Uhuru and Treasury CS Ukur Yatani implicated in KSh 34B fuel pump program loss

The Kenyan government may have lost KSh 34 billion in just 15 months before the August 9, 2022 General Election under the fuel pump prices stabilization program.

The loss was recently revealed by Auditor-General Nancy Gathungu in a special audit report to Parliament. The report also highlighted various ways through which public funds may have been stolen by government officials, including the overpayment of 11 oil marketing companies (OMCs) by KSh 554.72 million.

The funds were meant to stabilize fuel prices to cushion Kenyans against price hikes driven by fluctuation in global oil prices. However, they may have ended up in the pockets of a few individuals.

The KSh 34 billion lost, according to fiscal analysts at the Parliamentary Budget Office (PBO), is enough to construct 3,400 boreholes, build 6,800 fully equipped laboratories in secondary schools, or 17,000 classrooms. The special audit report covered the period from April 1, 2021 to June 30, 2022. It found that irregularities in the utilization of KSh 22.68 billion from the Petroleum Development Levy Fund (PDLF) were among the possible avenues through which public funds may have been lost.

There were also irregular advance sales prices stabilization compensation of KSh 5.32 billion, irregular demurrage charges of KSh 3.2 billion, and irregular administrative costs of KSh 2.21 billion.

The report puts the National Treasury Cabinet Secretary at the time on the spot over the KSh 22.68 billion from the PDLF. The PDLF Act of 1991 requires that the fund’s monies be used in the development of facilities for the distribution or testing of oil products. It also provides that the cash shall be used for stabilizing the local petroleum pump prices in instances of spikes occasioned by high landed costs above a threshold determined by the Energy and Petroleum Regulatory Authority (EPRA).

However, the audit found that of the KSh 49.68 billion disbursed by the Treasury from the PDLF between July 2020 and June 2020, KSh 18.14 billion was transferred to the State Department for Infrastructure to fund various road projects in violation of the law. Another KSh 4.54 billion was transferred out of the PDLF to the Ministry of Energy to “finance various projects not related to petroleum.”

The audit report also notes that the KSh 5.32 billion in irregular advance sales price stabilisation compensation was against the Public Finance Management (PFM) Act, with the responsibility on the then Principal Secretary in charge of the Energy Ministry and Director-General of EPRA.

The report further notes that the OMCs were allowed to determine the compensation framework that was used “and they could vary the conditions without legal standing or fuel pump prices”. The stabilisation was not anchored on any law, directive, or circular, and the committee formed to develop the stabilisation mechanism was never gazetted, formalized, or legalized. The KSh 2.21 billion in irregular administrative costs for the stabilization of pump prices was against Regulation 4 of the Energy (Petroleum Pricing) Regulations of 2010, putting the Petroleum and Mining PS and DG EPRA, at the time, on the spot. The amount was paid as administration costs from the April-May-August 2021 and June 2021-July 2022 pricing.

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