Misappropriation of Donor Funds

Kenya’s Strategic location as a gateway to Eastern Africa and its well-developed connections to the rest of the world makes it an important hub of business attracting millions of foreign investors, travel and large regional relief operations. This advantage, which has ensured Kenya’s economic survival even in the face of domestic and global hardships, has its serious downside.

The Government of Kenya annually distributes a huge sum of money to the public and appoints various individuals to be in charge who are supposed to oversee and ensure those projects are complete.  Also, we receive funds from foreign investors and countries.

Various incidents that there have been misuse of public funds;

Through a report of joint Senate Committee on Health established criminal culpability on part of public official in purchase and supply of Covid- 19 emergency commodities at Kenya Medical Supplies Authority(Kemsa) that led to irregular expenditure of public funds.

Another investigation done on the misappropriation of public funds on the Arror and Kimwarer dam Scandal that led to loss of billions of shillings in dubious circumstances. The Public Finance Management Act states that one commits a crime if they fail to comply with procurement procedures.

Some of the counties you find that the Governors use the allocated funds to facilitate the flow of activities for their own personal gain.

What leads to the misuse?

Lack of good documentation – Through the audits we have done of various organizations, we find it hard to ascertain the amount of money spent since the client say the invoice got lost.

Ineffectiveness of controls – You do find that the controls in place are inadequate or not working thus creating loopholes for misappropriating of funds.

Integrity – Most of the time you find people are involved in stealing billions of money in the company and give out bribery to find employment elsewhere. This act of stealing continues that person since he/she knows can influence the power of bribery to people.

Importance of conducting audit to businesses:

Audits are independent and systematic evaluation or examination of statutory records, documents, books of accounts including vouchers of organizations or businesses. They are conducted or performed to determine if the non-financial disclosures and financial statements present a true and fair view of the business’s financial status. It is an activity that attempts to ensure that books of accounts are properly recorded and maintained as required by law.

Auditors obtain evidence and formulate opinions based on the evidence and educated judgment that is communicated through an audit report. The areas which are commonly audited include Secretarial & Compliance Audit, Quality Management, Internal Controls, Water Management, Project Management, and Energy Conservation. For small businesses, a financial audit is usually done. Through financial audits, businesses can have a better understanding of their financial position. It helps auditors highlight areas of success or concern in a small business. Audits also help the management team find pathways toward future success.

Auditing evaluates the effectiveness of the internal controls of a company. Keeping an effective system of internal controls is important in achieving the business objectives of a business. Obtaining reliable financial information on a business’s operations, preventing or avoiding fraud and misappropriation or misuse of assets and minimizing costs are very important in the operations of a business. It is very important that independent and external auditors contribute to the audit systems of a company in different but significant ways.

Auditors assess risks of misstatement. Auditors assess the risk of making material misstatements in a business’s financial reports. Without an audit system or internal controls, a company will not be able to create reliable financial reports for external or internal purposes. It will not be able to determine how to allocate its resources and is unable to know which segments or product lines are profitable or not.

Audits help in fraud prevention and detection. Internal audit helps prevent fraud in businesses. Regular analysis of the operations of a company and maintaining rigorous internal control systems help in detecting and preventing various kinds of fraud and accounting irregularities.

Who are we?

MGK Consulting is an independent audit and accounting firm established in 1999 which is accredited by the Institute of Certified Public Accountants of Kenya (ICPAK) and a member of Nexia International. We offer both financial and advisory services to both Local and international clients operating in or looking to set up in Kenya.


Mayfair Business Centre,2nd Floor Off Parklands Road.

P.O. Box 6358-00100 Nairobi,

+254 715 248882 | +254 733 533449

info@mgkconsult.co.ke | www.mgkconsult.co.ke

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