I.

THE LAW ON ACCOUNTING FOR NATIONAL GOVERNMENT

REVENUES (FROM ALL SOURCES INCLUDING PROCEEDS OF
DEBT ISSUES)

1.
The National Treasury did not pay immediately into the Consolidated
Fund, the FULL AMOUNT of the Net Proceeds of the Sovereign Bond of
US$1,999,052,872.97 (KSh.173,917,599,948.39 at US$87.00) which were
received on 24 June 2014 as required by Article 206(1) of the Constitution.

206. (1) There is established the Consolidated Fund into which shall be paid all
money raised or received by or on behalf of the national government, except
money that is reasonably excluded from the Fund by an Act of Parliament
and payable into another public fund established for a specific purpose;
2.
The National Treasury did not obtain the approval of the Controller of
Budget, a Constitutional Office Holder, Prior To making withdrawals from the Net
Proceeds of the Eurobond when effecting the repayment of the Syndicated Loan
as required Article 206(4) of the Constitution.

Article 206 (4): Money shall not be withdrawn from the Consolidated Fund unless
the Controller of Budget has approved the withdrawal.
3.
As a consequence of the failure to pay the proceeds of the Eurobond IN
FULL into the Consolidated Fund, The National Treasury is also in breach of
Article 221(6) of the Constitution as below:
4.
Since the money was not paid into the Consolidated Fund, it follows
that any expenditure allegedly made from the portion of the Eurobond proceeds
that did not go into the Consolidated Fund are in breach of Articles 221 (6) and
therefore unconstitutional.

221(6) When the estimates of national government expenditure, and the

estimates of expenditure for the Judiciary and Parliament have been approved by
the National Assembly, they shall be included in an Appropriation Bill, which shall
be introduced into the National Assembly to authorise the withdrawal from the
Consolidated Fund of the money needed for the expenditure, and for the
appropriation of that money for the purposes mentioned in the Bill.

II.

EVIDENCE FROM THE REPORT OF THE AUDITOR GENERAL ON

BREACHES OF THE CONSTITUTION BY THE NATIONAL
TREASURY ON ACCOUNTING FOR EUROBOND PROCEEDS

5.
The first incontrovertible proof that the proceeds of the Eurobond did not
go immediately, and in full, into the Consolidated Fund as required by the
Constitution is found in the Auditor Generals 2013/2014 Report On The
Financial Statements For The National Government, which clearly states that
ONLY USD 395,439,262.50 (KSh.34,648,388,180.25) went into the Consolidated
Fund (the Exchequer).
6.
The Auditor General also makes it clear in his report that Authority of the
Controller of Budget to incur the expenditure was not obtained for USD
604,560,737.50 (Kshs.53,201,344,900.00) withdrawn from the Offshore Account
to fund the repayment of the Syndicated Loan.
7.
The only reason the Auditor General did not qualify the accounts on this
matter for FY 2013/14 was because was able to see the Balance of the Eurobond
Proceeds in an Offshore Account, with the expectation that this money was going
to be transferred fully into the Consolidated Fund in the next financial year
2014/15.
8.
Incidentally the Auditor Generals Report for FY 2014/15 has inexplicably
been delayed and has not been issued in line with the Constitutional deadline of
30 September 2015.
2.6.6. Failure to transfer proceeds from the Sovereign Bond to the National
Exchequer Account
Available information indicates that Net Proceeds From The Sovereign Bond of USD
1,999,052,872.97 out of the total amount of USD 2,000,000,000.00 were received on 24
June 2014 and deposited into an OFFSHORE ACCOUNT, contrary to Article 206 of
the Constitution of Kenya and Section 17(2) of Public Finance and Management Act,
2012 which requires that all money raised or received by or on behalf of the National
Government be paid into the Consolidated Fund. There is the risk of proceeds being
appropriated without the authority of the Controller of Budget and also being applied for
other purposes other than those the Sovereign Bond was floated.
Out of the balance in the OFFSHORE ACCOUNT of USD 1,999,052,872.97 as at 2
July 2014 an amount of USD 395,439,262.50 (Kshs.34,648,388,180.25) was on 3 July
2014 transferred to the Exchequer to fund infrastructure projects and was accounted

for in 2013/2014 financial year. On the same date of 3 July 2014 another amount of
USD 604,560,737.50 (Kshs.53,201,344,900.00) was withdrawn from the Offshore
Account to fund the repayment of the syndicate loan but was recorded in 2014/2015
financial year books. Authority of the Controller of Budget to incur the expenditure
was however not obtained.
The Statement of Receipts into and Issues from the Exchequer Account for
2013/2014 therefore reflects only actual receipts from commercial loan of
Kshs.34,648,388,180.25 out of the net proceeds from the Sovereign Bond as a result of
failure to pay the full amount of the net proceeds from the Sovereign Bond of USD
1,999,052,872.97 (Kshs.173,917,599,948.39) into the Consolidated Fund during the
year.
I have however, not qualified my audit opinion on the Exchequer Account for the
year ended 30 June 2014 on the basis of this matter due to the fact that the Balance
Of Actual Net Proceeds from the Sovereign Bond is correctly reflected in the OffShore Account and in the Central Bank of Kenya Special Account.

