Ifmis' big, fat, tamper-proof lie exposed
Auditor-General Nancy Gathungu.
By Peter Mburu
Nation Media Group
What you need to know:
- The office of the US Trade Representative warned that IFMIS is vulnerable to manipulation.
- This is even as the National Treasury maintains that the IFMIS system is “tamper-proof.”
Fifteen governors could have diverted upto Sh17 billion approved by the Controller of Budget (COB), new revelations debunking the narrative that the government’s Integrated Financial Management Information System (Ifmis) has always been tamper proof, have shown.
A new audit reveals that in the year ending June 2023, the 15 counties cancelled 10,472 transactions that the COB had already approved for spending, and could largely not explain how they ended up spending the money.
In some instances, after voiding the transactions, the counties diverted funds into uses that had not been approved by the COB, the Auditor-General reveals in her latest report on county executives.
“Analysis of the Ifmis system payments indicated that 1,103 transactions amounting to Sh874,756,305 were voided during the year under review. However, no evidence was provided to confirm that the COB was informed of the voiding of the payments so as to make necessary adjustments and approval.
“In addition, review of payment details revealed that two transactions amounting to Sh15,914,003 were paid but could not be traced to specific approved budget line item,” Auditor-General Nancy Gathungu noted on Trans Nzoia County.
It is a case of a series of activities where counties apply for approval of spending from the COB, then after the COB approves, they cancel those transactions and pay others at a level where the COB does not know about what is happening.
The Auditor-General has flagged the mess, which is now spread across, as a loophole within the IFMIS that is enabling public entities to spend public money as they please, and at a level where the main gatekeeper, the COB, can’t see, exposing a possible wider problem within the IFMIS- an oracle based Enterprise Resource Planning (ERP) system used at national and county governments to mainly handle public procurements.
In the Auditor-General’s report, she notes that in 2022/23, the 15 counties voided transactions valued at Sh18.3 billion.
Trans Nzoia County cancelled 1,060 transactions valued at Sh812.6 million that could have been approved for spending by the COB and management could not confirm if they were subsequently paid.
The county did not inform COB Margaret Nyakang’o of the subsequent cancellation, which happened after Dr Nyakang’o approved them.
“There was therefore possibility of voiding transactions that had been approved by COB for payment and replacing them with un-approved payments. In the circumstances, controls in place to authorize and void transactions and later approve for payment could not be confirmed,” Ms Gathungu said.
Mombasa County, which cancelled 970 transactions valued at Sh5.2 billion - the highest value of voided transactions by any county on the IFMIS during the year - could not produce documents, including voided payment vouchers, requests to void, Treasury approvals and exchequer requisitions from the COB.
The Auditor-General further noted that while the county did not produce the documents, it also did not provide proof that the voided payments were reconciled with its pending bills and canceled payments, thus putting into doubt, how the money was actually used.
COB Margaret Nyakang’o on Tuesday told the Nation that while voiding could be justified in some cases, she had no access to actions occurring after she approved payments.
“I only approve withdrawals (from the County Revenue Fund), not payments. Since errors can be identified at any time, voiding can be justified. However, I have no access to the County payments or bank statements and cannot therefore explain the voiding,” Dr Nyakang’o said.
The revelations by Auditor-General Gathungu come just days after the office of the United States Trade Representative (USTR) warned that the system - IFMIS - is vulnerable to manipulation and hacking, which exposes Kenya to possible loss of billions of shillings.
“US companies have expressed concerns about Ifmis due to insufficient connectivity and technical capacity in county government offices, apathy from county government officials, central control shutdowns, and security gaps that render the system vulnerable to manipulation and hacking,” said US Trade Representative, Katherine Tai.
This is even as Treasury, as one official from Ifmis told the Nation, maintains that IFMIS is “tamper-proof.”
In Homa Bay, the Auditor-General indicated that out of the 516 transactions valued at Sh1.4 billion the county cancelled, the county provided documentation to support the voiding of transactions valued at Sh1.17 billion.
“In addition, (the county) Management has indicated, without providing evidence, that the voiding of the remaining transactions of Sh245,848,365 was as a result of lack of sufficient vote heads after upload of the second and third supplementary budgets for the year,” Ms Gathungu indicated while flagging a lack of proper internal controls over voided transactions for the county.
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Other counties that could neither provide explanations for cancelling transactions after approval by the COB, nor produce documents to show they were allowed by Treasury and informed the COB included Kwale (1,495 transactions), Taita Taveta (1,077 transactions), Meru (729 transactions), Siaya (1,103 transactions), Baringo (249 transactions) and Kisumu (811 transactions).
The five counties cancelled transactions valued at about Sh7 billion.
“Further, the voided payments were not disclosed as pending accounts payable and the utilization of funds meant for the voided transactions could also not be confirmed,” the Auditor-General noted on Kwale County.
The report notes that the counties have not explained how they spent the money for the approved spending after they cancelled the approved transactions.
In Migori, the Auditor-General noted that the county could not provide evidence for its claims that it cancelled 336 transactions valued at Sh322.5 million due to a Central Bank directive “to void all pending transactions in IFMIS and Internet Banking System due to non-release of exchequer disbursements”, to correct some errors and due to a change in priorities following the county’s supplementary budgets.
