Jun 27th, 2011 by Mars Group Kenya
MARS GROUP KENYA SUBMISSIONS TO THE BUDGET COMMITTEE ON THE EXPENDITURE AND REVENUE ESTIMATES OF THE GOVERNMENT OF KENYA FOR THE FINANCIAL YEAR ENDING 30TH JUNE 2012
Wednesday 22nd June ,2011
Mr. Chairman: As Patriotic Kenyans and in exercise of our Constitutional Rights, we are interested in sharing information we have obtained from public domain and official records, which is relevant to the Budget Estimates tabled in the National Assembly by the Minister for Finance regarding the Revenue and Expenditure of the Government of Kenya and which your Committee has the Mandate of the People of Kenya through the Constitution to interogate, to make recommendations and even where necessary to make Changes to the Estimates of Revenue and Expenditure.
Mr. Chairman: In order to better engage the public with public finances Mars Group Kenya conducts detailed studies of budgets at central and local levels. We have previously had the opportunity to appear before a Joint Parliamentary Enquiry by the Budget and Finance Committees into the Supplementary Estimates of the Financial Year 2008-2009. Our findings of discrepancies in the Supplementary Estimates triggered the enquiry and resulted in the adoption of a unanimous report which included a recommendation that an independent forensic audit should be done by an independent body to look into past three years of the National Budget including the Consolidated Fund Services to determine whether there might have been other inaccuracies or inconsistencies in the last two years in addition to the current year. Unfortunately the Independent Forensic Audit has not yet been commissioned.
Mr. Chairman: We have also appeared before the Parliamentary Accounts Committee enquiring into the procurement processes which resulted in the purchase of 120 VW Passat saloon cars by the Ministry of Finance for Cabinet Ministers, Assistant Ministers and Permanent Secretaries.
We trust our information was useful to Parliament and we hope that we continue to contribute towards the ability of the National Assembly watchdog role over the funds of the Kenyan people.
Mr. Chairman: We appear before you in good faith. We mention this because we do what we do because we believe in parliamentary democracy and accountability, and we are only desirous to make Kenya a better governed and corruption free country. That is the only way our country will develop in an equitable and democratic manner. Kenya belongs to all Kenyans.
Mr. Chairman: it is our Contention that the Government has no money of its own. Indeed,the people of Kenya own the Government and its funds. As such Citizens of this great country have a Constitutional Right through elected representatives to demand accountability for public funds. Members of Parliament have an obligation to ensure oversight on Public Funds and that as a matter of fact there is no taxation without representation.
Mr. Chairman: We have a number of issues we wish to raise. The first matter is on what we believe is a violation of our Constitution by Parliament in allowing the withdrawal of Funds from the Consolidated Fund under Arcticle 222 of the Constitution of Kenya.
Mr. Chairman: The Constitution at article 221(1) says that at least two months before the end of each financial year, the Cabinet Secretary responsible for finance shall submit to the National Assembly estimates of the revenue and expenditure of the national government for the next financial year to be tabled in the National Assembly.
Mr. Chairman: The Constitution further states that before the National Assembly considers the estimates of revenue and expenditure, a committee of the Assembly shall discuss and review the estimates and make recommendations to the Assembly; and in discussing and reviewing the estimates, the committee shall seek representations from the public and the recommendations shall be taken into account when the committee makes its recommendations to the National Assembly.
Mr. Chairman: The Constitution is clear at article 221(6) That after the estimates of national government expenditure, and the estimates of expenditure for the Judiciary and Parliament have been approved by the National Assembly, they shall be included in an Appropriation Bill, which shall be introduced into the National Assembly to authorise the withdrawal from the Consolidated Fund of the money needed for the expenditure, and for the appropriation of that money for the purposes mentioned in the Bill.
Mr. Chairman: Was it Constitutional for Parliament to authorise the withdrawal of tax money from the Consolidated Fund without an Appropriation Bill as required by Article 221 (6) of the Constitution? Does any Member of Parliament believe that this was Constitutional?
Mr. Chairman: It is true that the Constitution at Article 222 (1) provides that the National Assembly may authorise the withdrawal of money from the Consolidated Fund If the Appropriation Act for a financial year has not been assented to, or is not likely to be assented to, by the beginning of that financial year.