III.

EVIDENCE FROM THE REPORT OF THE CONTROLLER OF

BUDGET ON BREACHES OF THE CONSTITUTION BY THE
NATIONAL TREASURY ON ACCOUNTING FOR EUROBOND
PROCEEDS

9.
According to the Controller Of Budget the only receipt of Eurobond
proceeds into the Consolidated Fund for the year 2014/15 is an amount of
US$815,436,932.00 (KSh.73,810,000,000.00 at 90.52) which were proceeds of
the Eurobond 'Tap Sale". The Amount was paid in full into the Consolidated Fund
on 17 December 2014.
10.
Even though the Controller Of Budget has been appearing in Road
Shows and Press Conferences in an attempt to support the National Treasurys
position on the Eurobond Matter, her public statements issued in press
conferences amount to nothing as she cannot negate or recant the contents in
her Constitutional Reports made to Parliament. Indeed Mrs Agnes Odhiambo is
at risk of committing perjury.
11.
It is clear from the Both the Reports of the Auditor General and
controller of the Budget that a balance of USD $999,052,872.97
(KSh.86,067,866,868.14 at 86.15) has not been paid into the Consolidated
Fund as at 30 June 2015.

12.

Below are extracts from the Report of the Controller Of Budget for FY
2014/15.

IV.

CONCLUSIONS AND FOLLOW-UP ACTIONS RECOMMENDED

FOLLOWING BLATANT BREACHES OF THE CONSTITUTION BY
THE NATIONAL TREASURY IN ACCOUNTING FOR THE
PROCEEDS OF THE EUROBOND

13.
Material and blatant breaches of the Constitution relating to accounting for receipts
of National Government Revenue with respect to the proceeds of the Eurobond.
14.
The Constitution of Kenya, 2010 is the highest law of the Land. Its provisions on
accounting for National Government Revenue accordingly are the highest laws relating to
public financial management and accounting. Any breach of the Constitutional Provisions,
which has been demonstrated to have occurred on the Eurobond matter, have grave
consequences and must attract severe penalties and sanctions.
15.
Simply stated the two top National Treasury officials are culpable for two reasons.
Firstly, for not paying the Eurobond proceeds IMMEDIATELY and IN FULL, into the
Consolidated Fund.

16.
Secondly, the two top National Treasury officials did not obtain the prior approval
of the Controller of Budget for all withdrawals from the Consolidated Fund as
required under Article 206(4) of the Constitution.
17.
Under the Constitution at Article 221(6), the Government can only spend money
that has been appropriated by Parliament in an Appropriations Bill (save for Consolidated
Fund services under Article 221(7)). If the National Treasury has spent all Eurobond
Proceeds as it claims, then the two top National Treasury officials must face heavy
sanctions for expenditure that was not appropriated by Parliament.
18.
Considering that the Eurobond proceeds amounting to US$ 999,052,872.97,
equivalent to KES 87,766,528,223.47 were not paid into the Consolidated Fund, it follows
that alleged expenditure of this portion of the proceeds amounts to spending money which
has not been appropriated by Parliament, contrary to Article 221(6) of the Constitution.

V.

TRACKING THE OFFSHORE BANK ACCOUNT MOVEMENTS OF

THE EUROBOND PROCEEDS

JP Morgan Chase Bank New York

19.
According to documents posted on the National Treasurys website and which are
also contained in the document bundle that was tabled by Cabinet Secretary Henry Rotich
before the Public Accounts Committee of Parliament (Bank Statements and Swift
Transfers) THE FIRST TRANSACTION you see on Bank Account Statement at JP Morgan
Chase Bank New York is an entry of US$ 2,000,000,000.00 on 24 June 2014 being the
proceeds of the Sovereign Bond.
20.
The Fees and Costs deducted amounted to $947,127.03. the Net Proceeds
received were thus US$ 1,999,052,872.97 (or KES 173,917,599,948.39).
21.
THE SECOND TRANSACTION is a debit entry of USD 604,560,737.50, equivalent
to KES 53,201,344,900.00 on 3 July 2014 which, according to documents, moved to
Standard Charted Bank London to repay the Syndicated Loan
22.
THE THIRD TRANSACTION which occurs on the same day, 3 July 2014, is a
debit entry of US$ 395,439,262.50 equivalent to KSh. 34,648,388,180.25 which, according
to documents, was a transfer to the Exchequer. This amount is clearly reflected in the
Auditor Generals Report as a receipt into the Consolidated Fund in the FY2013/14.
Because the payment is effected after the closure of the Financial Year this entry does not
appear in the Report of the Controller Of Budget for FY 2013/14.
23.
According to the JP Morgan Chase Bank New York Bank Statement the account
is then CLOSED on 8 September 2014, and the balance of US$ 999,052,872.97,
equivalent to KES 87,766,528,223.47 transferred in full to the Federal Reserve Bank of
New York. Below are two Excepts of Swift Transfers from the JP Morgan Chase Bank
Account and the transfer to an account at the Federal Reserve Bank of New York.

