Sh 1 Billion — NYS cannot account for money spent in illegal payments

KES 1.0 billion

The National Youth Service (NYS) cannot account for more than Sh1 billion which may have been lost through irregular expenditures and payments to contractors and employees.

Auditor-General Nancy Gathungu, in her latest report covering the period up to June 30, 2023, flagged irregular expenditures amounting to Sh303 million and other unexplained illegal payments running into millions of shillings.

The report reveals that taxpayers may have lost over Sh300 million paid to contractors for projects that have stalled for several years. According to Ms Gathungu, some projects were declared shoddy, resulting in no value for money.

One such project was a 12-unit flat at the Vocational Training Institute in Nairobi’s Industrial Area, contracted for Sh49,105,721. The contractor abandoned the site after receiving the first payment of Sh7,111,432.

According to the audit, the NYS re-advertised and awarded the completion contract at Sh61,098,319 with a timeline of 52 weeks commencing on November 26, 2019.

However, a physical inspection in March 2024 revealed the project was still incomplete, with Sh23,000,000 already paid and the contractor abandoning the site.

"In the circumstances, the NYS has not realised value for money on the expenditure of Sh30,111,432 spent on the project," reads the report in part.

In another instance, the NYS contracted for the supply, delivery, and installation of water tanks and booster pumps at the same institute for Sh11,715,396 for 16 weeks ending October 31, 2020.

The contractor abandoned the site due to non-payment of Sh5,770,669.

Works had stalled

"Site visit carried out in March 2024, revealed that the works had stalled and efforts between the NYS, Nairobi Region Works Office and the contractor revealed that no progress had been made. In the circumstances, value for money has not been realised on the project," further reads the report.

The NYS also contracted for a four-story classroom block and workshops at the NYS Engineering Institute in Ruaraka for Sh88,794,355. The project was to take 52 weeks ending June 9, 2012, and was later extended by 31 weeks to January 12, 2013.

Construction stalled in 2017 after paying Sh 81,884,550, representing 92 per cent of the contract sum.

A review in February 2024 revealed incomplete works, including electrical, plumbing, and drainage, originally valued at Sh4,778,265 as per the State Department of Public Works appraisal report dated April 5, 2022.

"Value for money has not been realised 12 years after the construction commenced," Ms Gathungu noted.

Additionally, the NYS awarded a contract for a double-span kitchen, dining, and barracks at the NYS Engineering Institute in 2011 for Sh192,000,000. The contractor abandoned the site after receiving Sh186,248,573.

A site visit in March 2024 revealed the project’s deterioration due to huge visible cracks.

Delayed payments

The NYS management claimed that the delay in completion was mainly due to delayed payments to the main contractor and sub-contractors.

"The NYS management has not made any efforts to invoke the relevant clauses of the contract to surcharge the contractor for the delayed completion. In the circumstances, value for money has not been realised 12 years after the construction commenced," revealed the report.

The service also faces scrutiny for paying Sh99 million in salaries outside the Integrated Personnel and Payroll Database (IPPD) system. The payments, purportedly made to trainers and lecturers, lacked supporting documents.

“Payments amounting to Sh99 million were processed outside the Integrated Personnel and Payroll Database (IPPD). Further, the criteria used in hiring the tutors were not provided for verification. In the circumstances, the NYS was in breach of public service policies and procedures. Millions of taxpayers’ money may have ended in the wrong hands of ghost workers," says the audit.

Also in doubt is Sh740 million outstanding payments made, which were not supported by a ledger and payment vouchers.

The report has further revealed that taxpayers could also be losing millions of shillings owing to the manual collection of the NYS revenue.

"Review of revenue management revealed that revenue from farming, security services and hire of machinery is manual as it is yet to be digitised. The benefits that would accrue with automation such as invoicing, revenue collections, reconciliations and banking have not been realised as gaps in manual systems may lead to undetected loss of revenue," the report said.

"In the circumstances, the effectiveness of internal controls on revenue collection could not be confirmed," it reads.

Undetected loss of revenue

The auditor-general said the “gaps in the manual system may be leading to undetected loss of revenue”.

During the year under review, NYS failed to meet revenue targets, with details showing that it realised Sh400 million against a target of Sh723 million.

“No explanation was given for under-collection of revenue. Further, the underperformance affected the planned activities and programmes of the service,” the report reads.

The audit has further flagged excess staff in senior management positions of assistant director, senior superintendent and superintendent, drawing millions of shillings in salaries.

"While the service's approved number of assistant directors was 14, an excess of 16 were in post. At least 52 senior superintendents were found holding office against an authorised establishment of 36,” the audit revealed.

Auditors also found 62 superintendents holding posts against the approved count of 57, meaning five were in the position irregularly.

It emerges that NYS assets, including land covering thousands of acres, are also at risk of loss as the service has not maintained a complete and accurate assets register.

NYS' pending bills of Sh15 billion were also not disclosed in the financial statements for audit, casting doubts on whether they were genuine.

The report further revealed that the service had not paid Sh378 million to contractors, including youth who worked in slum clean-ups initiated by the then Devolution Cabinet Secretary Anne Waiguru in 2015.