Youth Fund run down, facing uncertain future — auditor

 

The future of the Youth Fund is in doubt, eliciting concerns about the viability of the grants the government has been providing women and youth groups.

Auditor General Nancy Gathungu in a new report has revealed that the Youth Enterprise Development Fund is currently operating on a deficit of Sh42.7 million.

She said the deficit situation has prevailed over the past five years. The fund had a Sh163 million budget shortfall in the fiscal year ending June 2019.

“This has eroded the capital invested in the revolving fund and impaired the ability of the fund to sustain its core mandate and services,” Gathungu said in the report tabled in Parliament recently.

In an adverse opinion, the auditor put the YEDF management on the spotligh for failing to disclose the sorry state of the fund in its financial statements for the year to June 2020.

"This material uncertainty which casts significant doubt on the continued ability of the fund to discharge its mandate in the foreseeable future has not been disclosed in the financial statements," Gathungu said.

She argued that in the wake of the anomalies, the accuracy of financial statements for the financial year ending June 30, 2020 could not be confirmed.

Gathungu further flagged errors in the financial statement and unsupported statement of cash flows, citing an unexplained figure in respect of operation profit.

“In my opinion, the financial statements do not present fairly, the financial position of the Youth Enterprise Development Fund as at June 30, 2020,” the report reads.

“The statements do not present fairly, its financial performance and its cash flows for the year ended in accordance with International Public Accounting Standards and do not comply with the Public Finance Management Act, 2012,” Gathungu added.

There are concerted efforts by the government to merge the funds – Youth Enterprise, Women Fund and Uwezo Fund into one kitty - Biashara Fund.

The Youth Fund had loaned Sh5.8 billion to nearly 1.16 million youth since inception, the main concern being how much this has impacted the lives of beneficiaries.

Among the issues flagged in the scathing audit is that the YEDF is yet to recover rent deposit of about Sh1 million for offices that it vacated in 2017.

“The management did not provide an explanation for not recovering the amounts. No provision for bad and doubtful debts has been provided for in the financial statements,” she said.

Rent collected from tuck shops run by the fund was also not accurately reported and were understated by Sh1 million.

The fund owned 157 tuck shops, all of which were occupied by tenants for the 12 months of the year and was expected to collect Sh2.9 million but reported Sh1.9 million.

“The management did not provide an explanation for the difference,” Gathungu said on the revenue understated by about Sh1 million.

The audit further revealed that the YEDF management has been using monies meant for youth groups to fund the entity’s operations.

“The management of the fund has over time utilised Sh1.1 billion of the revolving fund to finance recurrent expenditure thereby negatively affecting the sustainability of the fund,” the auditor said.

“No reallocation approvals were availed for audit verification to support utilisation of conditional grants on recurrent expenditure,” she added.

Further to this, the Fund was found to have irregularly spent Sh30 million to construct bus shelters in public places on land which doesn’t belong to the fund.

“The property does not satisfy the conditions set out under International Public Sector Accounting Standard and therefore does not qualify to be accounted for as investment property,” the report reads.

Also doubted was debtors balance of Sh2.6 billion which could not be confirmed as the amount was not supported by detailed listing of debtors.

“Further, no ageing analysis was provided to support the above debtors’ balance and impairment figure applied on the revolving fund balance.”

Gathungu further raised concerns over irregular imprests issued to the former CEO and chairman at Sh1.9 million and Sh292,800 respectively.

The auditor said the recovery of the advances was doubtful and no provision for impairment has been made in the financial statements.

YEDF is also on the spot for failing to settle debt owed to a contractor of Sh5.5 million since June 2014 and Sh4.6 million outstanding since June 2015 amounting to Sh10.2 million.

Gathungu said no satisfactory explanation has been given for failure to settle the accounts payables in the year to which the expenses were incurred or subsequent financial years.

“In the circumstances, the existence and validity of the trade payables amount of Sh10,161,795 as at June 30, 2020 could not be ascertained,” she said.

The fund was also found to have not reported correctly the value of hatching machines that were procured in 2012-13.

Gathungu observed that the items continue to be carried in the books at a lower cost of Sh60,000, yet Sh190,000 is the current carrying value.

She also queried the payment of Sh6.7 million for legal services to recover Sh180 million that was paid to a consultant.

“The fund used request for quotation even though the contract sum was above the threshold of Sh1 million for using the method in line with Public Procurement and Assets Disposal Act, 2015,” Gathungu said, citing the fund management for non compliance with procurement law.    BY THE STAR