24.
Its crystal clear that after the money is moved to the Federal Reserve Bank of
New York from the Bank account at JP Morgan Chase Bank New York, everything goes
blank, as there are no Bank statements or third party documentary evidence to show
how, when and where the US$ 999,052,872.97, equivalent to KES 87,766,528,223.47,
moved.
25.
The swift transfer to the Fed shows the document was heavily redacted, clearly
hiding information that could have been vital to tracing the movement of the money after it
was deposited into the account at the Federal Reserve Bank of New York
Citibank, NA New York
26.
We must remember that In December 2014, the Government went back into the
market and through a TAP SALE, managed to raise an additional amount of US$
815,436,932.00, equivalent to KES 73,805,196,715.32. A Citibank Bank statement posted
on the National Treasury Website shows an entry of US$ 815,436,932.00 received on 3
December 2014.
27.
As opposed to the proceeds of the original Eurobond transaction, the statements
show clearly that the proceeds of the tap sales were transferred promptly to the
Consolidated Fund, as confirmed by the Report by the Controller of Budget (Budget
Implementation Review Report FY 2014/15 at page Seven Table 3.1, col. 2).
28.
Below is an extract of the swift transfer/Bank statement from the Citibank New York
account which clearly shows the movement of the proceeds of the tap sales from the
Offshore Account in New York to the Consolidated Fund as required under Article 2016(1)
of the Constitution of Kenya, 2010.

29.

cc

VI.

AN ELABORATE SCHEME OF DECEPTION BY THE NATIONAL

TREASURY IN ACCOUNTING FOR THE EUROBOND PROCEEDS
A RIDDLE OF NUMBERS THAT DO NOT ADD UP, REDACTED
BANK STATEMENTS AND ONE- LINE LETTERS TO THE CENTRAL
BANK PURPORTING TO TRANSFER NON EXISTENCE RECEIPTS.

The Mystery of 7 letters purporting to direct the CBK to make Non Existence
Transfers to the Consolidated Fund
30.
If you want to track the complex game of deception by the National Treasury, you
start by examining the seven letters one sentence letters from the Accountant General at
the National Treasury Mr BM Ndungu to the CBK where he purports to direct the Central
Bank to transfer parts of the US$ 999,052,872.97 (KSh. 87,766,528,223.47).
31.
Indeed these seven letters contained in the Bundle of Documents table before the
Public Accounts Committee (PAC) are the main tools which the Treasury relies on in a bid
to prove that the US$ 999,052,872.97 (KSh. 87,766,528,223.47) of the Eurobond proceeds
were paid into the consolidated Fund.
32.
It is clear from all the press statements and releases of information to the public by
the National Treasury that all the tables purporting to show that the money was paid into the
Consolidated Fund are based on these letters.
33.
The first of these letters dated 15 September 2014 purports to direct the CBK to
transfer KSh. 25Bn to the Consolidated Fund (Exchequer A/C) number 1000003987.
34.
The last of these letters is made on 26 June 2015 and purports to direct the CBK to
transfer KSh.17,268,281,131.75 from the Sovereign Bond Account No.1000212764 to the
Consolidated Fund (Exchequer A/C) number 1000003987.
35.
The details of the rest of these letters are set out in the table below (overleaf) and in
APPENDIX 1-7.

SN.
1
2
3
4
5
6
7

THE KENYA EUROBOND PROCEEDS (SOVEREIGN BOND)

