KENYA ROADS BOARD Annual Report 2014.pdf · KWS Kenya Wildlife Services MBS Moran of the Burning Spear MTEF Medium Term Expenditure Framework PALWECO Programme for Agriculture and

KENYA ROADS BOARD

ANNUAL REPORT & FINANCIAL STATEMENTSFOR THE YEAR ENDED 30TH JUNE 2013

Our Vision

An efficient road network for a prosperous Nation

Our Mission

To fund, oversee and coordinate road development, rehabilitation and maintenance. We shall ensure prudent sourcing and optimal utilization of resources for socio-economic development.

ExcellenceWe are committed to timely delivery of high quality and cost effective services and encourage peak performance, enthusiasm and passion for work. We shall encourage productivity, be responsive and acknowledge individual and team accomplishments.

Customer FocusWe are committed to meeting our stakeholder requirements to their satisfaction by ensuring effective and efficient use of resources. We encourage continual improvement of our services and processes.

Integrity and ImpartialityWe are committed to promoting transparency, accountability and professionalism in our work. We shall be impartial, objective and unbiased in how we relate to each other and our stakeholders.

Staff FocusWe shall promote a good working environment for our staff as well as promote growth, respect, unity and openness amongst them.

Diversity and InclusivenessWe shall embrace diversity and promote inclusiveness in our organization and shall not discriminate on the basis of age, gender, race, religion, tribe or physical ability.

Good Corporate CitizenshipWe shall ensure good corporate citizenship by supporting the less fortunate and ensuring compliance with our legal and statutory obligations. We shall endeavor to be sensitive to issues that affect Kenyans such as poverty and environment degradation and shall ensure they form part of our planning processes.

Our Core Values

Core Statements

Kenya Roads Board FY 2012/13 Annual Report


Table of Contents

Abbreviations 1

About us 2

Chairman’s Statement 7

The Board 9

Executive Director’s Statement 11

Management Team 13

Business Performance 15

Corporate Sustainability 25

Corporate Governance 31

Kenya Roads Board Fund Financial Statements 39-58 • ReportsoftheDirectors 40• StatementsofBoard’sResponsibilities 41• ReportofIndependentAuditors 42• StatementofFinancialPerformance 43• StatementofFinancialPosition 44• StatementofChangesinNetAssets 45• StatementofCashFlows 46• NotestotheFinancialStatements 47-58

Kenya Roads Board Financial Statements 59-83 • ReportsoftheDirectors 60• StatementsofBoard’sResponsibilities 61• ReportofIndependentAuditors 62• StatementofFinancialPerformance 63• StatementofFinancialPosition 64• StatementofChangesinNetAssets 65• StatementofCashFlows 66• NotestotheFinancialStatements 67-83


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Abbreviations

AfD L’Agence Française de Développement

APRP Annual Public Roads Programme

ARWP Annual Road Works Programe

CBS Chief of Burning Spear

FY Financial Year

HIV/AIDS Human Immunedeficiency Virus /Acquired Immune Deficiency Syndrome

HSC Head of State Commendation

IPSAS International Public Sector Accounting Standards

ISO International Standards Organization

KBS Kenya Bureau of Standards

KeRRA Kenya Rural Roads Authority

KeNHA Kenya National Highways Authority

KfW Germany Development Bank

KRA Kenya Revenue Authority

KRB Kenya Roads Board

KRBF Kenya Roads Board Fund

KURA Kenya Urban Roads Authority

KWS Kenya Wildlife Services

MBS Moran of the Burning Spear

MTEF Medium Term Expenditure Framework

PALWECO Programme for Agriculture and Livelihood in Western Communities

QMS Quality Management System

RICS Road Inventory & Condition Survey

RMLF Road maintenance Levy Fund

RSIP Road Sector Investment Programme

SIDA Swedish Development Cooperation Agency


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About us

IncorporationKenya Roads Board (KRB) is a statutory body established by the Kenya Roads Board Act No. 7 of 1999. The Board was established in accordance with Chapter 446 (State Corporations Act) of the Laws of Kenya, which is ‘An Act of Parliament to make provision for the establishment of state corporations for control and regulation of state corporations and for connected purposes’.

