The procurement watchdog's bark may be worse than its bite.

The reason? The procurement regulator is faced with serious financial challenges, a new audit has revealed.

The Public Procurement Regulatory Authority, the audit shows, has made Sh57.8 million losses in the past two years.

Auditor General Nancy Gathungu flagged the situation after the regulator reported a deficit of Sh29 million in the year to June 2021.

This was an increment of about Sh1 million from the Sh28 million loss the authority registered in 2020.

Gathungu said the growing loss was an indication the authority was experiencing operational challenges.

“The operational challenges have led to losses totalling Sh57,829,798 in two consecutive years.”

“The trend casts doubt on the authority’s ability to continue to sustain services,” Gathungu warned.

The auditor general added that trouble would follow should the management fail to put strategies in place to reverse the trend.

“The authority may experience further financial difficulties and may not meet its obligations as and when they fall due,” she said.

She added, “My opinion is not qualified on the effects of the above matter.”

PPRA is the state agency that provides checks on the procurement processes by ministries and state agencies. It is also an arbiter through the public procurement review administrative board.

The auditor has further flagged irregularities in the board expenses citing unbudgeted spending of Sh9.3 million.

Whereas the approved budget for the board allowances for the year was Sh36.9 million, the management ended up spending Sh46.2 million.

Gathungu said the management explanation that the over-expenditure was due to more public procurement dispute cases than was projected was not satisfactory.

“No evidence was provided of any supplementary budget approval from the board of directors and the National Treasury,” she pointed said.

“In the circumstances, the accuracy of the board expenses amounting to Sh46.2 million and the regularity of the expenditure amounting to Sh9.3 million over the approved budget could not be ascertained,” the auditor said.

Further to this, PPRA is on the spot for failing to explain board expenses of Sh1.15 million.

The authority disclosed that its expenses were Sh46.2 million but the schedules supporting the expenditure reflected Sh45.1 million, resulting in an unexplained variance of Sh1,151,811.

“The accuracy and completeness of board expenses amounting to Sh46,218,233 reflected in the financial statements could not be confirmed,” the report reads.

Gathungu has further called out the PPRA management over penalties and interest that were levied on the authority over unsettled taxes.

At least Sh1.3 million, which was deducted from amounts due to suppliers and contractors, was not remitted to KRA within the statutory timelines.

Much as the tax bill stands settled, the auditor general observed there was no explanation on how applicable penalties and interests levied over late remittances would be settled.

“The authority is, therefore, exposed to incurring interests and penalties levied by KRA, which could have been avoided. In the circumstances, the management is in breach of the law,” Gathungu said.

In what could be gross for a regulator, the auditor has also flagged the authority’s failure to update its fixed assets register.

It emerged in the review for June 30, 2021, that the register has not been updated for the last three financial years.

As a result, six vehicles, office partitions, and computers which had been disposed of before June 30, 2018, remained in the register.

Gathungu further pointed out that the register did not reflect the dates of acquisition, asset status, location, and working condition.

“In addition, assets procured between 2019 and 2021 had not been tagged making it difficult to be identified.”

“This is contrary to the public finance regulations that require accounting officers to maintain a register of assets under his control or possession as prescribed by relevant laws,” the auditor said.

Gathungu is also concerned that the regulator has neither resolved prior audit queries nor explained why it has failed to adhere to the set policy directives.

Also flagged were instances where staffers and board members with pending imprest claims were given multiple imprests amounting to Sh3 million.

Accounting officers are required to ensure an applicant for temporary imprest has none outstanding, even as it emerged that PPRA was yet to recover Sh2.26 million dating back to 2019.