AMOUNTS THAT THE NATIONAL TREASURY INSTRUCTED THE CENTRAL BANK TO TRANSFER INTO THE EXCHEQUER ACCOUNT
FROM DOCUMENTS SUBMITTED TO PARLIAMENT
DESCRIPTION AND REF
AMOUNT KSH
From Account / To Account
25,000,000,000
15 Sept 2014
Transfer of Special Bond Proceeds to the Exchequer
AG / CONF.17 / 1 / 1. Vol. 1 (25)
A/C. No 1000212764 Sovereign Bond Account
A/C No. 1000003987Consolidated Fund (Exchequer)
25,000,000,000
19 Sept 2014
Transfer of Special Bond Proceeds to the Exchequer
AG / CONF.17 / 1 / 1. Vol. 1 (22)
A/C. No 1000212764 Sovereign Bond Account
A/C No. 1000003987Consolidated Fund (Exchequer)
15,000,000,000
28 Oct 2014
Transfer of Special Bond Proceeds to the Exchequer
AG / CONF.17 / 1 / 1. Vol. 1 (25)
A/C. No 1000212764 Sovereign Bond Account
A/C No. 1000003987Consolidated Fund (Exchequer)
25,000,000,000
21 Jan 2015
Transfer of Special Bond Proceeds to the Exchequer
AG / CONF.17 / 1 / 1. Vol. 1 (44)
A/C. No 1000212764 Sovereign Bond Account
A/C No. 1000003987Consolidated Fund (Exchequer)
25,000,000,000
16 Mar 2015
Transfer of Special Bond Proceeds to the Exchequer
AG / CONF.17 / 1 / 1. Vol. 1 (50)
A/C. No 1000212764 Sovereign Bond Account
A/C No. 1000003987Consolidated Fund (Exchequer)
30,000,000,000
2 June 2015
Transfer of Special Bond Proceeds to the Exchequer
AG / CONF.17 / 1 / 1. Vol. 1 (58)
A/C. No 1000212764 Sovereign Bond Account
A/C No. 1000003987Consolidated Fund (Exchequer)
17,268,281,131.75
26 June 2015
Transfer of Special Bond Proceeds to the Exchequer
AG / CONF.17 / 1 / 1. Vol. 1 (59)
A/C. No 1000212764 Sovereign Bond Account
A/C No. 1000003987Consolidated Fund (Exchequer)
162,268,281,132
Total

VII.

WHY DO WE SAY THE SEVEN PURPORTED TRANSFER

INSTRUCTION LETTERS ARE NOT AUTHENTIC, AND WERE
HURRIEDLY PUT TOGETHER TO SUPPORT THE MAKE - BELIEVE
NARRATIVE BY THE NATIONAL TREASURY THAT EUROBOND
PROCEEDS WERE ACTUALLY DEPOSITED INTO THE
CONSOLIDATED FUND?

We examine the Anomalies in the Treasurys purported transfer instructions

36.
Considering the seven purported transfer instructions are supposed to be
important accounting documents transferring billions of shillings from one account to
another, it was incumbent on the National Treasury to ensure they are prepared with the
highest standard of fidelity. Indeed fidelity is so critical in preparing these accountable
documents that even minute details like dates of the transactions and document
references must by correct.
37.
As a matter of fact the seven purported transfer instructions are supposed to
represent authentic transactions and must be backed by adequate supporting documents
that leave a solid, auditable trail. At a minimum, these transactions are supposed to have
the same, if not higher, levels of documentation, approvals and controls.
38.
What then do you see as you scrutinise these seven purported transfer
instructions? The first tell tale sign of anomalies is the manner in which they are
referenced and how the folios are sequenced.
39.
As you can see from table XX the first purported transfer instruction dated 15
September 2014 has a folio reference of AG/CONF.17 / 1 / 1. Vol. 1 (25). The second
purported transfer instruction dated 19 September 2014 has a folio reference of
AG/CONF.17 / 1 / 1. Vol. 1 (22). The third letter dated 28 October 2014 has folio reference
AG/CONF.17 / 1 / 1. Vol. 1 (25) with the last, purporting to transfer a sum of
KSh.17,268,281,131.75 into the Consolidated Fund, and which is dated 26 June 2015,
bearing the folio reference AG / CONF.17 / 1 / 1. Vol. 1 (59).
40.
From the sequence in which the folios are referenced, it is clear that the referencing
falls way short of what is expected of credible accountable documents transferring billions
of Shillings from one account to another. What we observe is a haphazard numbering
where Folio reference numbers go up and down unpredictably, casting doubt on their
credibility of the purported transfer instructions.
41.
Even more critical, what dents the credibility of these purported transfer instruction
letters is the fact that you have a case where one document purporting to transfer the sum
of KSh.25, 000, 000, 000 on 15 September 2014 into the Consolidated Fund and separate
document dated 28 October 2014 purporting to transfer the sum of KSh.15, 000, 000, 000
into the Consolidated Fund bear the same folio refrence number of AG/CONF.17 / 1 / 1.
Vol. 1 (25).

42.
We all know that accountable documents must have unique document references
for clear identification and accounting purposes. In the current circumstances, when we are
talking about billions of shillings being transferred from one account to another, the
inference is that either these transfers did not take place or the documents are a forgery
on hardworking Kenyan taxpayers executed in broad daylight, akin to daylight robbery.
VIII.