Mr. Chairman: What Parliament did, Sir, was ultra Vires the Constitution. Any withdrawal of funds from the Consolidated Fund before an Appropriation Bill is introduced into and passed into Law as an Appropriation Act by the National Assembly is illegal. The Constitution at Article 222 merely provides for withdrawal of funds if the President has not assented to the Appropriation Act or is unlikely to assent to the Act. We believe that Parliament can reverse this action and that Parliament cannot be helpless.
Mr. Chairman: Parliament needs to consider that there are serious sanctions that come with violation of the Constitution. Indeed, the effect of the action by Parliament, which is to cause the taxation of Kenyans without following the law will be challenged by way of Judicial remedy. Parliament may have authorised, but Kenyans do not have to pay, if the taxation is unconstitutional. We urge this committee to advise the National Assembly to correct this grave mistake as a matter of urgency.
Mr. Chairman: Another further matter of legal violation of the Law requires the urgent action of Parliament.
Mr. Chairman: Mars Group has been informed by the Office of the Controller and Auditor General that the Controller and Auditor General has fulfilled his statutory obligation under the Public Audit Act which requires him under Section 9 to prepare a report on the audit of the Government of Kenya accounts and submit the report to the Minister responsible for finance within six months after the end of the financial year or other period to which the accounts examined and audited relate.
Mr. Chairman: The Controller and Auditor General has signed and forwarded his Audit report into the Appropriation Accounts and other Public Accounts of the Accounts and Funds of the Republic of Kenya for the financial year 2009/2010 to the Minister of Finance on 26th May 2011.
Mr. Chairman: The Public Audit Act at Section 10 states that the Minister of finance shall lay the report of the Controller and Auditor General before the National Assembly not later than seven days after the National Assembly first meets after the Minister has received the said report and further, that If the Minister fails to lay the report before the National Assembly as required under this section, the Controller and Auditor-General shall forthwith submit a copy of the report to the Speaker of the National Assembly who shall present it to the National Assembly.
Mr. Chairman: The Minister has not tabled the report of the Controller and Auditor General as at today 22nd June 2011.
Mr. Chairman: Who will make this Minister for Finance abide by the Law? The Controller and Auditor General reports on the state of accounting for Public Funds by the treasury. Is it right that Parliament continues to allow the taxation of Kenyans without demanding that accounting reports on Audits of tax money are tabled in the National Assembly before allowing withdrawal of more tax. Mr Chairman, Kenyans are feeling that our Members of Parliament do not care about accountability for our taxes because MP’s do not pay tax.
Mr. Chairman: Could this be true? Maybe it is time for some soul searching, because the moral authority to friviously approve taxation without demanding accountability is clearly what makes Kenyans hostile to their representatives. We cannot afford to ignore the Controller and Auditor General. It is only by way of his Audit Reports that Parliament is informed of how Public funds have been accounted for.
Mr. Chairman: Please allow us to address the next issue we wish to raise here today.
Mr. Chairman: On Wednesday 11th May 2011 Mars Kenya released a report entitled Revenue “ Accounting by the Government of Kenya: unsatisfactory state of affairs! “ which with your kind permission, we would like to table before your committee.
Mr. Chairman: The logic behind the release of this report is that not as much attention is being focused on tracking revenues of the Government of Kenya despite frequent reporting by the Controller and Auditor General decrying inconsistent revenue accounting by the Treasury over the years. This report is intended to red-flag the issue of revenue accounting by the Treasury with a view to getting greater transparency and accountability for the benefit of Kenyan taxayers.
Mr. Chairman: Kenya’s Controller & Auditor General has in his two latest reports excluded from the general certificate most Statements of Revenue of the Government of Kenya. In 2008, the C&AG certified only three Statements of revenue and only one as presenting a fair revenue postion of the government of Kenya for the year ending 2009. simply put, the current position is that only one out of 14 accounts has passed the Audit test.The total amount of the concerned statements is Ksh 714 billion for the two financial years.
