AUDIT UNVEILS FUEL SUBSIDY SCANDAL

INDIVIDUALS in former President Uhuru Kenyatta’s regime face investigations after it emerged that the government may have lost Sh34 billion (US$263 million) within 15 months before the August 9, 2022 General Election under the fuel pump prices stabilisation programme.

The possible loss, which has been exposed by Auditor-General Nancy Gathungu in a special audit report to Parliament, includes Sh554.72 million overpaid to 11 oil marketing companies (OMCs).

The Sh34 billion, according to fiscal analysts at the Parliamentary Budget Office (PBO), is enough to construct 3,400 boreholes complete with all the fittings, or build 6,800 fully equipped laboratories in secondary schools, or 17,000 classrooms. The amount was meant to stabilise fuel prices to cushion Kenyans against price hikes driven by fluctuation in global oil prices but may have ended up in the pockets of a few individuals.

The special audit covered the period April 1, 2021 to June 30, 2022 and has flagged various avenues through which the public funds may have been stolen either by commission or omission by government officers.

They include irregular utilisation of Sh22.68 billion from the Petroleum Development Levy Fund (PDLF), overpayment of OMCs and irregular advance sales prices stabilisation compensation of Sh5.32 billion. Also flagged are irregular demurrage charges Sh3.2 billion passed to the consumers through high pump prices and Sh2.21 billion in irregular administrative costs.

The special audit puts the National Treasury Cabinet Secretary at the time on the spot over the Sh22.68 billion from the PDLF. The PDLF Act of 1991 requires the fund’s monies be used in the development of facilities for the distribution or testing of oil products. The law which came into force on July 15, 2020, further provides that the cash shall also be used for stabilising the local petroleum pump prices in instances of spikes occasioned by high landed costs above a threshold determined by the Energy and Petroleum Regulatory Authority (Epra).

The audit found that of the Sh49.68 billion disbursed by Treasury from the PDLF between July 2020 and June 2020, Sh18.14 was transferred to the State Department for Infrastructure to fund various road projects in violation of the law. The projects were undertaken Kenya National Highways Authority (Sh531.78 million), Kenya Rural Roads Authority (Sh17.16 billion) and Kenya Urban Roads Authority (Sh373 million). Some Sh75 million went to the ministry for operations. Another Sh4.54 billion was transferred out of the PDLF to the Ministry of Energy to “finance various projects not related to petroleum”. “Utilisation of the PDLF to fund road construction projects and transfers to the Ministry of

Energy was in violation of the PDLF Act, the Petroleum Development Levy Order of 2020 and the PFM (Public Finance Management) Act,” the audit report states.

It also notes that the Sh5.32 billion in irregular advance sales price stabilisation compensation was against the PFM Act, with the responsibility on the then Principal Secretary in charge of the Energy ministry and Director-General of Epra.

The document shows that the money was paid during the months of April, May and June 2022 as stabilisation for advance sales of local volumes. But there was no legal framework for advance payment and that “there is no evidence of recovery of this advance”.

“There is no documented compensation mechanism in place to ascertain the specific components of petroleum products that should be stabilised and the respective amounts to be paid to the OMCs,” the report states. -