IS THERE EVIDENCE THAT THE CBK ACTED ON THE SEVEN

PURPORTED TRANSFER INSTRUCTIONS? WAS MONEY INDEED
TRANSFERRED TO THE CONSOLIDATED FUND AS A
CONSEQUENCE OF THE SEVEN PURPORTED TRANSFER
INSTRUCTIONS?

43.
There is no evidence that these purported transfer instructions were effected or
acted on by the Central Bank Of Kenya. If the amount of USD 999mn that these purported
transfer instruction sought to transfer into the consolidated fund, they would have been
reflected in the report of the controller of budget for FY 2014/15.
44.
The paper trail also shows that where the Central Bank of Kenya acted on genuine
transfer instructions, as was the case in the transfer from JP Morgan Chase Bank of USD
395mn on 3 July 2014, and the transfer from Citibank New York of the Tap Sales on 17
December 2014 the amounts are clearly captured in the Reports of the Auditor General for
FY 2013/14 and the Controller of Budget for FY 2014/15.
45.
You will also observe that where there are genuine instructions transferring
Eurobond Proceeds into the Consolidated Fund you will see an auditable trail of
accountable documents as below (see also APPENDIX 8, 9, 10,11)
I. TRANSFER INSTRUCTION from the Treasury
II. GOVERNMENT REMITTANCES IN FOREIGN EXCHANGE Form (Form PA)
signed by the Accountant General Mr Bernard Ndungu and his Deputy Julius
Kilinda and approved by National Treasury Principal Secretary, Dr Kamau Thugge;
III. CREDIT ADVISE from Central Bank Of Kenya and or CONFIRMATION FROM
CENTRAL BANK advising the National Treasury that the Consolidated Fund has
been credited with the transfer.
46.
It is clear from the paper trail with regard to ALL the purported transfer instructions
that there is no Government Remittances In Foreign Exchange Form (Form PA), or
Credit Advise or Confirmation from the Central Bank Of Kenya advising the National
Treasury that the Consolidated Fund has been credited with the transfer
47.
The lack of credibility of the seven instructions purporting to transfer USD
999mn into the Consolidated Fund is perhaps best illustrated by correspondence dated 15
January 2015 between the Central Banks Director of Financial markets and the National
Treasury.
48.
As we all know and is manifestly clear form the FY 2014/15 Report of the Controller
of Budget and the Report of the Auditor General for FY 20134/24, only two amounts from

the Eurobond proceeds, namely an amount of US$395,439,262.50 and US$815,436,932.00

went into the Consolidated Fund.
49.
You will notice from the paper trail that in both cases the Central Bank of Kenya
confirmed the transfers into the Consolidated Fund through Confirmation Letters dated 4
July 2014 and 15 January 2015 signed by Mr John K Birech (Assist. Director, External
Payments and Reserves Management) and Mr Gerald Nyaoma (Director, Financial
Markets), respectively.
50.
Mr Gerald Nyaomas Confirmation letter also serves to destroy the credibility of the
seven Purported Transfer Instructions in a more profound manner. In his letter dated 15
January 2015 Mr Nyaoma clearly confirms that the proceeds of the Tap Sales was credited
in full, as one lump sum, into the Consolidated Fund in the amount of US$815,436,932.00,
equivalent to KSh. 73,805,196,715.32. The statements from Citibank New York also attest
to this single lump sum transfer of the tap sales that was effected on 17 December 2014.
51.
The mischief in the National Treasurys narrative as presented by the seven
Purported Transfer Instructions is in the fact that they purport to show that the
USD999mn plus the Tap Sales of USD 815mn, trickled into the Consolidated Fund in
amounts which do not reflect the single credit of US$815,436,932.00, equivalent to KSh.
73,805,196,715.32 as confirmed by the Central Banks director Mr G. Nyaoma, and
reflected in the Citibank NY statement and in the 2014/15 Report of the Controller of
Budget.
CONCLUSION
52.

The seven Purported Transfer Instructions are not genuine. Period.

53.

The consequences of the above finding are grave in the extreme.

I.
II.

III.

A colossal sum of USD999mn has not been paid into the Consolidated Fund
and Responsible Officials of the National Treasury have gone to extraordinary
lengths to, in effect, manufacture documents to mislead Kenyan taxpayers.
If these seven Purported Transfer Instruction documents are not authentic as
amply demonstrated by the paper trail from the Document Bundle presented to the
Pac in Parliament and documents posted in the National Treasurys website- then it
follows that Responsible Officials of the National Treasury must be made to
account for presenting misleading documents to the Pubic Accounts Committee of
the National Assembly
Considering that the seven Purported Transfer Instruction are the basis upon
which the National Treasury insists that they have fully accounted for the Proceeds
of the Eurobond, then the National Treasury has no legs to stand on as its clear that
the USD $999,052,872.97 is yet to be accounted for.

