KEBS BALANCE SHEET IN THE RED: AUDITOR FLAGS Sh1.3 BILLION WORKING CAPITAL DEFICIT

The Kenya Bureau of Standards (KEBS) is technically insolvent, according to the Auditor-General's report for the financial year ended 30 June 2024, which shows the national standards regulator's short-term liabilities outstripping its assets by more than a billion shillings — a gap the auditor says now hinges on continued financial support from the National Government, its bankers and its creditors.

Auditor-General Nancy Gathungu, in a report signed on 24 December 2024, issued an unmodified — effectively clean — opinion on KEBS's financial statements, confirming they fairly present the Bureau's financial position.

But she attached a pointed "emphasis of matter" on the sustainability of KEBS's operations, a red flag that stops short of qualifying the accounts but signals real financial strain at an agency central to Kenya's product safety and trade regime.

The numbers behind the warning

Sh3.19 bn Current liabilities (FY 2023/24)

Sh1.85 bn; Current assets (FY 2023/24)

Sh1.34 bn

Negative working capital

The shortfall has widened sharply. A year earlier, in FY 2022/2023, KEBS's negative working capital stood at Kshs 903.6 million, against current liabilities of Kshs 2.26 billion and current assets of Kshs 1.33 billion. The nearly 50 per cent deterioration in twelve months means the Bureau's short-term obligations are now growing faster than the resources it has on hand to meet them.

"In the circumstances, the Bureau is technically insolvent, and the financial statements have been prepared on assumption of a going concern basis and of continued financial support from the National Government, bankers and creditors," the report states, though the Auditor-General notes her opinion is not modified in respect of this matter.

Unpaid bills, uncollected debts

Two other findings, raised under the report's section on lawfulness and effectiveness in the use of public resources, point to strained cash management on both sides of KEBS's ledger.

● Long-outstanding payables: Of Kshs 1.68 billion in trade and other payables, Kshs 319.4 million has been outstanding for more than a year. The audit found no satisfactory explanation for the Bureau's failure to clear these liabilities, warning that the delay could hurt the "business operations, liquidity and livelihoods" of the creditors owed money, and by extension their own dependents.

● Long-outstanding debtors: On the flip side, KEBS is itself owed Kshs 1.34 billion in receivables from exchange transactions, of which Kshs 188.6 million has been outstanding for over a year. The auditor linked this to an absence of "active and intentional collection" and weak enforcement of existing debt-recovery mechanisms — a gap that risks costing the Bureau revenue it could otherwise be using to meet its own obligations.

Taken together, the two findings describe an agency simultaneously struggling to pay what it owes and to collect what it is owed — a cash-flow squeeze from both directions that helps explain the widening working-capital deficit.

Staffing gaps add to the strain

The audit also flagged irregularities in KEBS's human resource structure. A review of payroll records showed the Bureau employs 1,117 members of staff against an approved establishment of 1,441 — a shortfall of 324 positions. At the same time, certain cadres are over-established by a combined 104 members, meaning some units are overstaffed even as the Bureau as a whole runs below its approved headcount.

The Auditor-General warned that the mismatch could leave employees "overstretched," with consequences for service delivery and the realisation of the Bureau's broader mandate — a mandate that includes certifying the safety and quality of goods moving through Kenya's domestic and export markets.

Governance and controls hold, but a prior issue lingers

Despite the financial red flags, the report found no fault with KEBS's governance architecture. Under the section on internal controls, risk management and governance, the Auditor-General concluded that nothing came to her attention to suggest these systems were not operating effectively, as required under Section 7(1)(a) of the Public Audit Act, 2015. No key audit matters were identified for the year under review.

However, the report notes one loose end: an issue raised in the prior year's audit report under the Report on Financial Statements remains unresolved as at 30 June 2024, a reminder that governance sign-off does not always translate into closed-out compliance gaps.

Why it matters

KEBS sits at the centre of Kenya's consumer protection and trade infrastructure, certifying standards for everything from food products to construction materials and enforcing compliance through market surveillance. A regulator that is itself technically insolvent, with a widening gap between what it owes and what it can readily pay, raises questions about its capacity to sustain enforcement operations, retain staff, and deliver on its mandate without leaning indefinitely on Treasury support.

The findings will add to pressure on the Bureau's management and its parent ministry to tighten debt collection, clear long-outstanding creditor balances, and align staffing levels with its approved establishment — before the going-concern caveat becomes a more serious qualification in future audits.