Auditor-General Nancy Gathungu has criticised the government for persistently low development budget absorption over five financial years, revealing significant financial mismanagement during her appearance before the National Assembly’s Budget and Appropriations Committee.

Gathungu disclosed that 14 major projects allocated Ksh515.1 billion failed to utilise Ksh304.4 billion, or 59.1 per cent of the allocation.

Many projects risk lapsing without meeting their objectives, while commitment fees on undrawn funds have cost taxpayers Sh6.56 billion.

“Indeed, between the FY 2020/2021 and FY 2023/2024, the Government paid commitment fees totalling Ksh6.569 billion on undrawn amounts in respect of loans signed between the Government of Kenya and foreign lenders,” Gathungu stated.  

Low allocations

The fees break down to Ksh2 billion (2020/21), Ksh1.48 billion (2021/22), Ksh1.43 billion (2022/23), and Ksh1.58 billion (2023/24).

Development expenditure allocation remains critically low. In 2023/24, only 15 per cent (Ksh708.85 billion) of the Ksh4.26 trillion gross expenditure went to development.

The proposed 2024/25 allocation of Ksh643.9 billion represents 25.8 per cent of national government expenditure.

“This is contrary to the provisions of Section 15(2)(a) of the Public Finance Management Act, 2012 which requires that, over the medium term, a minimum of thirty per cent (30%) of the National and County Governments budgets shall be allocated to development expenditure,” the report states.

Several flagship projects exemplify this crisis. The Ksh1.1 billion East Africa Skills Transformation project, running from 2018-2024, drew only 61 per cent of donor commitments by June 2024.

The Ksh23.5 billion Kapchorwa-Suam-Kitale and Eldoret bypass road projects had 35 per cent undrawn funds by September 2023.

Most concerning is the Mombasa Gate Bridge project, allocated Ksh49.05 billion over seven years since December 2019.

Despite four years elapsing, only Ksh938.2 million – just two per cent – has been utilised, leaving Ksh48.11 billion undrawn.

Commitment fees

Gathungu warned: “In accordance with Clause II (2.03) of the financing agreement, the loan will continue to attract a penalty on the undrawn balance in the form of commitment fees.”

The audit reveals systemic failures in project implementation, inadequate development funding allocation, and poor fiscal management that continues bleeding public resources through avoidable penalties.