Mr. Chairman: Untill we see the Report for 2009/2010 which is ready but not before this house as required by law, we are unable to say how many revenue accounts have passed the audit test this time. Suffice to say, that in the Kenya outside Parliament, those of us who fail tests, be they school exam, job interviews, or even Audit tests face the consequences.
Mr. Chairman: It also appears that the Treasury has been keeping different sets of books for the revenue collected and is now involved in an intricate web of a possible cover up and deception as it continues to present different revenue figures to the Controller and Auditor General and to Parliament. The actual revenue receipts as captured by the Controller and Auditor General in the exchequer account differ significantly with the actual revenue receipts presented to Parliament in the estimates of Revenue.
Mr. Chairman: Is it possible that treasury maintains different sets of revenue accounts? Same treasury, different revenue positions?
Mr. Chairman: The estimates of Revenue as tabled in parliament by the Finance Minister which reflect the final revised estimates of revenue differ at every revenue line item from the final revised estimates of revenue as captured by the Controller and Auditor General in his reports. These issues are captured in the report we have just tabled.
Mr. Chairman: The approved revised estimates of revenue cannot be altered by the Treasury. This fact was confirmed by the famous “computer error” when Parliament recalled supplementary estimates for this very reason, restating the fact that what Parliament approves is the final approval. The implications of treasury altering these figures are very serious and grave.
Mr. Chairman: Prior to the release of this report, almost a whole month earlier, Hon John Mbadi MP, requested a ministerial statement on behalf of Kenyans, from the Treasury. The Minister of Finance has since April 21st 2011 failed to bring this statement to the National Assembly. To date Kenyans and our representatives have no answers to the following questions.
Mr. Chairman: We expected the Minister of Finance to answer the issues raised by the Controller and Auditor General and asked by our representatives on the floor of the House –
!. How many revenue accounts passed the Audit test?
2. Do the Actual revenue receipts as reported to parliament faithfully refect the the actual receipts as captured by the controller & Auditor General
In the exchequer account?
3. Do the revised estimates of revenue tabled in Parliament reflect the actual approval by given by parliament?
Mr. Chairman: We repeat – Is Parliament willing to ignore the reports of the Controller & Auditor General? Is the Controller & Auditor General producing rubbish or is something wrong with the book keeping at treasury? Is Parliament willing to continue giving Authority for Kenyans to be taxed and look the other way, when the Treasury fails Audit tests and even when Treasury dares to change the Authority as given by Parliament as to the Amount we can be taxed?
Mr. Chairman: Kenyans voted for a new Constitution, so that we reclaim our sovereign power which was lost over years to dicatorships and impunity. When Kenyans seek accountability for Public Funds,it is not only because it is a Constitutional Right for citizens, but also because it is your duty to guarantee that accountability as part of that Job you sought from Kenyans who employed you and pay you well. In fact, Kenyans pay their representatives better than most in the world.
Mr. Chairman: Even though we are the best paying employers, it is sad that when the committee of supply sits to pass the budget, only a handful of MP’s are present. Taxation without Representation? This is why we must have a dedicated channel for Parliamentary broadcasts. Kenyans want to know if their member of Parliament represented them and how they voted. This is another Constitutional Right that we are not willing to negotiate. We want to watch our MP’s at work and we are ready to pay for it.
Mr. Chairman: Moving on to another matter. The Budget.
Mr. Chairman: The documents tabled for the Financial Year 2011/2012 and which your Committee is currently considering contain mathematical errors that have real and grave implications on the size of the deficit.
Mr. Chairman: We use the Estimates of Revenue and Expenditure for State Corporations for the financial year 2011-2012 as an example to illustrate this point. We invite you to look at the document we now table. Mr Chairman, with the benefit of a calculator, if you add up the numbers in the Annex of expenditure and revenue laid before the house, you will find that there is a deficit of Kshs -163,781,152,000. The Minister has tabled a document that claims there is a surplus of Kshs 87,325,089,000
Mr. Chairman: the variance is a staggering Kshs -251,106,241,000 deficit. What is the reason, excuse for this variance? Sir, this Committee needs to go through this entire budget with a toothcomb and we are confident that you will do so.