Kenya Roads Board is a State Corporation under the Ministry of Transport and Infrastructure.

Kenya Roads Board Fund (KRBF) is a Fund established under Chapter 408 of the Laws of Kenya - Kenya Roads Board Act, which came into effect under Legal Notice No. 7 of 1999. The Fund is managed by the Board of Directors of KRB.

The Board is domiciled and operates within the Republic of Kenya. The registered office is as set out on page 5.

Principal ActivityAs stipulated in the Kenya Roads Board Act of 1999, the object and purpose for which the Board was established is “to oversee the road network in Kenya and coordinate its maintenance, rehabilitation and development funded by the fund and to be the principal advisor to the Minister of Roads on all matters related thereto.”

Specific MandatesThe mandates of KRB are provided for in the Kenya Roads Board Act, No. 7 of 1999 as hereunder:

(a) Coordinate the optimal utilization of the Fund in implementation of programmes relating to the maintenance, rehabilitation and development of the road network;

(b) Seek to achieve optimal efficiency and cost effectiveness in roadworks funded by the Fund; (c) Manage the Fund; (d) Based on a five year road investment programme approved by the Minister for Roads and the Minister for Finance, determine

the allocation of financial resources from the Fund, or any other source available to the Board required by road agencies for the maintenance, rehabilitation and development of the road network to ensure that the allocation of funds is pegged to specific categories of roads and that not less than:-(i) Twenty two percent (22%) shall be deposited into a special bank account to be called Constituency Road Fund Account to be

maintained by every constituency for monies from the Fund which is allocated equally to all Constituencies in the country to be administered by the Kenya Rural Roads Authority (KeRRA);

(ii) Ten percent (10%) of the monies from the Fund is allocated for the maintenance or development of link roads between constituencies and to serve as Government counterpart funds in funding works on rural roads, to be administered by the Kenya Rural Roads Authority and that the said per centum shall be equally distributed to the constituencies where Kenya Rural Roads Authority has the mandate;

(iii) Forty percent (40%) of the monies from the Fund is allocated in respect of the national roads to be administered by the Kenya National Highways Authority (KeNHA);

(iv) Fifteen percent (15%) of the monies from the Fund is allocated in respect of the Kenya Urban Roads Authority (KURA);


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(v) One percent (1%) of the monies from the Fund is allocated in respect of roads in national parks and game reserves to be administered by the Kenya Wildlife Service (KWS);

(vi) A maximum of two percent (2%) of the monies from the Fund is allocated in respect of recurrent expenditure of the Board under section 31(5); and

(vii) The remainder of the monies from the Fund (10%) shall be allocated annually by the Board with the approval of the Minister to road authorities based on an Annual Roads Work Programme (ARW) derived from the five-year Road Sector Investment Programme (RSIP) approved by the Minister responsible for Roads and the Minister for Finance.

(e) Ensure that a maximum of ten percent (10%) of all monies allocated to each road agency is utilized for development purposes by the said agency;

(f) Monitor and evaluate, by means of technical, financial and performance audits, the delivery of goods, works and services funded by the Fund;

(g) In implementing paragraph (f), pay due regard to public procurement and disposal regulations and additional guidelines issued or approved by the Minister ;

(h) Recommend to the Minister appropriate levels of road user charges, fines, penalties, levies or any sums required to be collected under the Road Maintenance Levy Fund Act, 1993 and paid into the Fund;

(i) Recommend to the Minister such periodic reviews of the Fuel Levy as are necessary for the purposes of the Fund; and

(j) Identify, quantify and recommend to the Minister such other potential sources of revenue as may be available to the Fund for the development, rehabilitation and maintenance of roads.

