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How to Analyse Auditor General Reports in Kenya

This article focuses on how to analyse the reports by the auditor general in Kenya. The focus is on the different terms and opinions that the Auditor General employs in the audit reports and also some additional information.

The terms apply, with the necessary changes, to both the national and the county governments.

This guide should enable any person to understand and analyse the audit reports from the Auditor General for any arm of the National or the County Government and their respective ministries, departments and agencies (MDAs).

The arms and MDAs include the Executive, Parliament, Judiciary, County Executive, County Assembly, Independent Commissions and Offices, Political Parties, et cetera.)

The definition of terms and opinions are courtesy of International Budget Partnership Kenya.

Table of Contents

Part 1: Definition of Terms

Unsupported Expenditure

A government ministry (or county department) reports an expenditure. However, it does not provide enough documentation to show for sure that-

  • the spending was authorized (by parliament or county assembly), or
  • it received goods and services for the expenditure.

This is called unsupported expenditure. The key information here is the absence of supporting documentation.

When you hear the media, politicians, the public among others, refer to public funds as “unaccounted for”, they refer to unsupported expenditure which is the correct accounting terminology for public funds ‘unaccounted for’.

An example of unsupported expenditure
Unsupported Expenditure

Excess Expenditure

The government ministry (or county department) overspends its budget without authorisation (of parliament or county assembly).

A ministry (or county department) has a “vote” of spending, that is when Parliament (or County Assembly) tells them how much they can spend. If the government ministry or department exceeds the vote without proper authorization, then it becomes an “excess expenditure” or “excess vote”.

The key information here is spending more than the allocated money without authorization.

Example of excess expenditure
Excess Expenditure

Pending Bills

Pending Bills arise when a government ministry (or county department) commits to pay for goods and services, and receives those goods and services, but does not settle the bill within that financial year.

Pending bills are a problem because the (national or county) government works on a single-year budget and a ministry (or county department) must have cash and book expenditure when it happens.

All money that is not spent is returned to the Treasury (or to the County Revenue Fund in the case of a County Government) to be budgeted afresh the next year. There is no basis for carrying forward commitments.

Example of pending bills
Pending Bills

N.B. In (some) counties, pending bills are (part of) the county’s debt since the pending bills consist of money owed to suppliers.


Imprests are cash advances when the (national or county) government officers travel or attend meetings that they must return or account for with proper records.

The imprests are often not returned or accounted for. Sometimes, officers who have failed to account for them are allowed to obtain new imprests, which is against government policy.

Example of imprests

Part 2: Audit Statements

What opinion does the Auditor General have on financial statements (or audit reports)?

Unqualified Certificate/Opinion

This means that no problems exist with the documentation that the auditor general reviews and the government ministry (or county government department) has managed funds properly.

An unqualified opinion is a clean opinion, meaning that the financial transactions, by and large, were recorded properly and are in agreement with underlying accounting records.

Image showing unqualified opinion
Unqualified Opinion

Qualified Opinion

A qualified opinion occurs when the auditor has found some problems but they are not pervasive (widespread or persistent).

The auditor received all the information required for the audit, but the audit reveals some gaps in adherence to procedures and budgets.

A qualified opinion means that financial transactions are recorded and deemed to be in agreement with the underlying records, but there are cases where the Auditor-General is unsatisfied with the accuracy of certain expenditure.

Example of qualified opinion
Qualified Opinion

Adverse Opinion

An adverse opinion occurs when the auditor general is able to review the ministry’s documentation, but the problems found are pervasive and will require considerable changes to rectify.

This kind of finding should be of concern to oversight bodies.

Example of adverse opinion
Adverse Opinion

An adverse opinion means that although the financial transactions are recorded, the Auditor-General may be unsatisfied with the accuracy of significant amounts of expenditure.

Consequently, the Auditor-General cannot give a clean (unqualified) opinion and gives an adverse opinion.

Disclaimer Opinion

A disclaimer is when the auditor is unable to review fully the ministry’s documentation because there is a substantial amount of information that the ministry has not made available.

In such a case, the auditor feels unable to determine whether the situation is qualified or adverse because the paperwork is not adequate. This is a serious lapse in compliance and should be of concern to oversight bodies.

For a disclaimer, the record-keeping is so bad the auditor cannot give an opinion.

Example of disclaimer opinion
Disclaimer Opinion

A disclaimer opinion is serious and means that there was no basis upon which the Auditor-General can undertake an audit because the accounting records are unreliable. There are no verifiable supporting documentation and explanations for transactions.

Part 3: Additional Information

Additional interpretation of findings in the auditor general;s reports.

“Material” vs. “Fundamental” findings in the Auditor General’s Report

So how should we understand the difference between a finding that is “material” but not “fundamental”]?

One possible explanation for the difference is that a material finding is one where the Ministries, Departments and Agencies (MDAs) did not follow procedures.

However, a fundamental finding suggests that the failure was systematic, rather than an occasional lapse. The audit refers to this kind of finding sometimes as a “but for” or “except for” finding. This is because it finds that “but for” a particular issue, the overall audit would have been unqualified.

Another distinction might be that the potential loss from a “material” finding is less significant. Therefore, indeed, there may not be any potential loss. Compare that to a more fundamental finding, which implies a potentially significant loss of public funds.

Example of material finding
Material Finding

Was there theft or plunder? (Qualified Opinion)

For a qualified opinion, the auditor general received all the information required for audit. Yet, the audit reveals some gaps in adherence to procedures and budgets.

The Auditor-General uses two kinds of specific items to qualify an opinion and which are more likely to associate with loss of funds. These opinions are the unsupported expenditure and non-surrender of imprests.

The first is when a Ministry, Department, or Agency cannot provide paperwork to show that they actually ordered and received goods and services even though they spent money.

The second involves cash advances that government officials did not return and for which no paperwork showing their use is available.

Some of the other causes of a qualified opinion are, in and of themselves, less likely to be about the theft of funds than poor management and failure to follow the budget.

For example, unauthorized expenditures may be for legitimate expenditure with proper documentation, but they have no authority of expenditure. Excess expenditure is expenditure beyond the budget but can be for legitimate expenses that have proper records.

Both are still bad practices that no one should tolerate, but they are not the same as stealing money (in other words, they are not necessarily “plunder”).

What are some of the examples in the Auditor General report for Qualified Opinion?

When we look at some actual examples in the audit reports as the cause of qualified opinion, some additional considerations emerge.

Some of the cases in the reports relate to under-collection of revenue (presumably against budget). In others, the sources of revenue receipts to MDA’s are not clear from available documents.

In still others, government MDAs collect revenues but fail to remit them to Treasury.

None of these cases is necessarily an issue of plunder.

Example of qualifed opinion on revenue
Qualified Opinion

In other cases, there are pending bills where the government incurs costs but not paid for them within the financial year of expenditure. The auditor flags these items because the law does not allow agencies to commit funds for future years.

Parliament appropriates money for each year. When a ministry acquires pending bills, it is making a commitment to a future year without authority.

However, this does not also necessarily relate to any plunder of funds unless the government does not support the pending bills, as is sometimes the case.

Example of qualifed opinion on pending bills
Qualified Opinion

Breaking Procurement Laws

In other cases, Ministries, Departments, and Agencies use the money for appropriate expenditures but break procurement rules.

Failure to follow procurement processes can lead to loss of funds but does not necessarily mean theft of money.

Example of procurement related audit query
Breaking Procurement Laws

(Some of the terms used here like ‘ministry’ are for explanatory purposes. You can apply this guide to any audit report from the Auditor General under Article 229 of the Kenyan Constitution).