Auditor-General Nancy Gathungu has raised a red flag over the Sh22.7 billion irregularly withdrawn from the Petroleum Development Levy Fund (PDLF) to finance road projects contrary to the law.
A special audit by Ms Gathungu’s office, covering April 1, 2021, to June 30, 2022, also questioned the Sh5.32 billion in irregular advance sales price stabilisation compensation.
The audit, however, revealed that cash from the PDLF was illegally diverted to road development and maintenance agencies and the Energy Ministry. “Utilisation of the PDLF to fund road construction projects and transfers to the Ministry of Energy was in violation of the PDF Act, the Petroleum Development Levy Order of 2020, and the Public Finance Management Act,” a report from the special audit partly said.
However, the audit does not state the various road projects that were financed by the PDL funds.
The Petroleum Development Fund Act requires that collections into the PDLF be used to stabilise pump prices and cushion consumers. It states that the fund shall be used for the development of the oil industry, including 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).
“There shall be paid out of the fund such monies as are necessary for the development of common facilities for the distribution or testing of oil products and development of the oil industry,” states section 4 (4) of the PDL Act.
The law came into force on July 15, 2020. The PFM Act mandates the National Treasury to ensure that the PDLF monies are spent by the law.
“The administrator of a national public fund shall ensure that money held in the fund, including any earnings or accruals, is spent for the purposes for which the fund is established,” reads section 24 (7) of the PFM Act.
However, despite the PFM Act and PDL Act ring-fencing the fund, previous violations of the fund have been reported by the auditors.
For instance, the audit established that of the Sh49.68 billion disbursed by the 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 by the country’s three road agencies.
They include Kenya National Highways Authority (Kenha) which was allocated Sh531.78 million, Kenya Rural Roads Authority (Kerra) Sh17.16 billion, and Kenya Urban Roads Authority (Kura) Sh373 million with Sh75 million left at the ministry headquarters 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 sector development.”
Public Accounts Committee (PAC) chairman John Mbadi said it’s unacceptable for the Treasury, “that is charged with the responsibility of ensuring prudent use of public resources to be the one violating the law.”
“It is quite unfortunate that the National Treasury has been called out by the auditor-general for violating the laws it’s supposed to protect and in the process, overseeing the abuse of public funds,” said Mr Mbadi.
Nonetheless, the PAC chairman said that the individuals at the Treasury “who abetted this illegality will not be left unscathed.”
“When the time comes, however long it takes, those responsible will be called to account for their acts of commission or omission,” said Mr Mbadi.
The audit also flagged the irregular demurrage charges of Sh3.2 billion passed on to the consumers through high pump prices and Sh2.21 billion in irregular inclusion of administrative costs for stabilisation in pump prices.
There is also the Sh5.32 billion in irregular advance sales price stabilization compensation, contrary to the PFM Act with the audit laying blame on the then Principal Secretary in charge of Petroleum at the energy ministry, Andrew Kamau and Director-General of Epra, Daniel Kiptoo.
Epra sets the petroleum pump prices every 14th day of the month.
