Kenya Railways is losing millions in potential revenue due to weak internal controls in its ticketing and revenue collection systems, a new report by the Auditor-General has revealed.
In her audit for the financial year ending June 2024, Auditor-General Nancy Gathungu highlighted serious flaws that allow passengers to travel without paying fares, raising concerns over financial mismanagement within the state corporation.
According to the report, overcrowded commuter trains have made it difficult for revenue inspectors to verify tickets, resulting in significant revenue leaks.
“In the circumstances, the effectiveness of internal controls on revenue collections in the commuter service trains could not be confirmed,” the report noted.
The Auditor further faulted the handling of ticket receipts, saying some were discarded into open trays at station exits without being destroyed or safeguarded, creating opportunities for reuse and fraud.
Mobile money transactions were also flagged as a major loophole. The report observed that cashiers often prioritized cash payments over M-Pesa, leading to delays and revenue risks. In many cases, passengers using mobile payment systems were only required to show M-Pesa confirmation messages and read reference numbers aloud — a practice Gathungu warned was highly susceptible to fraud and manipulation.
“The cashiers who issued tickets were the same individuals tasked with verifying them, presenting a clear case of lack of segregation of duties, which could easily lead to collusion and loss of funds,” she said.
Beyond revenue collection flaws, Kenya Railways is under renewed scrutiny for failing to service a Sh46 billion loan borrowed from China Exim Bank. The corporation has incurred Sh34.1 billion in penalties and interest due to delayed payments, with Gathungu terming the penalties “unnecessary public losses.”
“Failure to meet obligations when due has attracted avoidable expenditure of Sh34,166,273,919 — including penalties of Sh5.3 billion and interest of Sh28.8 billion — which could have been avoided,” the report stated.
The corporation is also grappling with contingent liabilities, including lawsuits worth Sh27.97 billion and government-backed guarantees amounting to Sh166.8 million, which the Auditor cautioned could disrupt operations if crystallized.