Structural Functions in the Roads Sub-sector

Kenya Roads Board

MinistryofTransport&InfrastructureStateDepartmentofInfrastructure

Road Agencies• Kenya National Highways Authority• Kenya Rural Roads Authority• Kenya Urban Roads Authority• Kenya Wildlife Service

About us (Continued)


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Our Numbers in Brief

Trend in Annual RMLF Collections From FY 2006/07 to FY 2012/13 in Kshs. Billions

9 RMLF Rate per litre in Kshs.

24.9 FY2012/13RMLFCollectionsinKshs.Billion

24.37 FY2012/13RMLFDisbursementsinKshs.Billion

68,183 NumberofKilometersmaintainedinFY2012/13

Allocation Criteria for the KRB Fund

2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

1619

22 24 24 24 25

KeRRA - Constituency Roads22%

KeRRA - Link roads10%

KURA15%

Allocation by KRB/Minister 10%

KWS: 1%KRB: 2%KeNHA40%


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Registered Office

Kenya Re-Towers, 3rd FloorOff Ragati Road, Upper HillP.O. Box 73718- 00200, City SquareNairobi, KenyaTel. No.: 254-020-4980000, 2722865/6Fax No.: 254-020-2723161Website: www.krb.go.keE-mail address: [email protected]: Kenya Roads Board

Independent Auditors

Auditor-GeneralKenya National Audit OfficeP.O. Box 30084 – 00100, GPONairobi, Kenya

Principal Bankers

Central Bank of KenyaP. O. Box 60000-00200, City SquareNairobi, Kenya

Citibank N.ACitibank House, Upper HillP.O. Box 30711-00100, GPONairobi, Kenya

Co-operative Bank of KenyaP. O. Box 41862-00100, GPONairobi, Kenya

Malindi - Garsen Road rehabilitated using KRBF Funds


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Above: KRB Directors inspecting a drift along D510 Syongila - Tulia Road in Kitui County

Below: Mpeketoni - Mkunumbi Road in Lamu County maintained using RMLF


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Chairman’s Statement

On behalf of the Members of the Board, it is my pleasure to present the Annual Report and Financial Statements for Kenya Roads Board Fund and Kenya Roads Board Operations for the year ended 30th June 2013.

Overview According to the Kenya Vision 2030 and Second Medium Term Plan 2013-2017, the development of high quality infrastructure has been recognized as an enabler for socio-economic transformation, sustainable economic growth and development of the economy. The strategies and measures to be pursued during the period include; supporting development initiatives around flagship projects, strengthening institutional framework, enhancing efficiency and quality as well as increasing the pace of projects so that they are completed as envisaged. Other measures include encouraging private sector participation in the provision of infrastructure services through the Public-Private-Partnership framework.

The road sub-sector aims at improving both the quality and quantity of infrastructure facilities in order to contribute to the attainment of sustained economic growth. A high quality road network is a treasured asset for any economy and its maintenance needs to be managed in the most appropriate business-like manner. The need for better roads continues to be a priority for Kenyan road users. In the last three years, the Government has continued to commit more financial resources for infrastructural development - including roads, ports and energy generation. The approved total expenditure for the Infrastructure Sector increased from KShs. 217.45 billion in FY 2011/12 to KShs. 268.69 billion in FY 2012/13.

Operating Environment The Kenyan economy continued to witness gradual stabilization in 2013, even though it was an electioneering year. Kenya’s economy grew by 4.6%; driven by strong performance in the Agricultural, Financial, Tourism and Construction sectors. Interest rates have shown a downward trend in comparison to the high rates witnessed in 2012. Similarly, crude oil prices remained stable in the first six months of 2013 with an average of USD 111.39 per Barrel.

“Eng. Joel M. WanyoikeChairman

A high quality road network is a treasured asset for any economy and its maintenance needs to be managed in the most appropriate business-like manner. The need for better roads continues to be a priority for Kenyan road users.”


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In the short to medium term, the Kenyan economy is expected to have a sustained and rising growth based on the following fundamentals: increased investor confidence due to the peaceful March 2013 elections, stable macroeconomic environment, a projected easing and stability of international oil prices and reforms in security, governance and the judiciary.

