Sh24.5 Billion Worth of Stipend Can't Be Accounted For By the State Department for Social Protection
Kevin Namunwa  |  Jan 22, 2021

Ksh 24.5 billion worth of stipends meant to benefit those who’ve been hit by the pandemic cannot be accounted for by the State Department for Social Protection. The money was supposed to have been disbursed to the elderly, the disabled and orphans across the country, raising questions on whether the amount reached its intended beneficiaries.

According to the department’s Auditor-General Nancy Gathungu, it has no records for the cash transfers effected in the year to June 30, 2019 through four contracted financial institutions, including Co-operative Bank of Kenya  , Post Bank, Equity Bank   and KCB Bank  .

An audit revealed that the department did not have payrolls and reconciliation reports for each of the service providers.

It also could not provide other key accounting records such as credit reports, dormant accounts reports, performance reports and balance returned to principal by clawback.

“Management has explained that it was unable to access the information, though it was enshrined in the contract, due to the confidentiality clause of the Banking Act,” Ms Gathungu said, noting that the accuracy and completeness of the amount disbursed through the banks could not be ascertained.

As per the contract agreements, the department was required to provide to the individual payment service providers (PSPs) reconciliation reports showing the funds received and disbursed to the beneficiaries.

The Banking Act ordinarily dictates that bankers cannot divulge information on their clients to third persons, without the express consent of the customer unless they are compelled to do so by a court order. The banks can also make disclosure on clients in special circumstances of public interest or protection of the banks’ own interests.

And in what raises further concern about the probity of the cash transfer scheme, an audit revealed that the Postal Corporation of Kenya (PCK) still held Sh169.3million in unpaid cash transfer balances —long after its agency contract with the department lapsed.

The department contracted PCK as an agent to disburse cash to the vulnerable beneficiaries throughout the country.

“A review of the matter during the year, revealed that the status had not changed and the amount of Sh169,300,000 due to the State Department was still outstanding. Management has not demonstrated efforts being made to recover this long overdue refund from PCK,” Ms Gathungu said.

The Auditor-General also revealed that some beneficiaries of the stipends were forced to sign up with specific service providers.

“The contractual agreement with the PSPs provides for beneficiaries to identify a convenient bank of their own choice. However, information from field audit inspections revealed that some beneficiaries were coerced into enrolling into PSPs they had not applied for. The affected beneficiaries stated that their accounts were opened at KCB without their consent,” she said.