Auditor Questions TSC Failure To Deduct And Remit Sh2.2bn Taxes
The Teachers Service Commission (TSC) failed to deduct and remit to the taxman Sh2.2 billion in Pay As You Earn.
According to a report by the auditor general, Nancy Gathungu, the money was to be deducted from the gross pay of 5,412 TSC staff and 25 members of the commission’s secretariat, which totaled Sh2,194,204,393 and Sh12,608,086 respectively.
According to Gathungu’s report for the fiscal year ended June 30, last year, the commission’s payrolls showed the codes of the 5,437 employees were zero.
This, she claims, indicates that the individuals do not have special needs and are not exempt from paying PAYE.
“Failure to deduct and remit PAYE is contrary to the Income Tax Act CAP 470. Consequently, the management was in breach of the law,” Gathungu said.
Employees with special needs, as defined in Section 11 (3) of the Persons with Disabilities Act of 2003, are identified in the Integrated Payroll and Personnel Database by codes 2-9 in the special needs field.
PAYE is a compulsory tax levied on all employee earnings. The tax is managed by the Kenya Revenue Authority, which collects statutory contributions from employers before salary and wages are paid to employees.
According to the report, a detailed analysis of the payroll revealed that 32 teachers had an outstanding “salary over-payment” balance of Sh33,780,614.
“However, the repayment period for the recovery of the outstanding amounts is beyond the retirement age of the respective teachers. The recoverability of the balance is therefore doubtful,” Gathungu said.
The report also stated that there were Sh11 million in outstanding imprests, of which Sh1.2 million was owed by eight teachers who had more than one imprest.
The statement states that this is a violation of Regulation 93 (4)(b) of the Public Finance Management (National Government) Regulations, 2015, which requires the accounting officer to ensure that the applicant has no outstanding imprests before issuing additional imprests.
According to the report, during the fiscal year under review, management granted a waiver of Sh621,622 to one of the commission’s tenants due to Covid-19 challenges that harmed his business.
“The tenant was supposed to pay an annual rent of Sh1,896,060 as per the lease agreement but this was reduced to Sh1,274,438. The commission did not provide any evidence of seeking authority from the National Treasury.
According to the report, some of the employees with outstanding balances received additional salary advances during the fiscal year under review. It stated that management provided no explanation for the non-recovery of salary advances.
Gathungu also stated that insurance costs totaled Sh47.7 million, including Sh7 million in compensation under the Work Injury Benefits Act of 2007.
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She stated that the Chief Executive Officer approved payment of the claims in 2018 and 2019, but they were not included as pending bills on the 2019-2020 fiscal year.
Furthermore, Gathungu explained that no documentation demonstrating the approved budget reallocation to support payment was provided. As a result, the validity of the Sh7 million insurance costs could not be determined.
Auditor Questions TSC Failure To Deduct And Remit Sh2.2bn Taxes