The Auditor General has issued a damning adverse opinion on the financial statements of the County Government of Kilifi’s Receiver of Revenue, exposing widespread inaccuracies, unsupported figures, unexplained variances, and systemic weaknesses in revenue management.
The findings paint a troubling picture of a county financial system riddled with inconsistencies, weak controls, and possible breaches of the law, raising serious concerns about accountability and the safeguarding of public funds.
At the core of the audit findings is the lack of accuracy and reliability in reported revenue figures. The county reported own-source revenue of KSh 1,003,644,804, yet comparisons with the Kilifi Pay revenue system revealed unexplained variances across multiple revenue streams.
For instance, single business permits showed a discrepancy of KSh 18,557,720, while property rent had a variance of KSh 14,237,817, among others. These inconsistencies were not explained, casting doubt on the integrity of the county’s revenue reporting.
Further discrepancies were identified in the opening balances. The county reported a beginning balance of KSh 728,756,252, which did not align with prior audited statements that reflected KSh 816,045,933, resulting in an unexplained variance of KSh 87,289,681. Additionally, adjustments referenced in the financial notes lacked proper support and failed to comply with National Treasury reporting templates, further weakening the credibility of the statements.
One of the most alarming revelations relates to massive undisclosed revenue arrears. While the official statements reflected zero arrears for property rent and business permits, county records showed KSh 45.7 billion in property rent arrears and KSh 139.8 million in house stall arrears. These figures were not disclosed in the financial statements, and no aging analysis was provided, making it impossible to assess recoverability or enforce accountability.
The audit also uncovered extensive cases of unsupported revenue streams. Key income sources such as physical planning approvals, conservancy fees, liquor licenses, agriculture revenue, and property rent lacked proper documentation, registers, or supporting schedules. In some cases, records were missing entirely for certain periods, while in others, reported figures conflicted with system data. This included inconsistencies where revenue was reported in statements but not reflected in performance summaries or digital systems.
Particularly concerning were the irregularities in cess revenue. The county reported KSh 233.5 million, yet bank records showed KSh 200 million, while the Kilifi Revenue Management System reflected only KSh 93.4 million, leaving massive unexplained gaps. Additional issues included unreported Mpesa reversals and long-outstanding, unreconciled transactions, further highlighting breakdowns in financial controls.
The county’s ability to collect revenue also came into question, with KSh 31 billion in unpaid land rates, penalties, and interest identified as outstanding. Despite this massive debt, only KSh 18.1 million was recovered during the year under review, with no adequate explanation provided for the poor recovery performance.
In terms of financial assets, the county reported KSh 676 million, including bank balances and cash in hand. However, auditors were unable to verify these figures due to missing cashbooks, reconciliation statements, and lack of supporting documentation. Even the reported cash in hand of KSh 1.45 million was not backed by a board of survey certificate, raising further doubts about the existence and accuracy of these funds.
The audit further exposed irregular disbursements, including payments totaling KSh 45.1 million made to a contracted revenue collection company. These payments were deemed unlawful as they had already been deducted at source. Additionally, monthly payments were altered contrary to court orders, signaling non-compliance with legal provisions and contractual obligations.
Legal compliance issues extended beyond disbursements. The county was found to have violated court orders by directly collecting cess and parking fees between January 17 and February 3, 2022, despite a restraining order. During this period, the county collected KSh 22.4 million, effectively breaching judicial directives and raising questions about governance and adherence to the rule of law.
Governance weaknesses were also evident in the failure to properly designate a Receiver of Revenue. Although a designation was reportedly made in July 2022, inconsistencies in leadership within the finance department meant that proper accountability structures could not be confirmed during the audit period.
A major structural issue identified was the failure to fully automate revenue collection systems. The county continued to rely on both manual and electronic methods, creating loopholes for inefficiency and potential manipulation. Critical controls such as receipt tracking, daily collection verification, supervisory approvals, and cash surveys were either poorly maintained or entirely absent, severely compromising the reliability of the system.
The County Revenue Fund also reflected significant irregularities. Returns to the fund amounting to KSh 932 million could not be verified, while bank accounts holding over KSh 645 million included unexplained balances allegedly tied to escrow accounts without supporting evidence.
Budget performance further highlighted inefficiencies, with the county collecting KSh 1 billion against a target of KSh 1.37 billion, representing a 27% shortfall. Many revenue streams underperformed significantly, potentially affecting service delivery and project implementation. At a broader level, the county also experienced underfunding and under-disbursement in its overall budget, which could hinder development objectives.
Additionally, delays in exchequer disbursements were flagged, with 21% of funds released late, contrary to legal requirements. These delays may have disrupted project timelines and negatively impacted service delivery to residents.
Overall, the Auditor General’s report reveals a deeply troubled financial management system within Kilifi County, characterized by inaccurate reporting, unsupported transactions, weak internal controls, legal breaches, and poor revenue collection performance. The adverse opinion issued is a strong signal that the county’s financial statements cannot be relied upon, and urgent reforms are needed to restore accountability, transparency, and efficiency in the management of public resources.
