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How to Analyse Auditor General Reports in Kenya

  • Author Gĩthĩnji
  • Updated on:

How to analyse the reports by the auditor general in Kenya relies on different terms and opinions that the Auditor General employs in the audit reports,

This article is a guide for those terms and opinions. The terms apply, with the necessary changes, to both the national and the county governments.

The guide shall 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.

The examples for each term or opinion are quoted or in a table, and they are from actual audit reports for the national and county governments.

Table of ContentsShow/Hide

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.

Unsupported Expenditure on Air Tickets

Included in other operating expenses figures of KES 917,731,316 are payments for the purchase of air tickets amounting to KES 60,285,800 made to various suppliers.

However, documentary evidence of travel including boarding passes and certificates of inspection and acceptance were not provided for audit verification to confirm receipt of the tickets and also authenticate that the utilization of funds was for the benefit of the State Department.

In the absence of supporting documentation, it was not possible to confirm the propriety and validity of the expenditure of KES 60,285,800 on the purchase of air tickets.

When you hear the media, politicians, and 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’.

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”.

Disbursements to Maseno University

On August 1 2016, Maseno University entered into a contract for the construction of an administration block at a contract price of KES 89,800,246. A review of the payment records indicates that KES 121,250,000 has been disbursed towards the administration block.

No explanation for the excess expenditure of KES 31,349,754 has been availed for audit review.

Under the circumstances, the accuracy and completeness o the current grants to Government Agencies and other levels of Government could not be ascertained.

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

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.

Pending Bills

Note 18.1 to the financial statements reflects pending bills amounting to KES 241,957,497 (2018 - KES 563,474,303). The balance comprises the opening balance of KES 2,035,366 and bills incurred during the year of KES 239,922131.

Failure to settle the bills during the year to which they relate adversely affects the provisions of the subsequent year to which they have to be charged.

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.

Long Outstanding Imprests and Advances

The statement of financial assets reflects accounts receivables-imprests and advances of KES 30,189,944 which had not been recovered as of 30 June 2019, which includes a long outstanding balance of KES 1,774,900 issued during the financial year 2016/2017.

No explanation has been availed why the Accounting Officer has not taken action to recover the full amount from the salaries of the defaulting officers plus interest at the prevailing Central Bank Rate as provided for under Section 93(5) of the Public Finance Management (National Government) Regulations, 2015.

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) have managed funds properly.

Unmodified/Unqualified Opinion

The books of accounts and underlying records agree with the financial statements and no material misstatements were found. The financial statements present fairly, in all material respects the operations of the entity.

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.

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.

Modified/Qualified Opinion

Financial transactions were recorded and are to a large extent in agreement with the underlying records, except in cases where I (Auditor General) noted material misstatements or omissions in the financial statements. The issues, though material, are not widespread or persistent.

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

Adverse Opinion

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

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

Adverse Opinion

The financial statements exhibit significant misstatements with the underlying accounting records. There is significant disagreement between the financial statements and the underlying books of accounts and/or standards. These problems are widespread, and persistent and require considerable intervention by the management to rectify.

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 shall be of concern to oversight bodies.

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

Disclaimer of Opinion

The financial statements exhibit serious and significant misstatements that may arise from inadequate information, limitation of scope, inadequacy or lack of proper records such that I (Auditor General) was not able to form an opinion on the financial operations.

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 shall we understand the difference between a finding that is “material” but not “fundamental”?

The following is a list of financial statements for which I (Auditor General) expressed a qualified opinion. I was provided with sufficient and appropriate information and explanations and, out of the audit, I raised issues which were 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.

Was there theft or plunder? (Qualified Opinion)

For a qualified opinion, the auditor general received all the information required for the 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 ordered and received goods and services even though they spent money.

115 Ministry of Energy and Petroleum 27,995,732,666 No documents were made available to support the source of these receipts

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 expenditures with proper documentation, but they have no authority over expenditures. 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 shall 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 reports 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 the under-collection of revenue (presumably against budget). In others, the sources of revenue receipts to MDA’s are not clear from available documents.

114 Ministry of Labour, Social Security and Services 368,807,869 Under-collection of Revenue

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

None of these cases is necessarily an issue of plunder.

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.

103 Ministry of Devolution and Planning 1,113,380,200 Payments not paid during the year but carried forward with respect to the construction of civil works, supply of goods and services and staff payables

Parliament appropriates money for each year. When a ministry acquires pending bills, it is committing 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.

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).

(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).

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