StrategyThe board has continued to monitor the implementation of its five-year Strategic Plan (2013-2017). The board developed the FY2012/13 business plan which was extracted from the five year strategic plan. The deliverables that were set out in the business plan and performance contract for FY 2012/13 were achieved. Specifically, the Kenya Roads Board Fund collections exceeded the estimates, the APRP was approved and implemented during the year, the board carried out monitoring and evaluation on Kenya Roads Board Fund utilization and the internal capacity was strengthened to ensure effective delivery of the Board’s mandates.

Corporate GovernanceStrong Corporate Governance is integral to the Board’s long-term success and is essential in delivering the KRB’s strategy. The Statement of Corporate Governance included in this report from page 31 to 38, details the measures that the board has undertaken to ensure a robust corporate governance environment.

With regard to excellence in Financial Reporting and disclosure, the board, for the second year running was nominated and declared the winner of the Financial Reporting (FiRe) Awards (Public Sector Category). The FiRe Awards are jointly organized by the Nairobi Securities Exchange, the Institute of Certified Public Accountants of Kenya and the Capital Markets Authority.

Future Outlook 2013/2014Kenya Roads Board will align itself with the new Constitutional dispensation to serve Kenyans at the National and County levels of government. The board is actively engaged in activities aimed at increasing and sustaining the KRB Fund to meet the ever increasing road maintenance needs.

The board remains committed to deepening relationships with its stakeholders and key partners. Further, the board shall endeavour to develop its people and develop innovative and cost-effective methods of road construction and maintenance.

AcknowledgementOn behalf of KRB directors and staff, I express my sincere gratitude to the Government of Kenya, Ministry of Transport and Infrastructure, Road Agencies, taxpayers and other stakeholders for their continued support. This has gone a long way towards building a solid institution that is responsive to its mandates and stakeholders’ expectations.

I also wish to thank my fellow directors for dedicating their time and effort to steer the Board. Their advice and guidance has played a key role in the attainment of the impressive results.

Our management and staff have risen to the challenges with a great deal of resourcefulness, diligence, resilience and determination. We are proud of the team and greatly appreciate their ability and commitment towards achieving the Board’s vision, mission and objectives

I look forward to a promising financial year 2013/14. God Bless you all.

Eng. Joel M. WanyoikeChairman29th August 2013

Chairman’s Statement (Continued)


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The Board

Mrs. Consolata Yambo - Migowa

Mrs. Migowa is serving her second term in the Board. She represents the League of Kenya Women Voters. She holds a Masters Degree in Gender & Development and a Bachelor of Arts Degree in Political Science and Sociology from the University of Nairobi. She has vast experience in project monitoring and evaluation and has been instrumental in fighting for the rights of women and children. Mrs. Migowa is currently a member of Homa Bay County Executive Committee responsible for Water Service and Environment. Age 60

Mr. Joel Kipkemboi Yego

Mr. Yego represents the Institution of Surveyors ofKenya and is serving his second term. He holds a Masters Degree in Remote Sensing and a Bachelor of Science degree in Survey and Photogrammetry. He has served as lecturer in the Department of Survey at the University of Nairobi. He has also served as a Commissioner in the Njonjo Commission of Inquiry and is currently the Managing Consultant at Chalan Associates. Age 59.

Mr. Joseph Kinyua, CBS (up to March 2013)

Mr. Kinyua is the former Permanent Secretary, Ministry of Finance and currently Chief of Staff & Head of Public Service. He holds a Master of Arts Degree in Economics and a Bachelor of Arts Degree, both from the University of Nairobi. As a high-ranking economist who has worked at both the Treasury and the Central Bank of Kenya (CBK), Mr. Kinyua has been a key actor in policy decisions over the past three decades. He took his first government posting in 1980 as an economist in CBK’s research department. Mr. Kinyua has served as a Director on several boards of State Corporations. He is also a member of the Programme Committee of the African Economie Research Consortium (AERC) and Alternate Governor, World Bank Board of Governors. Age 62.

