 16 projects.

This practice makes it difficult to track spending and increases the risk of funds being misused.

The report flagged Sh1.3 billion in ineligible spending, including Sh475 million by the National Treasury for the Africa Climate Summit, which happened before the financing agreement was signed.

Other departments overspent without authorization or failed to deduct wrongly paid amounts.

The failure to use allocated funds fully was also a major concern, with 44 projects not absorbing their budgets before closure.

"Although the project periods were ending, some funds had not been absorbed, posing risks that the projects would end without implementing all planned activities and therefore not meeting their objectives," Gathungu said.

Finally, the audit noted 28 projects that had passed their completion dates but lacked proper closure procedures, raising questions about accountability and the long-term impact of donor funding.