IX.

ARE THE JP MORGAN CHASE BANK STATEMENTS POSTED ON

THE NATIONAL TREASURYS WEBSITE GENUINE

54.
What is strange is that the JPMorgan Chase Bank Statements on the Eurobond
Proceeds posted by the National Treasury on their website, were issued by JPMorgan
Chase Bank, NA (Johannesburg Branch), despite the fact that the Eurobond transactions
were made with the parent bank in New York.
55.
This raises the following questions. Why would a sovereign state like Kenya choose
to bank the Eurobond proceeds denominated in United States Dollars in South Africa, a
Non Dollar Domicile Country?
56.
Firstly its uncommon for a Branch to issue Bank statements for customers of their
Parent Bank whose accounts are not domiciled with them.
57.
Considering that the South Africa Branch of JP Morgan is registered as branch of a
foreign bank, are they legally empowered to issue bank statements for a client who is not a
client of the south African branch, but is a client of the parent bank in new York
58.
The issue of capacity of the JP Morgan Chase Branch in SA to issue the statements
arises well. An examination of its own balance sheet based on normal prudential regulatory
restrictions on deposit taking would not support the deposits of USD 2bn by Kenya.
59.
In any case the Total Assets of JPMorgan Chase Bank, NA (Johannesburg
Branch) of USD 2.9bn approx. would not be sufficient to allow the Johannesburg Branch
to receive deposits of the magnitude of Kenya's Eurobond (USD 2bn or about 66% of their
asset base). See APPENDIX 12-13

X.

COVER-UP: HOW THE NATIONAL TREASURY USED THE SEVEN

PURPORTED TRANSFER INSTRUCTIONS TO COVER THE GAP OF
USD USD 999MN NOT REMITTED INTO THE CONSOLIDATED
FUND

MOVEMENT IN SOVEREIGN BOND ACCOUNTS:

1

Proceeds from Sovereign Bond

Less Commissions deducted at source
Net proceeds received in offshore A/C
Less Transfer to Exchequer A/C on 30.06.2014 for infrastructure projects in FY2013/2014
Add Exchange gain on translation of closing balance
Balance in Off-shore account as at 30th June 2014

Less Payment of syndicated loan on 02.07.2014

Less Commissions and bank charges:
(i) Account settlement charges
(ii) Interest payment
(iii) Federal Interest withheld
Add Exchange gain on translation of closing balance before transfer
Balance transferred to Sovereign Bond Account at CBK on 08/09/2014

Less Payments from the S/Bond account at CBK A/C No. 1000212764:
(i) Amount transferred to Exchequer A/C on 15.09.2014
(ii) Amount transferred to Exchequer A/C on 19.09.2014
(iii) Amount transferred to Exchequer A/C on 30.10.2014
Total payments from S/Bond account at CBK:

Balance in Soveregn Bond Account at CBK as at 31st October 2014

Add Proceeds from the tap sale:

(i) Face Value of the proceeds
(ii) Premium on issue of tap sale
(iii) Less Commissions and transaction expenses deducted at source
Net proceeds transferred to S/Bond account at CBK 17.12.2014

Balance in Soveregn Bond Account at CBK as at 31st December 2014

10

Less transfers to Exchequer Account:

(i) Amount transferred to Exchequer A/C on 21.01.2015
(ii) Amount transferred to Exchequer A/C on 17.03.2015
Balance in Soveregn Bond Account at CBK as at 31st March 2015

11

12

Less transfers to Exchequer Account:

(i) Amount transferred to Exchequer A/C on 02.06.2015
(ii) Amount transferred to Exchequer A/C on 30.06.2015
Balance in Soveregn Bond Account at CBK as at 30th June 2015

US$
2,000,000,000.00
(947,127.03)
1,999,052,872.97
(395,439,262.50)

87.62

KShs
174,000,000,000.00
(82,400,051.61)
173,917,599,948.39
(34,648,388,180.25)
1,239,412,781.24
140,508,624,549.38

(604,560,737.50)

88.00

(53,201,344,900.00)

(156,394.64)
169,415.65
(47,436.38)

88.00
88.00
88.00

(13,762,728.32)
14,908,577.20
(4,174,401.62)
1,158,833,323.80
88,463,084,420.45

1,603,613,610.47

999,018,457.60

Ex-Rate
87.00
87.00
87.62

88.55

(25,000,000,000.00)
(25,000,000,000.00)
(15,000,000,000.00)
(65,000,000,000.00)
23,463,084,420.45

750,000,000.00
65,684,271.00
(247,339.00)
815,436,932.00

90.51
90.51
90.51
90.51

67,882,499,999.98
5,945,083,368.21
(22,386,652.89)
73,805,196,715.30
97,268,281,135.75
(25,000,000,000.00)
(25,000,000,000.00)
47,268,281,135.75

(30,000,000,000.00)
(17,268,281,135.75)
-

XI.