Eng. Joel M. Wanyoike - Chairman

Eng. Wanyoike is the Chairman of the Board. He represents the InstitutionofEngineersofKenya. He has been serving the Board in the position of a Director until April, 2012 when His Excellency the President appointed him as Chairman of the Board. He is a career Highway Engineer holding a Bacherlor of Science Degree in Civil Engineering from University of Nairobi and Master of Science Degree in Highway Engineering from Birmingham University, UK. Eng. Wanyoike has served in the public service since 1974, rising from the position of an Assistant Engineer to Chief Superintending Engineer (Design) in charge of Roads Design at the Ministry of Roads. Eng. Wanyoike also served as a City Engineer of the Nairobi City Council. He is currently the Vice Chairman of Muranga University College Council. Age 63.

Eng. M. S. M. Kamau, CBS, HSC (up to March 2013)

Eng. Kamau is the former Permanent Secretary, Ministry of Roads and currently the Cabinet Secretary, Ministry of Transport & Infrastructure. He holds a Master of Science Degree in Engineering from the University of Newcastle Upon Tyne (UK), and a Bachelor of Science Degree in Civil Engineering – University of Nairobi. He is a registered consulting Engineer with the Engineers Board of Kenya. Engineer Kamau has previously held senior positions in the Roads Ministry and has over 30 years experience in engineering. He is the Chairman of the Governing Council for Management University of Africa (MUA) and a member of the Lions Club of Kenya. Age 55.

Board size and composition The Board is composed of thirteen members, with eight from the private sector and five representatives from the public sector. The Chairman is appointed by the President from amongst the eight members from the private sector, and serves for a maximum of two 3-year terms. The members of the Board who held office during the year are as follows:-


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The Board (Continued)

Mrs. Monika Solanki

Mrs. Solanki represents the Kenya Association of Tour Operators (KATO) in the Board. She is the Chairperson of Coast KATO branch and a member of the Executive Board of KATO. She has over 25 years experience in tours and travel and is the Managing Director of Lofty Tours. Age 48.

Ms. Rita Kavashe

Ms. Kavashe represents the Automobile Association of Kenya. She holds a Bachelors Degree in Education (Moi University) and an Masters in Business Administration from the University of Nairobi. She is the Managing Director and Export Director Sub-Saharan Africa of General Motors East Africa Limited. She has over 16 years experience in the Motor Industry. Age 48.

CPA Osman H. Ibrahim, OGW

CPA Ibrahim represents the InstituteofCertifiedPublicAccountants of Kenya. He holds an Masters in Business Administration in Finance and a Bachelor of Commerce degree both from the University of Nairobi. He is the Acting Director, Finance and Administration at the Kenya School of Government. He has extensive experience in strategic planning, financial and procurement management in both public and private sectors. Age 44

Dr. Cyrus Njiru, CBS

Dr. Njiru is the former Permanent Secretary in the Ministry of Transport. He holds a Masters Degree in Business Administration from the United Kingdom; a PhD (Infrastructure Development, Finance and Management) from UK; Master of Science in Engineering Project Management from the UK and Master of Science in Management and Implementation of Development Projects from the UK. He has previously worked as the Principal Adviser on Infrastructure Development and Management at the African Development Bank’s headquarters in Tunis, Tunisia. He has also served as a Research and Consultancy Manager at the Institute of Development Engineering in the United Kingdom. Dr. Cyrus Njiru has served as a Non-Executive Director of Kenya Airways Ltd. Age 56.

Eng. Michael Karanja

Eng. Karanja is a Board member representing the Kenya Association of Manufacturers. He holds a BSc degree in Engineering and is a registered Engineer. He was previously the managing director of Sameer Africa Limited and has over 27 years experience in engineering, supply chain management and general management. He is also a founder member and non-executive director of the Center for Corporate Governance. Age 67.

Prof. Karega Mutahi, CBS (up to March 2013)

Prof. Mutahi is the former Permanent Secretary, Ministry of Local Government. He holds a Masters Degree from the University of California, Los Angeles and a Ph.D. in Linguistics from the University of Nairobi. He has been an associate professor of Linguistics and African Languages at the University of Nairobi. In addition, he has helped in guiding the Ministry of Education through the transition to Free Primary Education. Age 70.

