A new audit has revealed serious mismanagement of proceeds from crime recovered from suspects of graft and money laundering. Auditor General Nancy Gathungu’s review has identified significant issues with the fund, putting Asset Recovery Agency managers under scrutiny.
Gathungu’s report indicates that proceeds of crime are not properly recorded, inaccurately valued, and in some cases, cannot be traced. She notes that her review of the accounts for the fiscal years 2018-19, 2019-20, 2020-21, and 2021-22 uncovered several anomalies.
“The four financial statements were audited in January 2024, and the anomalies observed included inaccuracies in the financial statements, unconfirmed forfeited movable and immovable assets, and overstated preserved assets,” Gathungu said.
The auditor criticized the managers for failing to submit bank reconciliation statements to the National Treasury and for not maintaining proper fund records. Additionally, there was no register for the forfeited and preserved assets, and records for rental income from these assets were not kept as required by regulations.
Accounting officers are expected to brief the National Assembly on the steps taken to ensure that the financial reports accurately reflect the true financial position of the entity.
“In the circumstances, the management was in breach of the law,” Gathungu stated in the report for the year ending June 30, 2023.
The report, obtained by the Star, reveals that management did not provide documentation to support balances amounting to approximately Sh704 million.
“Management did not provide the cash book, corresponding bank confirmation certificate, and bank reconciliation statement to support the balance,” Gathungu said.
She added that the accuracy of the reported cash and cash equivalents balance of Sh703,959,433 as of June 30, 2023, could not be confirmed. The auditor also noted that variances between reported statements and recomputed values hindered the confirmation of the accuracy and completeness of the financial statements.
The audit has also uncovered issues with the valuation of assets. Five movable and three immovable forfeited assets, whose value remains undetermined, were reported to be worth Sh402 million, though they had not been valued at the time of the audit.
Regarding overstated preserved assets, the audit found that the reported balance of Sh1 billion was incorrect. There were assets worth Sh2.9 million that had not been included in the fund’s financial statements as equity.
“In the circumstances, the reported preserved assets balance of Sh1.07 billion as of June 30, 2023, is overstated,” Gathungu stated.
The audit also highlighted that the fund management failed to maintain necessary records during the review period. According to Regulation 100 of the Public Finance Management (National Government) Regulations, 2015, accounting officers are required to keep a cash book showing all receipts and payments and to maintain other necessary books and registers for proper account maintenance.
However, the fund was found lacking these records, putting it in breach of the law.
Additionally, Gathungu noted that fund managers did not submit bank reconciliation statements for accounts held at Kenya Commercial Bank each month. The Public Finance Management (PFM) regulations mandate that bank reconciliations be completed monthly and submitted to the National Treasury and the Auditor General within the first 10 days of each new month.
The audit also revealed that the Asset Recovery Agency (ARA) failed to comply with a court order regarding the deposit of funds into an escrow account. A 2026 court order required the deposit of Sh8.8 million in an anti-corruption suit, but only Sh1.2 million was deposited. Gathungu reported that Sh7.6 million, which was yet to be collected at the time of the audit, remained unaccounted for.
The Proceeds of Crime and Anti-Money Laundering Act, 2009, mandates the Asset Recovery Agency to combat illicit cash flows and manage recovered assets effectively.
The audit highlights issues with the management of collections from enforcement actions by the Asset Recovery Agency (ARA), indicating that these have not been accounted for adequately.
In a related development, the Ethics and Anti-Corruption Commission (EACC) has recently recovered and returned assets worth Sh5 billion to the state. This includes a parcel of land valued at Sh1.4 billion, which was previously seized from the judiciary in Kisumu. Other assets returned include land parcels from the police, the state law office, and Uasin Gishu Referral Hospital, as well as cash totaling Sh511 million.
The EACC also restored properties from various municipalities, including Bungoma, Kakamega, Kisii, Kabarnet, Nakuru, and Kitale, further emphasizing its role in managing and returning state assets.
