Taxpayers may have lost Sh10 million at the Tana and Athi River Development Authority, which was paid to a lawyer to defend the agency in a court case.
The authority deposited the money with the lawyer as court security in a case by residents seeking additional compensation for land acquired to build Masinga Dam.
The residents of Mbondeni and Makina locations sued for compensation amounting to Sh100 million, arguing they were not adequately compensated when the dam was built in 1975.
Tarda lost the case filed at the High Court in Embu 22 years ago but appealed and got a favourable ruling in October 2013 at the High Court in Nyeri.
With the 2013 ruling, the Sh10 million deposit was thus released to the authority’s lawyer, who as is the norm, was expected to release the same to Tarda.
However, the lawyer did not remit the money to the authority. Calls by Tarda management for the remittance have hit a brick wall.
Auditor General Nancy Gathungu, while flagging the issue, revealed that the lawyer has instead laid claim to Sh4 million as legal fees.
The lawyer wants the authority to pay Sh1.9 million for the legal services provided during the appeal and Sh1.9 million for an “unexplained outstanding fee.”
“The matter had not been resolved as of June 30, 2021,” Gathungu said in her report following a review of Tarda's books of account for the referenced financial year.
The auditor said that without the Sh10 million, the income of Sh248 million posted by the authority for the year in review cannot be confirmed.
“In the exclusion of the released court deposit balance, the accuracy and completeness of the trade receivable balance of Sh248 million couldn’t be confirmed,” the auditor said.
Tarda, at the same time, is broke and is struggling to meet its financial obligations, the audit shows.
Gathungu reports that the agency recorded a deficit totalling Sh669 million, raising its cumulative deficit to Sh15.9 billion.
“This is implying that the authority was technically insolvent as of June 30, 2021. My opinion is not modified in respect of this matter,” the auditor general stated.
The authority’s income prospects are uncertain in the wake of the directive that all revenue from hydroelectric power facilities is remitted to the National Treasury.
Tarda expected to raise revenue from Kenya Power and KenGen.
The management further attributed the cash shortages to the transfer of power generation assets to the two entities ‘without fair compensation to the authority’.
KPLC was required to pay Sh258 million every year for bulk power supply but after 15 years of engagement, the balance stood at Sh3.7 billion.
So grave is the situation that the authority is yet to remit to the Kenya Revenue Authority, a chunk of Sh49 million pay-as-you-earn tax deductions.
“Verification of documents provided for audit indicated that some of the taxes deducted from employees were not remitted to KRA and others were not remitted in due time.”
Gathungu said the management was in breach of the law requiring employers to remit PAYE deductions by the 10th of every month.
“In view of the infringement, interest and penalties may have accrued on the balance and as a result, the outstanding PAYE tax balance may not be fairly stated,” Gathungu said.
Tarda has further been called out for excess expenditure on workers’ salaries, accounting for 108 per cent of the authority’s revenue.
Regulation 26 of the Public Finance Management (National Government) Regulations, 2015, requires expenditures on salaries capped at 35 per cent of the total revenue earned by the national government entity in a year.
“Consequently, the excess expenditure on salaries was irregular and may have resulted in ineffective use of public resources,” Gathungu said.
An irregular payment of hardship allowances totalling Sh2.1 million has also been flagged after many who were eligible did not receive a share.
The allowance was paid at Sh600 for single people and Sh1,200 for married persons contrary to the law which sets a uniform rate.
“The management may have breached regulations on payment of hardship allowance,” Gathungu said of Tarda, further flagging an ethnic imbalance in its staff.
At least 131 of the 350 employees – representing 37 per cent, were from the same ethnic community at the time of the audit.