Nancy Gathungu: Treasury Gave Kenya Airways KSh 16b Without Recovery Plan

• The Office of the Auditor General is supposed to conduct a special audit on the use of public funds under Article 223 of the constitution, which allows the withdrawal of non-budgeted funds
• Treasury funded Kenya Airways (KQ) with a staggering KSh 16.27 billion for the financial year 2022/2023 without any loan agreement or recovery plan
• The Auditor General's report raises broader questions about financial oversight and accountability in the disbursement of public funds

Elijah Ntongai, a journalist at TUKO.co.ke, leverages more than three years of expertise in financial, business, and technology research, providing insights into both Kenyan and global economic trends.

The Auditor General, Nancy Gathungu, has revealed that the Treasury funded Kenya Airways (KQ) with a staggering KSh 16.27 billion for the financial year 2022/2023 without signing a loan agreement or a clear recovery mechanism.

The Gathungu disclosed this in the special audit report on the use of public funds under Article 223 of the Constitution, which permits the withdrawal of funds by government institutions for emergency purposes not anticipated during budget formulation.

Additionally, the audit uncovered that KQ did not establish a designated government account to receive the loan as required by the law.

National Treasury at fault

The shareholder loan agreement between the government and Kenya Airways PLC was not signed when the funds were released.

This lack of a formal agreement raised concerns about the absence of explicit contractual terms for the repayment of the loan, and the National Treasury, in its fiduciary role, was faulted for releasing public funds without a robust mechanism for recovery.

Financial risks

As the government holds a significant 48.9% stake in Kenya Airways, the lack of a loan agreement and recovery plan poses a considerable financial risk of losing the funds.

The Auditor-General's report noted the urgency for the Treasury and KQ to establish proper protocols, agreements, and recovery mechanisms for the funds.

This revelation raises broader questions about financial oversight and accountability in the disbursement of public funds and the need for transparent processes to safeguard public resources.

Discrepancies in funds released for fuel subsidy

In other related news, the auditor-general flagged discrepancies in the authorisation, release, and use of advance payments released to oil marketers for price stabilisation in a review of expenditures incurred for the financial year 2022/2023.

In the report, KSh 2.2 billion was attributed to administration costs, and according to Gathungu, these costs were irregularly included in the pump price build-up, thus increasing the cost of petroleum products.

"The stabilisation programme may have been hampered by avoidable additional costs which were passed on to the consumers and may not have cushioned the citizens from the high pump prices," read the report in part.