COMMON MYTHS THAT SURROUND THE EUROBOND SAGA

60.
I.

The following common myths surround the Eurobond saga:

MYTH: That the repayment of the Syndicated Loan directly from the offshore
account saved Kenya from making losses on foreign exchange.

II.

FACT: The National Treasury can instruct the Central Bank to pay monies into the
Consolidated Fund and simultaneously effect loan repayments denominated in
foreign currency out of the Consolidated Fund without loss of translation into local
currency. Indeed the Central Bank, as the ultimate repository of foreign reserves for
the Country, is in the best position for mitigating foreign exchange losses for the
National Treasury. The Treasury belated realised this point and abandoned the so
called saving Foreign exchange narrative and instead quickly started trumpeting
the foreign exchange gains made on the JP Morgan account.

III.

MYTH: That the Eurobond boosted Kenyas foreign reserves position

IV.

FACT: Increases in Kenyas foreign exchange reserves come from a variety of

sources, including FDI inflows, export receipts, Diaspora remittances, donor and
lender disbursements, and the large borrowings from the IMF in recent months
including the Precautionary Facility. To attribute all the increases to the Eurobond is
inaccurate. In any case foreign exchange reserves are not national government
revenues available for public expenditure. It must be remembered that Kenya
issued the Eurobond to raise money to fund infrastructure projects and other pub,ic
expenditure, not to boost our reserves.

V.

MYTH. The provisions of the Constitution in respect of accounting for revenues and
Public Funds is inferior to the PFM law.

VI.

FACT: The Constitution is the supreme law of the land. Any provision of any law
that is in consistent with the Constitution is null and void (to the extent of the
Inconsistency).

VII.

MYTH. There is nothing special about the Consolidated Fund as the PFM Law
allows the National Treasury to open as many accounts as the Cabinet Secretary
deems necessary.

VIII.

FACT: the Constitutional Provisions on Public Funds override the PFM Law. The
Cabinet Secretary can open as many Bank Accounts as he wishes as long as he
does not breach the Constitution.

IX.

MYTH: the Eurobond proceeds were accounted for correctly as required under the
Constitution

X.

FACT. Material breaches of the Constitution have covered in accounting and

financial management of the Eurobond proceeds. Indeed accounting and financial
management constitutes the greatest failure in respect of the Eurobond proceeds.

XI.

MYTH. Bank accounts and Public Funds are the same and can be used
interchangeably.

XII.

FACT; The Constitution goes to great lengths to define PUBLIC FUNDS as a

special repository for receiving, issuing and accounting for national Government
revenues and expenditures. Indeed Public funds can only be created by the
Constitution itself or under an Act Of Parliament.

XIII.

MYTH. In an interview with the Business Daily newspaper the National Treasury
Cabinet Secretary denied knowledge of the account at the Federal Reserve Bank
Of New York.

XIV.

FACT; The evidence appears as appended at APPENDIX 14.

KNOWN FACTS ON THE PROCEEDS OF THE SOVEREIGN BOND PAID INTO THE EXCHEQUER ACCOUNT
FROM THE COB ANNUAL REPORTS FY2013/14 AND FY2014/15 AND AUDITOR GENERAL REPORTS FY2013/14
(Description As Per From The Respective Reports)
DATE
AMOUNT USD
Exch. Rate
AMOUNT KES
RECEIPTS OF SOVEREIGN BOND PROCEEDS
Net Proceeds from the Sovereign Bond Note 1 and Note 2
24-Jun-14
$1,999,052,872.97
$87.00 173,917,599,948.39
Commercial Loan (Sovereign Bond 'Tap Sale") Note 2
17-Dec-14
$815,436,932.00
$90.52
73,810,000,000.00
Total Sovereign Bond Proceeds
A
$2,814,489,804.97
$88.02 247,727,599,948.39
PAYMENTS FROM SOVEREIGN BOND PROCEEDS
Transferred To The Exchequer to Fund Infrastructure Projects Note 1
Revenues from Commercial Loan (Sovereign Bond 'Tap Sale") Note 2
Subtotal: Transfers to the Consolidated Fund (= Exchequer A/C)
Repayment Of Syndicate Loan Withdrawn from Offshore Account Note 1
Eurobond Proceeds Paid Into Exchequer A/C + Syndicated Loan Repayment
BALANCE NOT PAID INTO EXCHEQUER A/C AND THUS UNACCOUNTED FOR

3-Jul-14
17- Dec-14
3-Jul-14
A

$395,439,262.50
$815,436,932.00
$1,210,876,194.50
$604,560,737.50
$1,815,436,932.00