Followingthecompositionofthenewgoverment,thefollowingbecamemembersoftheboardinApril,2013:Mr. Henry Rotich, Principal Secretary - The National TreasuryMr. G. Konchellah, Principal Secretary - Ministry of Devolution & PlanningEng. John Mosonik, Principal Secretary - Ministry of Transport & InfrastructureMs. Mwanamaka Mabruki, Principal Secretary - Ministry of East African Affairs and Commerce


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Executive Director’s Statement

OverviewKenya has maintained economic stability and fiscal discipline even in the face of fiscal pressure from the March 2013 elections, a new devolved system of governance, public sector pay pressure and rising security costs associated with security operations in Somalia.

Kenya Roads Board has continued to carry out its mandate of effectively and efficiently managing the Kenya Roads Board Fund in light of these factors. The board is happy to note it will continue to achieve its ambitious strategic performance targets set in the annual business plans, derived from the Strategic Plan 2013-2017.

Financial Performance & Utilization of FundsThe Board surpassed its budgeted revenue for the financial year 2012/13 by Kshs 899 million (2011/12: Kshs. 970 Million) including interest despite the challenges faced during the year. The revenue for the period amounted to Kshs. 25.27 Billion compared to Kshs. 25.07 Billion in FY 2011/12.

The Board released funds amounting to Kshs. 26.8 Billion to the Road Agencies during the financial year, which includes prior year funds amounting to Kshs 3.7 Billion. At the close of the year, the Board carried over Kshs. 1.7 Billion which will be released in the course of the Financial Year 2013/2014.

The Road Agencies applied 81% (Kshs. 26.5 Billion) of the available funds (Kshs. 32.6 Billion) to maintain 68,183 KM of the road network. In FY 2011/12 the Road Agencies reported that 79% (Kshs. 28.7 Billion) of the available funds (Kshs. 36.2 Billion) was utilized to maintain 69,572 KM of the road network. The board shall continue to ensure all the funds are utilized as planned. See pages 16-18

Business Plan The Board undertook a participatory and consultative process in the development of the Business Plan for FY2012/13. This entailed

“Dr. Francis N. Nyangaga, MBS, OGWExecutive Director

The Board surpassed its budgeted revenue for the financial year by Kshs. 899 Million (2011/12: Kshs 970 Million) despite the challenges faced during the year.”


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Executive Director’s Statement (Continued)

among others, a review of the business environment, key policies and laws & regulations. The board has continued to implement the approved business plan during the year and has successfully achieved most of the key deliverables. The key business highlights are in are shown on pages 15 to 22.

Performance ContractingAt the commencement of the year, the board signed the 2012/13 performance contract with the Government of Kenya through the Parent Ministry. The board has continuously endeavored to meet the agreed performance targets. During FY 2012/13, the board scored an average of 2.8354 (very good) compared to 2.7253 in FY 2011/12.

Human CapitalThe board believes that human capital is a key pillar to the successful execution of the Board’s Strategic Plan. The input of members of staff is the most critical element guaranteeing the attainment of targets set in the Performance Contracts and the strategic business plan.

The staff have received high quality training through an elaborate training plan for all staff. The board has put in place a performance management system that sets key performance benchmarks which when attained results in achievement of the Board’s goals and rewards for staff.

AppreciationI would like to thank the board of directors, management and staff of Kenya Roads Board for their continued support and dedication, without which our ambitious objectives could not have been achieved. I would also wish to extend our gratitude to the Government of Kenya, the Ministry of Transport and Infrastructure, the National Treasury, Road Agencies, and other stakeholders for their co-operation and support.

Finally, I would like to thank all taxpayers and stakeholders, and assure them of our strong commitment to deliver outstanding value to Kenyans as a whole.

