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A parliamentary committee has directed Auditor General Nancy Gathungu to conduct a forensic audit of the country’s entire debt portfolio and submit a report to Parliament within six months.

In its report, the Public Accounts Committee (PAC) also instructed the Attorney General to review and approve all financing agreements and contracts entered into by the State to protect public interest.

Committee also recommended that the National Treasury only enters into loan agreements if the programme/project implementation plans are prepared for immediate execution.

Directives follow adoption of the report of the Auditor on financial statements for the national government ministries, departments and agencies for the Financial Year 2020/21.

“Accounting Officers who fail to absorb such funds promptly and within schedule should be held personally liable and will make good the lost interest subject to Article 226(5) of the Constitution,” the report.

Speaking when he was moving the report, committee chair and Nominated MP John Mbadi expressed concern about the interest and commitment fees charged on undrawn loans, with loans advanced towards dam construction being prevalent.

The lawmaker noted that there are many instances where loans have been negotiated, signed, and committed, but the implementing agency has not yet drawn down.

“In some cases, you find that the loan has been negotiated, a contract has been signed, commitments made, and yet, even the land where the project is supposed to be implemented has not been procured or acquired,” Mbadi noted.

Interest charged

In the report, the committee also lamented that interest accrued was charged pronto while the responsible persons have not even obtained the utility of the programs.

Funds cited as commitment fees for the year under review amounted to Sh2 billion from 20 loan agreements worth Sh379.9 billion that had no draw-downs, terming the amounts as wasteful expenditure.
“Related to these were various donor-funded projects with undrawn balances that the implementing agencies had no capacity to absorb and, hence, forfeited development funds,” the report.

Committee details that the government enters into contracts that prescribe punitive interest rates for delayed payments, some of which are incredibly three per cent above the Central Bank of Kenya (CBK) base lending rate.

“Sometimes, I wonder whether the Office of the Attorney General is involved when we are negotiating or signing contracts. Some of the contracts are signed with punitive interest rates, some as crazy as th,” Mbadi noted.