The National Assembly has cleared the Rural Electrification and Renewable Energy Corporation (REREC) over audit concerns touching on its financial statements after lawmakers established that the errors identified by the Auditor-General had been corrected.
The decision, however, has opened a fresh line of inquiry into Kenya Power, with Parliament calling for an audit of completed electricity projects that are yet to supply power to the customers they were meant to serve.
The Public Investments Committee on Commercial Affairs and Energy, chaired by Pokot South MP David Pkosing, reached the conclusion after examining the corporation’s audited accounts.
In its report tabled before the House, the committee said REREC had satisfactorily addressed the accounting issues that had been flagged during the audit process.
The Auditor-General had questioned differences recorded in the corporation’s financial statements involving computer assets, intangible assets and the reporting of foreign exchange gains in an escrow account.
According to the committee report, “Note 32 to the financial statements reflects computers net book value of Sh. 59,307,000 while re-computation revealed Sh.55,483,00 resulting in an unexplained and unreconciled variance of Sh.3,824,000.”
It further stated that “Note 33 to the financial statements reflects intangible assets net book value of Sh.61,212,00 while re-computation revealed Sh. 37,981,00 resulting in an unexplained and unreconciled variance of Sh. 23,231,000.”
The report also noted that “The Corporation’s Escrow US Dollar cashbook was adjusted by Sh.46,172,436 to cater for the exchange rate gain which was not reported as exchange gain in the statement of the financial performance.”
Because of the discrepancies, auditors had initially indicated that they could not verify the accuracy and completeness of the corporation’s financial statements.
During the committee sittings, REREC Chief Executive Officer Dr. Rose Mkalama explained the accounting entries and maintained that the corporation had followed its financial policies.
She told lawmakers, “The net book value for computers and related hardware reported under the note 32 is Sh. 59,306, 507.92 and according to the corporation’s accounting policy, these assets are depreciated at a rate of 33.3 percent per annum on a pro-rata basis.”
On the issue of the escrow account, Mkalama explained, “An Escrow account in the USD for the repayment of the Garissa Power Plant loan as at the reporting date, the balance in the escrow account was USD 12, 302,710.03 and was translated using an exchange rate of Sh. 101.85 per USD instead of the applicable closing rate as at 30th June 2021 which was Sh. 107.85 per USD resulting in a foreign exchange gain amounting to Sh. 73,862.276.64 and not 46, 172,436 as reported in the audit report.”
After considering the explanations and reviewing the supporting documents, the committee found that the corporation had rectified the issues raised during the audit.
Its report states, “At the time of examination, that the management had made the necessary amendments to the financial statements including updating the ledgers, reversing the wrongly posted items and making adjustments to foreign exchange and the matter now stands resolved.”
Lawmakers also looked into audit findings concerning delays in completing and commissioning electricity projects. REREC attributed the delays to prolonged wayleave acquisition, saying negotiations with landowners and engagement with other stakeholders took longer than expected before construction could proceed.
The committee, however, raised concern over completed projects that remain without customers despite being ready for use.
REREC told the committee that 51 completed and commissioned projects worth Sh.220,898,613 had not achieved their intended purpose because Kenya Power had not connected the targeted consumers in line with the Service Level Agreement between the two agencies.
To determine the cause of the delays, the committee directed the Office of the Auditor-General to examine Kenya Power’s handling of customer connections.
The report states, “The office of the Auditor general to audit the unconnected customers from the Kenya power and lighting company (KPLC) end as the mandate for customer connection falls within there jurisdiction.”
The committee said the review should establish why completed electricity infrastructure remains underutilised even after projects have been handed over, with attention now shifting to the final stage of connecting homes and businesses to the power network.