The Auditor-General has qualified Kenya Railways Corporation's financial statements for the year ended 30 June 2025 on six grounds, which means the audit found material misstatements but stopped short of declaring the accounts fundamentally unreliable.
- •The audit has flagged KSh 16.91 Billion in completed projects still classified as work-in-progress, a KSh 520 Million gap in rental income, unsupported land records across 119 parcels and broken interfaces between the corporation's freight billing and accounting systems.
- •Eight prior-year issues from FY2023/24 remain unresolved, several now raised for the third or fourth time.
- •Beyond the qualified opinion, the auditor raised three emphasis-of-matter items: contingent liabilities of KSh 28.15 Billion (mainly lawsuits), KSh 8.31 Billion in land compensation payable with no movement during the year, and budget under-utilization of KSh 7.29 Billion (23.6% of receipts).
On the balance sheet, property, plant and equipment includes KSh 18.75 Billion in land for which the corporation holds no title deeds across 119 parcels. The land has not been revalued in years, contrary to both IAS 16 and the corporation's own finance manual, which requires valuation every five years. A valuation exercise in the Central and Eastern regions estimated market value at KSh 160 Billion, but Coast and Western regions are still pending.
Capital work-in-progress of KSh 152.28 Billion includes KSh 16.91 Bn in finished projects never transferred to their correct asset classes. The misclassification inflates capital work-in-progress, understates operating assets and delays depreciation charges. Management has cited ongoing use of some assets and pending transfers to other government agencies but failed to capitalize the projects as committed.
The corporation's Enterprise Resource Planning (ERP) billing system recorded KSh 1.94 Billion in rental invoices, but only KSh 1.42 Billion reached the financial statements, leaving KSh 519.98 Million unreconciled. No property register exists. ERP invoices lack plot numbers, house details and property sizes, raising questions about how the corporation tracks its income from its vast property portfolio.
Within trade receivables of KSh 89.81 Billion, the auditor identified KSh 1.28 Billion in long-outstanding balances including petty cash and imprest dating to 2011 and KSh 131.82 Million owed by a development partner from the pre-concession era. No surrender forms, warrants or evidence of recovery efforts were provided.
At the Railway Training Institute, Systems, Applications, & Products (SAP) misconfiguration has contaminated student debtor accounts (KSh 314.94 Million), and 128 students graduated in December 2024 owing KSh 791,453 in fees.
On the freight side, 1,981 Translogic invoices totalling KSh 81.67 Million had no corresponding SAP entries, and a sample of 5,095 mismatched records revealed a KSh 97.12 Mn variance. KPA and KRC still lack an integrated billing system, relying instead on manual Excel-based bills.
Under lawfulness, the Auditor-General found KSh 6.90 Billion in cumulative default penalties on the on-lent SGR loan, calling them "avoidable expenditure." Fourteen new projects worth KSh 13.76 Billion were initiated with none completed, the furthest at 44%. Disability employment stood at 0.4% against a 5% statutory requirement. And 529 land parcels remain illegally allocated across Mombasa, Limuru, Kikuyu, Nakuru and Kisumu, including 247 Kisumu residential units occupied rent-free, costing the corporation KSh 27.44 Million annually.
The internal controls report flagged a server room without CCTV, smoke detection last tested in January 2019, only 5 of 27 IT systems backed up, operations control systems running on unsupported software from 2012, ticketing vendors with direct access to production databases, and faulty turnstile readers requiring manual intervention at passenger gates. The corporation's asset register remains untagged, without serial numbers or location data, and 32 grounded vehicles have no disposal plan.
The findings paint a picture of a corporation whose revenue line is improving but whose governance, asset management and internal controls have not kept pace.
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