Mr. Chairman: Mars Group raised similar concerns about mathematical errors in the Estimates of Revenue and Expenditure for State Corporations for the financial year 2010-2011. Indeed the Parliamentary Budget Committee picked up on the errors, and in its report stated “ It is also important to note that there are some anomalies (mathematical errors) in the Estimates of Revenue and Expenditure for State Corporations ” . Mr Chairman, this matter is serious. The variance amounts to almost half the recurrent budget.
Mr. Chairman: Finally, the document we now table expounds on the real need to have the budget in a simplified citzen friendly format. It simply totals up the amount on each line line item of Expenditure and Appropriations in Aid as detailed in the estimates. It would be easier for this Committee and the Public that we know how much money across the budget has been allocated for each line item and sub – item. An ideal budget for us as citizens to consider would go further to break down the category and Chapter, sub – chapter, item and sub – item. The format we table only provides the item across the budget as the estimates do not indicate the sub item.
Mr. Chairman: One cannot make sense of this budget. How for example does one approve fuel expenses of Khs 5.052 Billion without knowing how many cars Government is fueling? Or why we need to spend Kshs 2 Billion on Advertising for Government when we could fund the Kenya Gazette and provide it for free to Kenyans?. We could raise similar questions on most of these expenditure items.
Mr. Chairman: The estimates of revenue do not provide for witholding tax. The line item has been removed, even as the Minister told Parliament that he intends to increase this tax from 5% to 10%.
Mr. Chairman: The Government spends too much money on itself and very little on us. The evidence is in the recurrent, development ratio. Surely, as representatives of the people, you can do something about that. Kenyans have given the Budget making process to our Representatives. In our humble opinion, that the budget of the executive is their wish list. Now its time for the National Assembly to demonstrate to Kenyans that “they are the people” and that they choose well at the ballot.
Mr Chairman: We are grateful to your Committee, our elected representatives, for taking time to hear us. With your kind permission we wish to support our Memorandum with supporting documents. We would be happy to take any clarifications.
Dated at Nairobi this 22nd day of June 2011 and signed: for Mars Group Kenya
Jayne Mati Mwalimu Mati
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MARS GROUP KENYA SUBMISSIONS ON KENREN FERTILISER COMPANY
Representation on the inclusion of payments out of the Consolidated Fund to an Austrian Bank ostensibly related to the defunct Ken Ren Chemical and Fertiliser Company factory project
Wednesday 22nd June, 2011
Main Conference Room,
County Hall,
Nairobi
KENYA
Honorable Members,This year Payments to Austria Bawag Bank related to the failed Ken Ren Chemical and Fertiliser Factory project of the 1970s have again been factored into the Budget see Consolidated Fund Services Estimates 2011-2012 at p.16 (attached and as follows)
- 2011/2 = Ksh 372,357,514
- 2012/3 = Ksh 404,709,457
- 2013/4 = Ksh 437,321,723
But worse still, Kenya has paid huge sums for this undelivered project in the past. Between 2003 and 2009 the C&AG states the country paid Ksh 2.3 billion for this non existent factory. Thus in the Controller and Auditor General Report 2008 – 2009 (attached) – see page 18 and 19 – the C& AG says
“A review of the two debts in June 2009 showed that a total of Kshs.2,371,887,138.05 made up of principal and interest amounts of Kshs.1,639,409,203.95 and Kshs.732,477,934.10 respectively, had been paid as at 30 June 2009. However, and as observed in the preceding paragraphs, no fertilizer factory had been constructed, thus making the entire expenditure of Kshs.2,371,887,138.05 nugatory.”
This sort of impunity is not new to Treasury – another example is their complete refusal (since April 21st 2011) to provide a requested statement on the tax accounts to Hon John Mbadi – see attached extracts of the Hansard of the National Assembly “Status of the Tax Revenue Account at Treasury”
Jayne Mati Mwalimu Mati
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MARS GROUP KENYA GENERAL SUBMISSIONS
General Representations to the Budget Committee on FY 2011 – 2012Wednesday 22nd June, 2011
Main Conference Room, County Hall,
Nairobi, KENYA
Mr. Chairman & Honourable Members, We are: Mwalimu Mati, Jayne Mati, Kevin Cheruiyot & Jayne Wariga of Mars Group Kenya; Davis Adieno & Martin Napisa of the National Taxpayers Association & Benjamin Ndolo director of the Organisation for National Empowerment (ONE).
