Kenya’s auditor general, Nancy Gathungu, disclosed in a report made public on Tuesday that the government allocated KES 16.3 billion to Kenya Airways as a shareholder loan.
Shockingly, there was no signed loan agreement or established mechanisms to recover the funds, raising concerns about the lack of proper oversight by the National Treasury.
Gathungu’s report highlighted that the struggling national airline received the funds over two years without the necessary shareholder loan agreement in place. The National Treasury, responsible for managing public funds, was faulted for releasing money without ensuring an effective mechanism for recovery.
“The shareholder loan agreement had not been signed by the Government and Kenya Airways as at the time of disbursing the funds,” the report emphasized. Gathungu underscored the failure of the National Treasury in its fiduciary role, putting taxpayer money, withdrawn under a special constitutional provision, at “high risk.”
The auditor general urged the National Treasury to formalize all loan agreements before releasing funds, stating, “This lapse should be addressed immediately by both parties before further loss of public funds through avoidable interest costs and exchange losses.”
The audit report delivered a damning assessment of Kenya’s government, assigning a failing grade to budget oversight. It pointed out poor planning and transparency issues in government spending, particularly under the constitutional Article 223, where expenditures lawfully bypass normal budget channels.
Expenditures under Article 223 skyrocketed by 13,299% over the past decade, reaching KES 147.39 billion in the most recent budget year. Gathungu recommended that the government issue clearer guidelines on triggers for spending under Article 223 to prevent loopholes and safeguard public resources.
The special audit covered government spending over the past nine years and also highlighted wasteful use of public funds in subsidies that failed to achieve their intended purpose, as well as challenges in relief food distribution.
