LSK made irregular payment of salaries to employees — audit

An audit report of the Law Society of Kenya accounts has flagged irregular payment of salaries and failure to remit employee taxes on time to Kenya Revenue Authority. 

The report, which the Star understands was discussed by members of the society last Friday but has yet to be adopted, shows that the bitter leadership wrangles that plagued the society for the last two years affected its handling of funds.

The audit by Crowe Erastus & Co. certified public accountants studied the accounts and transactions of the society between January 2019 and December 2021.

The report shows that two individuals were irregularly put on the society’s payroll in the dying days of its immediate past administration and paid salaries amounting to more than Sh2.1 million.

They were paid for the months of September, October and November 2021.

The report says that the two —Juliet Jakaila and Veronica Ochieng’ Odipo —were irregularly fixed into the society’s payroll at the height of the power struggle in the society’s council.

They were replacing three legitimate employees —Florence Muturi, Mary Kitonga and Geoffrey Karani —who had been irregularly sacked by the past council.

The three would later go to court and have the society compelled to pay them.

“Sh2,140,824 was paid out as salaries to two persons as staff of LSK…in the months of September, October and November. The two were not on the official payroll approved for payment by management, however, they were included in the instruction to the bank,” the report says.

The two had been appointed by the former LSK president Nelson Havi as members of a caretaker team after nine former members differed with him.

However, the auditors recommend that the society institute a process to recover the cash from the two.

President Erick Theuri told the Star that upon adoption of the report, all avenues, including going to court, will be on the table to recover the monies.

The report also shows that the society failed to remit to KRA the PAYE it recovered from its employees for the years 2019, 2020 and 2021.

The tax man then imposed a penalty amounting to Sh2,159,566 on the society for the anomaly. It says that of the sum, Sh1,867, 872 were penalties and Sh291,694 were interests.

Another tax issue unearthed by the audit was that the allowances paid to the former council members after official meetings were not subjected to taxation as required by the law.

It says that Sh2.6 million were given to the council members and some staff as retreat allowance but that they did not pay tax as required by the Income Tax Act.

“The allowances were not included/subjected to tax. From our computation, the tax exposure is Sh780,000. Similar omissions also occurred in 2020 (Sh18,750) and 2021 (Sh55,000). [Tax] exposure total comes to Sh853,750,” the report reads.

The report also questions the practice of single sourcing of hotels and facilities where the Continuous Professional Development seminars were done, holding that the practice is prone to abuse by members in management who may have conflict of interest.

The report also faults the society’s former vice president Carolyn Kamende for failing to sign documents that allow release of funds on time, exposing the society to loss and expensive legal disputes.

 

(edited by Amol Awuor)

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