PROJECT MANAGEMENT

This Value for Money Audit was prompted by the Auditor General’s Report of the
financial year ended 2004/2005 which highlighted the problem of low absorption of
External Debt/Loan by beneficiary projects. A sum of Shillings six (6) billion was paid
out as commitment fees on loan amounts not drawn by beneficiary projects. The report
further highlighted failure by government to release all the budgeted counterpart
funding.

The Public Accounts Committee of Parliament (PAC) while discussing the OAG report of
the financial year ended 30th June, 2005 recommended that Government should not
get debt/loan which it cannot absorb. The Committee directed that an Accounting
officer who does not absorb loans as agreed be charged for inefficiency and negligence
and that any commitment fees/penalties paid as a result of non- absorption by the
Ministry, should be surcharged to the Accounting Officer of the Ministry but not
Government as this is a loss of tax payer’s money. The Committee further directed
that Government should budget for all counterpart funds before procuring a loan.

The objective of the audit was to examine the causes of low absorption of external
debt and make recommendations to address the challenges. The audit was conducted
at the MOFPED and the relevant line ministries covering a period of four years, from FY
2004/2005 to FY 2007/2008.