Dr. Francis N. Nyangaga, MBS, OGWExecutive Director29th August 2013


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Dr. Francis N. Nyangaga, MBS, OGW

Dr. Nyangaga is the Executive Director, Kenya Roads Board. Dr. Nyangaga holds a Doctorate Philosophy Degree, Civil Engineering and a Bachelor of Science Civil Engineering. He is a registered member with Engineers Registration Board and Institution of Engineers of Kenya. Dr. Nyangaga has more than twenty years practical experience in road planning, design, construction and maintenance under the Ministry of Roads heading various projects and regional offices. Age 56.

CPA Rashid Kamis Mohamed, MBS

CPA Mohamed is the GeneralManager,Finance.He holds a Bachelor of Commerce degree from the University of Nairobi and an Masters in Business Administration from the University of Oxford in the United Kingdom. He is a registered member of the Institute of Certified Public Accounts of Kenya, and is currently a member of the governing council of the institute. He has over fifteen years managerial experience in finance in both private and public organizations. CPA Mohamed has also been engaged in public policy and advocacy matters of governance and financial management and is also involved in various social initiatives. Age 43.

Eng. Jacob Zecha Ruwa

Eng. Ruwa is the General Manager, Planning andProgramming. Eng. Ruwa holds a Bachelor of Science degree in Civil Engineering. He is a registered member with Engineers Registration Board and Institution of Engineers of Kenya. Eng. Ruwa has more than twenty years practical experience in road planning, design, construction and maintenance under the Ministry of Roads heading various projects and regional offices. Eng. Ruwa also has administrative experience while deputizing the Principal at Kenya Institute of Highways and Building Technology, in the line of training and has been involved in the preparation of training manuals for road works. Age 56.

Eng. Stephen Waireri Ndinika

Eng. Ndinika is the General Manager, TechnicalCompliance. Eng. Ndinika holds a Bachelor of Science in Civil Engineering and Masters of Science in Highway Engineering, from Birmingham University in the United Kingdom. He is a registered member with Engineers Registration Board and Institution of Engineers of Kenya. Eng. Ndinika has more than twenty years practical experience in roads construction and maintenance in developing countries having worked in both public and private sectors and has also managed projects funded by various international funding agencies. He also has been involved in monitoring and evaluation of delivery of work as well as Technical, Performance and Financial Audits. Age 53.

Ms. Lucy Kabura Gathika

Ms. Gathika is the Senior Manager Legal and Corporate Affairs. Ms. Gathika holds a Bachelor of Law and a Masters in Business Administration from the University of Nairobi. Ms. Gathika is also a member of the Institute of Certified Public Secretaries of Kenya and is an Advocate of the High Court of Kenya. Ms. Gathika has a wealth of more than fifteen years experience having worked in both public and private sector. Ms. Gathika has worked at Kenya Power and Lighting Company as Legal Officer and as a State Counsel at the Attorney General’s chambers. Ms. Gathika has also served as a Resident Magistrate. Age 45.

Mrs. Ruth Moraa Bita

Mrs. Bita is the SeniorManager,HumanResourcesandAdministration. Mrs. Bita holds a degree in Business Administration and a Masters in Business Administration from the University of Nairobi. Mrs. Bita is also a Certified Public Secretary and a member of Institute of Human Resource Management. She has over 15 years managerial experience in both public and private sectors having worked with KWS, Co-operative Bank among others. Age 56.

The Management Team


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Above: Lower Eastern KeNHA Regional Manager making a presentation to KRB Board members along Mwingi - Ukasi Road

Below: Synergy at Work - KRB Board Members and Staff during an annual team building activity


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Business Performance

Sources of FundsThe Kenya Roads Board Act No. 7 of 1999 empowers the Board to manage “such moneys or assets as may accrue to or vest in the Board in the course of its functions under the Act or under any other written law”.

The Road Maintenance Levy Fund (RMLF) mainly comprises Fuel Levy and Transit Tolls. Fuel levy is charged at the rate of Kshs. 9 per litre of petrol and diesel imported into the country, while Transit Tolls are charged on foreign-registered commercial trucks exceeding 2 tonnes that ply the roads in Kenya, and are based on distance covered and country of origin of the truck. Fuel levy is collected from the oil marketers on the Board’s behalf by Kenya Revenue Authority (KRA). KRA charges an agency commission of 2% on all fuel levy remittances.

