A fresh audit has cast a spotlight on the National Environment Trust Fund (NETFUND), revealing a string of compliance and management shortcomings ranging from payroll irregularities and procurement breaches to concerns over how the agency is structured and staffed.
The issues emerged during a session on Wednesday before the National Assembly's Special Funds Accounts Committee (SFAC), where officials from the Fund were called upon to respond to findings contained in the Auditor-General's report for the 2024/2025 financial year.
Among the concerns raised was the failure by NETFUND to comply with the one-third basic pay requirement for some employees. Auditors established that seven staff members received net salaries below the legal threshold in different months during the period under review.
"Review of payroll records for the period under audit revealed that seven (7) employees in different months in the year received net pay less than a third of the basic pay contrary to Part C.1(3) of the provisions of the Human Resource policies and procedures manual for the public service, 2016 and in the circumstances, management was in breach of the law," the OAG told MPs.
Responding to the findings, NETFUND Chief Executive Officer Samson Toniok said the situation arose following the introduction and adjustment of various statutory deductions that affected employees' take-home pay.
"NETFUND acknowledges instances of non-compliance with the one-third rule for certain staff members. This has been largely occasioned by increased statutory deductions introduced during the year that were unplanned for. The introduction of Housing Levy and the amendment of Social Health Insurance Fund rates coupled with the implementation of the National Social Security Fund Act, 2013 contributed to this violation. However, the HR Department has since encouraged the affected staff to review and adjust their personal deductions accordingly to ensure compliance going forward."
The audit also questioned the Fund's adherence to procurement regulations, specifically the requirement to deduct the Public Procurement Capacity Building Levy from eligible contracts.
Lawmakers heard that NETFUND did not deduct the mandatory 0.03 per cent levy from contracts entered into after September 1, 2024. Auditors further noted that management did not provide a summary of the contracts affected by the omission.
According to Toniok, the lapse was linked to delays in configuring the institution's payment system.
"This was occasioned by the delayed configuration of the SAGE ERP system by the service provider that is used to make payments as it is an automated process. However, we have since made the amendments and have fully implemented the directive."
Another matter raised by auditors related to staffing levels within the organisation.
The report noted that NETFUND's approved establishment consists of 77 positions, including 38 technical officers and 39 support staff. However, records reviewed during the audit showed a different picture, with 42 technical officers and only eight support staff reflected in the payroll.
Auditors warned that the imbalance could have both financial and operational implications.
"In the circumstances, the over-employment may have led to loss of public funds, whereas the shortfall has the negative effect of derailing the delivery of services."
NETFUND, however, disputed the interpretation of the staffing figures and maintained that its workforce is distributed across various departments according to operational needs.
Toniok explained that technical officers serve departments responsible for programmes, resource mobilisation and fund management, while support staff is spread across corporate services, strategy and planning, internal audit, supply chain and legal services.
"Technical staff are drawn from the Core departments comprising the Directorate of programmes, Directorate of resource mobilization, and Fund management services. Support staff, on the other hand, are drawn from the Directorate of corporate services, Directorate of strategy & planning, Internal audit department, Supply chain department, and Legal services department.’’
The agency further stated that it currently has an equal number of technical and support staff.
"Currently, the total number of staff under Support services is 27, while the total number of staff under technical services is 27. This brings the total staff membership for NETFUND to 54, representing 70 percent of the approved establishment. The absorption of 8 staff members from the defunct Kenya Water Towers Agency (KWTA) has enhanced the in-post workforce to current staffing levels.’’
The CEO told the committee that financial constraints have prevented the Fund from filling all available positions.
"NETFUND has had insufficient funds to undertake recruitments and fill the staff establishment as required and has been lobbying with the National Treasury to have this issue addressed."
While reviewing the audit findings, Committee Vice Chairperson Dawood urged the Fund to sustain efforts aimed at improving compliance and accountability.
He directed management to address all outstanding issues highlighted by auditors and ensure public resources are managed in accordance with the law.
Toniok also used the appearance before lawmakers to outline NETFUND's work, noting that the institution supports research, scholarships and resource mobilisation initiatives.
He said the Fund has continued to pursue funding opportunities from development partners and international climate financing mechanisms.
"We've not received any seed capital from the exchequer, we only receive recurrent budget, and we are relying on donors, and we can say that We've done well in resource mobilization."
The CEO told lawmakers that the agency had already secured funding for climate-related programmes through international partners.
"We've secured 15 million USD from the adaptation fund for two projects, we have the climate investment fund which has availed 38million USD for a program in Ewaso-Nyiro...."