Wednesday, March 3, 2010

Treasury stares at the Noose

Treasury stares at the noose

http://www.standardmedia.co.ke/mag/InsidePage.php?id=2000004544&cid=457&

Updated 13 hr(s) 5 min(s) ago

By James Anyanzwa and John Njiraini                          

Government operations could be paralysed as Parliament prepares to put Treasury to task for ignoring its directive.

As Finance Minister Uhuru Kenyatta prepares to table before the House the Supplementary and Revised Budget for the rest of the financial year some time this month, some MPs are incensed by what they called "a deliberate decision by Treasury to ignore a directive to institute a forensic audit on the budgeting process."

Eight months ago, the Parliamentary Joint Committee on Finance and Budget compelled Treasury to undertake an independent forensic audit on the National Budget for the past three years following the infamous 'typing error' debacle that nearly exposed the public to a loss of Sh10.7 billion through the supplementary estimates.

Finance Minister Uhuru Kenyatta (right) and PS Finance Joseph Kinyua in a past media briefing. Photo: File

Although the directive by Parliament was adopted on May 13 last year, no move has been taken eight months down the line, something MPs interpret as arrogance by Treasury technocrats.

"I don't think anything has happened. There is no action that has been taken so far," a highly placed source who is a member of both the House Finance and Budget committees told The Financial Journal.

He said Parliament is preparing to put Uhuru to task to explain why Treasury ignored the directive as soon as he tables the Supplementary Budget for the remaining period of the current financial year.

This comes at a time when Treasury has embarked on the 2010/11 financial year budget preparation.

A fortnight ago, Finance PS Joseph Kinyua placed paid-up statements in local dailies inviting various stakeholders to submit their proposals for consideration in the 2010/2011 fiscal year budget in June.

Consult stakeholders

"In addition to compiling the annual Government estimates of revenues and expenditures for tabling in Parliament, the ministry similarly regards this period as important to consult stakeholders on key policy issues," he said.

The Financial Journal has established that the move is causing anxiety at the Treasury with fears that Parliament could delay the passing of the supplementary budget. This move now threatens to throw Government operations off track and affect the implementation of various development projects.

A supplementary budget usually introduces critical adjustments to the budget to reflect changed circumstances and allocate funds for immediate or emergency spending. This is because it contains major re-allocations within budgets of specific ministries.

Certainly, Uhuru will be seeking a Parliamentary approval to offset shortfalls in the

2009/2010 budget occasioned by unplanned spending on emergencies such as food, water and energy.

While it not clear how much money Uhuru will be asking Parliament to approve for spending, the Government cannot afford a protracted battle on the floor of the House that could result in any delay.

"I am yet to table the proposals before the Cabinet and therefore I cannot reveal how much we will be asking for," Uhuru was quoted saying last week.

The need for independent investigations became important after flaws were detected in the Supplementary Budget last year affecting 36 ministries.

Although Uhuru said the discrepancies were caused by a 'computer error', they expressed reservations about the budget making process and recommended that an external investigation be launched at the Treasury to find out if there have been anomalies in the last three budgets.

They also recommended that it must be established whether the discrepancies were as a result of computer software, malice or sabotage by Treasury officials and said officers responsible must be identified and punished.

However, investigations by The Financial Journal have established that while the audit was indeed crucial in restoring public confidence in the budget making process,

Treasury technocrats appear hesitant towards its implementation.

The decision by Treasury to sit on the directive and hope it would be forgotten has now come back to haunt the mandarins at Treasury Building.

Scuttle budget

Efforts to get comments from Treasury PS Joseph Kinyua failed as he was said to be in meetings while his phone went unanswered.

MPs are said to be plotting on how to corner the Minister by scuttling a quick passing of the supplementary budget.

Coming at a time when the House is hugely divided due to the manner in which the Government has been handling the war on graft, the move could prove costly to the economy.

The Government desperately needs funds to run its emergency programmes and complete ongoing projects.

Top on the list is a rescue package for a dairy sector teetering on the verge of collapse due to a milk glut that has resulted in thousands of litres of milk going to waste, and massive losses for farmers.

Co-operative Minister Joseph Nyaga has said he will soon petition the Cabinet to approve Sh1 billion for the industry.

Funds will also be required for resettlement and compensation of Mau forest settlers as the rehabilitation of the Mau Forest enters a crucial stage.

Also, Treasury will need to allocate funds for a referendum, as the constitutional review process enters the home stretch.

Besides, the Government will also be seeking to reduce allocations to various ministries after spending billions during the first half of this financial year on emergencies like importation of food due to a prolonged drought and addressing the energy crisis.

Though Treasury had hoped the directive to appoint an independent auditor to re-examine its financial activities would die a natural death, the inaction is now raising questions on Treasury's role, in as far as tackling corruption is concerned.

Since May 13 last year, several ministries have been hit with financial scandals, corruption and mismanagement.

The latest include the misappropriation of Sh100 million meant for the Free Primary Education programme, and the maize scandal that cost the country a staggering Sh2 billion.

While the two scams were investigated by independent forensic audits, critics believe a similar independent forensic audit of Treasury would have arrested the misconduct in the ministries at the centre of mega scandals.

Surprisingly, over Sh8 billion of the Sh10.7 billion identified in the flawed supplementary budget 'computer error' inquiry was actually in the budget of the Ministry of Education.

The Treasury audit was expected to determine and evaluate the objectivity, inadequacies, competence and due diligence of the institutions and persons engaged in the budget-making process.


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You can now collect and sign the petition for the forensic audit to Parliament here 
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