B-A

$999,052,872.97

$87.62
$90.52

34,648,388,180.25
73,810,000,000.00
$108,458,388,180.25
$88.00 $53,201,344,900.00
$89.05 $161,659,733,080.25
$86.15

$86,067,866,868.14

Note 1: Summary Of The Report Of The Auditor-General On The Financial Statements For Ministries, Departments, Commissions, Funds And Other
Accounts Of The National Government For The Year 2013/2014 (relevant extract of Report reproduced in Full below)
Note 2: Annual National Government Budget Implementation Review Report FY2014/15
From Table 3.1: Statement of Actual Revenue as at the end of June 2015 (Kshs. Billion) see extract overleaf

SN.
1
2
3
4
5
6
7

THE KENYA EUROBOND PROCEEDS (SOVEREIGN BOND)

AMOUNTS THAT THE NATIONAL TREASURY INSTRUCTED THE CENTRAL BANK TO TRANSFER INTO THE EXCHEQUER ACCOUNT
FROM DOCUMENTS SUBMITTED TO PARLIAMENT
Date
DESCRIPTION AND REF
AMOUNT KSH
25,000,000,000
15 Sept 2014
Transfer of Special Bond Proceeds to the Exchequer
AG / CONF.17 / 1 / 1. Vol. 1 (25)
25,000,000,000
19 Sept 2014
Transfer of Special Bond Proceeds to the Exchequer
AG / CONF.17 / 1 / 1. Vol. 1 (22)
15,000,000,000
28 Oct 2014
Transfer of Special Bond Proceeds to the Exchequer
AG / CONF.17 / 1 / 1. Vol. 1 (25)
25,000,000,000
21 Jan 2015
Transfer of Special Bond Proceeds to the Exchequer
AG / CONF.17 / 1 / 1. Vol. 1 (44)
25,000,000,000
21 Jan 2015
Transfer of Special Bond Proceeds to the Exchequer
AG / CONF.17 / 1 / 1. Vol. 1 (50)
30,000,000,000
16 Mar 2015
Transfer of Special Bond Proceeds to the Exchequer
AG / CONF.17 / 1 / 1. Vol. 1 (58)
17,268,281,131.75
21 Jan 2015
Transfer of Special Bond Proceeds to the Exchequer
AG / CONF.17 / 1 / 1. Vol. 1 (59)
162,268,281,132
Total

TYPES AND METHODS OF ESTABLISHMENT OF PUBLIC FUNDS IN KENYA

Type/Name of Fund

Authority to establish
Fund & Scope

Source of Funds /
Expenditure chargeable to

Administrator / Auditor
General Audits Accounts

Reference

Constitutional Public Funds

Judiciary Fund

Constitution of Kenya

Chief Registrar, Judiciary

Article 173(1)

Equalization Fund

Constitution of Kenya

National Government Revenue

Consolidated Fund
National Government Revenue, 0.5%
Consolidated Fund, Un-expended balances
retained in Equalization Fund, and are not
part of Consolidated Fund
National Government Revenue
National Government Revenue

National Treasury

Article 204(1)

National Treasury
National Treasury

Article 206(1)
Article 207(1)

National Government Revenue

Cabinet Secretary Finance

Article 208 (1)

Consolidated Fund
Constitution of Kenya
Revenue Fund
Constitution of Kenya
for each County Government
Contingencies Fund
Constitution of Kenya
Constitutional, Statutory Public Funds
Political Parties Fund
Constitution of Kenya & Act
for Parliament
National Public Fund established Constitution of Kenya & Act
for a specific purpose
for Parliament

Public Resources per Article 91(2)(e)

Establishment, Management per its Act
National Government Revenue "reasonably
excluded from the (Consolidated) Fund
by an Act of Parliament

National Treasury
OAG to Audit accounts
Accounting Officer/CEO as
provided for under its Act
OAG to Audit accounts Article
229(4)(b), (h); 229(5)
County Public Fund established Constitution of Kenya & Act County Government Revenue "reasonably Accounting Officer/CEO as
for a specific purpose
for Parliament
provided for under its Act
excluded from the (County) Revenue
OAG to Audit accounts Article
Fund by an Act of Parliament
229(4)(b), (h); 229(5)
Discretional Public Funds
Public Fund
Cabinet Secretary responsible
Established and wound up at the discretion of the Finance Cabinet
for Finance
Secretary from Consolidated Fund
Statutory Public Funds
National Public Funds
Accounting Officer
earmarked for specific purposes and established by an Act of
per Act establishing Fund
Parliament from/chargeable to Consolidated Fund

Article 92(f)
Article 206(1)(a)

Article 207(1)
Article 207(3)(b)

PFMA S.24(4)
PFMA S.24(12)
PFMA S.24(13)