General Comments:
1. The budget committee has previously noted the unclear nexus between the Treasury and the Planning Ministry in drawing up the budget. It has also noted that the nexus between Parliament as a budget making body and the Treasury has been unsatisfactorily implemented. Thus the Speaker was able to clearly say: “The spirit, letter and intent of the new Constitution as set out at Chapter 12 on Public Finance completes the transition of our Parliament from a budget approving legislature to a budget making one. It brings openness and accountability to the budget process, strengthens the separation of powers and ensures fiscal parity between the three arms of Government.” But unfortunately the budget is still opaque and Members of Parliament are being asked to approve the budget blind – because of the unwieldy format the estimates are presented in.
2. We would like to pose with your permission a series of questions which you may wish to consider. For example can MPs say with certainty that the Estimates allow them to say how much of the Ksh 1.149 budget is fuel expenditure – or indeed how many vehicles are to be fuelled? This especially after Schedule 5 of the estimates which detailed how many vehicles each department of the Government had was inexplicably removed from the estimates in 2007? When you are asked to approve rent are you given an inventory of the buildings and produced assets to be rented? Unless you know the answers to such questions we believe you are approving the budget blindly.
3. We have noted that the Budget Committee report of May 13th 2009 had an annex which listed vote-heads and sub-items in great detail. Why can’t the Treasury produce its estimates by vote-head and sub-item across the entire Government to enable better and more substantial trend analysis? This is a reform whose time has come.
4. Finally, whereas payment of taxes is a legal obligation on citizens, accounting for taxes is also a legal obligation on various public officers. There is also a moral basis for tax collection which should be carefully preserved. Many citizens already feel over taxed, but it is only recently that they started to worry that the Treasury is not being accountable when queried about the status of its tax accounts. We would like to say that we have studied the Controller and Auditor Generals reports in the public domain over the latest 3 years (excluding the yet to be tabled report for 2009-2010 – which the Minister received on 26th May this year and which has for whatever reason not been tabled in the National Assembly as required by the Public Audit Act).. We were shocked to discover that in 2006-7 and 2007-2008 only 3 revenue accounts were not excluded from the C&AG’s general certificate; and that by 2008-2009 only 1 revenue account was certified as being a true representation of the collections received by Treasury.
The amounts refused certification are gigantic, but understandable when compared with the stated losses through procurement expenditure of Ksh 270 billion per annum, as the Permanent Secretary for Treasury told a committee of this House in December 2011. With such shoddy accounting for revenue and massive losses through procurement we are worried that the moral basis for tax collection could be undermined with disastrous consequences for this country. When Kenyans learn that the Minister of Finance has stated in writing as recently as 2nd July 2010 that 97% of all ordinary revenue (their taxes) is consumed by recurrent expenditure leaving only 3% of taxes being used for development expenditure they will be very angry indeed.
- We hope that our presentation will be useful to the Committee and propose to supply certain information for the purposes of addressing your attention to:
- Dubious payments for supposed foreign obligations
- Revenue accounting including in state corporations
- Format of the estimates especially of expenditure
- Failure to address the Controller & Auditor’s concerns
- Failure of the National Assembly to enforce its own resolutions
- The position of the National Taxpayers Association on among other things absorption of funds by key ministries
- The position of the Organisation for National Empowerment encompassing the views of entrepreneurs on energy costs and tax issues.
1. It is necessary to have a special audit by the Auditor General to clear the audit queries exposed in our representations
2. The National Assembly should no longer make resolutions in vain. Now is the time for the implementation of the National Assembly’s resolution that there take place an independent forensic audit as recommended in the Joint Committee Report on the Supplementary Budget of 13th May 2009
3. The National Assembly can demand a better formatted budget.
4. The National Assembly should make for the first time in history certain necessary reallocations between budget lines to ensure that tax monies are used for developmental purposes rather than waste and comfort of Central Government officials.
Dated at Nairobi this 22nd day of June 2011 and signed: for Mars Group Kenya
Jayne Mati Mwalimu Mati
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