Auditor-General puts Treasury on the spot over Sh16b loan to KQ
The National Treasury disbursed a shareholder loan amounting to Sh16.3 billion to Kenya Airways (KQ) during the financial years 2021/22 and 2022/23 without a valid loan agreement, a new report by the Office of Auditor General has revealed.
Auditor General Nancy Gathungo said KQ had not established a separate account for the government loan, a standard procedure for such transactions.
This oversight led to a situation known as the commingling of funds, where the loan money was mixed with the company’s general finances.
She said this lack of segregation made it challenging to track the utilisation of the loan, raising questions about financial transparency and accountability.
Furthermore, Gathungo added, the shareholder loan agreement had not been signed by the Government and Kenya Airways Plc at the time of disbursing the funds.
“This situation suggests a failure in the fiduciary role of the National Treasury by releasing public funds without an effective mechanism of recovery. It also indicates a failure on the part of Kenya Airways Plc’s management to act in good faith by not complying with the agreed covenant clauses.” she said.
This move was part of a strategic measure to bolster the national carrier, which has been consistently flying in economic headwinds. The government holds a significant 48.9 per cent stake in KQ and is on the lookout for a strategic investor.
Bailout support
This is part of a grand plan to navigate the airline back to profitability. The government has even set a deadline to end bailout support for KQ by December 2023. The damning information is contained in the special audit report by OAG on the supplementary budget expenditure and withdrawals under article 223 of the Constitution of Kenya, 2010. On April 26 2023, the Public Accounts Committee of the National Assembly, in a letter asked the Auditor-General to conduct a special audit to scrutinise all expenditures made under Article 223 of the Constitution during the financial year 2022/2023.
The letter revealed that the National Government had spent a total of Sh130 billion, attributed to various initiatives including fuel stabilisation, subsidies for flour and fertilizer, provision for relief food, and enhanced security operations.
