Connect with us

Business

How Private Audit Firms Are Covering Up Massive Rot In State Agencies

Published

on

Loading...
A parliamentary committee has raised questions over possible collusion between top management of profitable parastatals under the Ministry of Energy with private auditors hired to check their books.

This is meant to give them a clean bill of health at the time of the scrutiny of their financial accounts, the National Assembly Public Investments Committee (PIC) said Thursday.

The committee chairman Abdulswamad Nassir questioned why agencies such as the Directorate of Criminal Investigations (DCI) have always found some missing links in the financial operations of the companies while auditors give them high scores on financial probity.

Mr Nassir said the committee has raised these concerns with DCI boss George Kinoti, seeking investigations over possible conspiracy between the parastatals’ management and the auditors.

“It is suspicious that all these state corporations audited by the private firms are always given a clean bill of health every successive year yet those audited by the Auditor General have issues flagged down against them,” Mr Nassir said at Parliament Buildings.

Loading...

“We want the DCI to look into how these audit processes are conducted because it cannot be that barely after a parastatal is audited and cleared, investigators unearth criminal activities in their operations and take top management to court as was the case with Kenya Power,” the Mvita MP said.

Mr Nassir singled out the case of Kenya Power which was given a clean bill of health by private auditors only for top managers of the state corporation to be later arrested and charged in court over massive rot in the company.

The office of the Auditor-General, known for unearthing massive financial irregularities in the operations of the State firms, is by law allowed to engage the services of private firms to help it in the audit of some parastatals on its behalf.

The office routinely contracts reputable firms such as Deloitte to audit National Oil Corporation and KETRACO and PriceWaterhouse Coopers (PwC) to look into the accounts of Kenya Power, KenGen and GDC.

Loading...
Continue Reading

Business

KRA must ease tax filing to boost revenues

Published

on

Loading...

Nikhil Hira Independent tax consultant and Director Bowmans Coulson Harney (law firm). [Courtesy]

Anyone who has been following Kenya’s budgets over the last few years will recall headlines each year saying that the country has set its largest-ever budget. 

The upcoming 2021/22 fiscal year is no exception, with Treasury Cabinet Secretary Ukur Yatani announcing a budget of Sh3.6 trillion – yes, the biggest ever! A little over Sh2 trillion will come from government revenues, with approximately Sh1.8 trillion of this from tax revenues. 

The balance will be borrowed – another common feature of the last few years. 

This year’s budget comes amidst an economic crisis brought on by the Covid-19 pandemic, with the inherent assumption that the pandemic will come to an end before the start of the next financial year. 

Given surges in infections that are being seen globally, and indeed in Kenya, this assumption may well be the deal-breaker. 

The Ministry of Health has already said that Kenya may see another wave of infections in July, fuelled by the Indian variant. This could result in more lockdowns with the associated impact on the economy and indeed revenue collections. The lack of vaccines is an issue that the government must address as a matter of great urgency if the country is to get through the pandemic without further economic woes. 

While deficits in government budgets are not uncommon, Kenya seems to be annually widening the gap between expenditure and revenues. 

If one applies this model to their household budget, the upshot will almost certainly be bankruptcy. 

Take a quick survey and help us improve our website!

Take a survey

What is actually required is curtailing recurring government expenditures, which is something that the government has acknowledged in the past with proposed austerity measures. 

The reality is that Kenya has not succeeded in doing this, and the pressure on revenue collection is exacerbated. 

Loading...

When you add to the high level of wastage and corruption we are witnessing, the deficit will almost certainly continue to widen. 

The responsibility for tax collection and enforcement lies with the Kenya Revenue Authority better (KRA). 

There is no doubt that the authority has improved significantly in this task since it was set up in 1995. 

The taxman estimates that 4.4 million tax returns were filed by June 30 last year, up from 3.6 million in the previous year.  While this is a significant improvement, when compared to the country’s population, this number of returns seems unusually low. 

The increase in the number of tax returns, is to a large extent, due to the online reporting system, iTax, and a major push by KRA through taxpayer education.

There is no doubt that the online system has made filing tax returns significantly easier and gone are the large queues of people witnessed at Times Tower on deadline day. 

That said, there is still much to be done to make filing returns a seamless and painless exercise. 

System downtime during filing periods is something that all of us will have experienced, although, in typical Kenyan fashion, we inevitably wait until the last day to file our returns as we do with most things! 

The spreadsheet that one uses to file a return is by no means the simplest to use.  One key issue seems to be that taxpayers are not alerted to changes in the model until they try to upload a return. 

The spreadsheet does not allow one to make it more relevant to their sources of income – in essence, it is too rigid and inflexible. KRA should be able to rectify this without too much effort.

Last year was unusual in that different rates of tax were applicable in the first quarter as compared to the rest of the year.  This followed the Covid-19 relief measures that were introduced in April 2020. 

There was much debate about whether the changes were meant to apply for the whole year or whether some form of apportionment was needed. 

In the end, the decision was made for apportionment. One can argue about what the correct treatment should be, but the issue was how long it took for the decision to be made and, indeed, to amend the iTax system. 

The age-old notion has always been that the more complex and difficult it is to file a tax return, the more likely it will be that taxpayers simply won’t file their returns. While the issue with the system has been resolved, there is an inherent administrative issue here that must be addressed. 

KRA has to be significantly more proactive in dealing with changes in rates and law to ensure the least inconvenience to taxpayers. 

The writer, Nikhil Hira, is the Director of Bowmans Kenya.

The views expressed in this article are the author’s and not necessarily those of Bowmans Kenya  

Loading...
Continue Reading

Business

The age of gentrification is truly upon our country

Published

on

Loading...

Never mind the businessmen outside Nairobi could be richer. Rural folks aspire to one day moved to a new county (city).

Loading...
Continue Reading

Business

The rise and fall of Trade Bank: A tale of the sleazy 90s

Published

on

Loading...

It is where titans such as Equity Group boss James Mwangi, who now oversees an over Sh1 trillion asset-rich bank, cut their teeth.

Loading...
Continue Reading
Advertisement
Loading...
Advertisement
Loading...

Trending