An audit by the Auditor General has revealed the improper investment of KES 2.1 billion from the Coffee Cherry Fund, intended to benefit coffee farmers. The funds were placed in a commercial bank, violating the directives of the National Treasury.
Auditor General Nancy Gathungu criticized the fund administrators for depositing KES 2,181,054,794 in a call account, instead of investing it in treasury bills or bonds through the Central Bank of Kenya (CBK), as instructed by a Treasury circular. “The farmers have not received value for their money due to this violation,” Gathungu stated in her report.
The March 26, 2018, Treasury circular directed state corporations and semi-autonomous government agencies to invest surplus funds in government securities such as treasury bills or bonds, bypassing commercial banks. It also required the retirement of any funds previously held in commercial bank fixed deposits, aiming to maximize returns for such funds. The use of intermediaries, such as commercial banks, was expressly discouraged.
Gathungu’s audit of the Coffee Cherry Fund’s accounts for the fiscal year ending June 30, 2023, highlighted irregularities in how the funds were handled, raising concerns over the fund’s management. She noted that the decision to place the money in a call deposit account deprived the fund and the farmers of potential returns from higher-yielding investments.
In addition, the audit identified KES 181 million in interest accumulated from the call deposit account, which had not been properly managed. Gathungu explained that the balances showed unapplied interest of KES 181,054,794, which remained unearned unless rolled over with the principal. “The improper management of this interest has denied the fund the opportunity to generate higher returns,” she said.