Other sources of funds comprise agricultural cess and income from treasury operations. The Board currently manages 80% of the Coffee Cess collected for maintenance of roads within the coffee growing areas. Income from treasury activities represents interest earned from the Board’s liquid assets.

Allocation CriteriaThe Board prepares an Annual Disbursement Program based on the historical collection trends and the annual budget. This program details the funding available to each Road Agency during the course of the year for the planning of works. Based on this program and the monthly collections, the Board disburses funds to the Road Agencies in accordance with the Kenya Roads Board Act and the Kenya Roads Act of 2007.

Growth in RMLF CollectionsAnnual fuel levy collections have improved since 1993 due to the upward reviews of the rate charged per litre of fuel and increased economic activity. The last review was done in FY 2006/07, when the rate was increased from Kshs. 5.80 to Kshs. 9.00 per litre of petrol and diesel. Since then RMLF annual collections have increased from Kshs.16 Billion to Kshs. 24.8 Billion in FY 2012/13 as shown on Page 4.

RMLF Receipts And Disbursements - Fy 2012/13The Board collected Kshs. 24.9 Billion from fuel levy and transit tolls, against a target of Kshs. 24.3 Billion, representing RMLF surplus collections of Kshs. 558.9 Million. The RMLF collections were disbursed to the Road Agencies in accordance with the KRB Act as shown on Note 8 to Kenya Roads Board Fund Financial Statements on page 56 and 57.

Agricultural CessThese funds are administered by the Kenya Rural Roads Authority (KeRRA), for maintenance of feeder roads that provide access to the coffee growing areas. The Work Plans for coffee cess funds are prepared by the Constituency Roads Committees in consultation with coffee stakeholders, and submitted to the KeRRA Regional Office. KeRRA then forwards the Work Plans to the Kenya Roads Board for review and approval. Once Work Plans are approved, funds are released to the KeRRA Regional Office through KeRRA headquarters, for implementation of the road works.

During the year, the Board released Kshs. 149 Million to various constituencies in coffee growing areas for maintenance of roads as per the approved Work Plans.

Forward EstimatesThe Board prepares its annual budget based on the Medium Term Expenditure Framework (MTEF). The budget is then submitted to the Ministry of Transport and Infrastructure and Treasury for approval by the end of January every year.


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Based on the MTEF, the forward budgets for the next four financial years are as follows:

FY2013/14 FY2014/15 FY2015/16 FY2016/17

KShs‘000 KShs‘000 Kshs‘000 KShs‘000

Road Maintenance Levy Fund 25,174,472 25,792,248 28,087,313 29,482,131

Utilization of the Kenya Roads Board FundKenya Roads Board is committed to ensure that the proceeds from the KRB Fund have been applied for the purpose for which it was intended and that the use of such resources is efficient and transparent, in accordance with the principles, procedures and requirements of KRB and sound professional practice. It is KRB’s intention that value for money is achieved. The Board monitors the utilisation of funds on a regular basis through Technical, Performance and Financial audits and APRP Implementation Progress Reports.

The Kenya Roads Board Act requires each Road Agency to submit its audited accounts to the board within six months of the end of the financial year. From the unaudited financial statements for the Road Agencies for FY2012/13 and the APRP implementation reports, the broad summary of the total expenditure of the Fund for FY2012/13 is shown below:-

Road Agency Opening Bank Balance

1July2012Kshs

Transfers from KRB Fund

Kshs

Total Available FundsKshs

Amount UtilisedKshs

%Utilisa-

tion

Closing Bank Balance

30June2013Kshs

KeNHA 441,493,360 10,875,242,008 11,316,735,368 11,193,685,190 99 3,106,950,788KeRRA 2,637,177,127 8,246,898,433 10,884,075,560 8,073,431,622 74 3,878,121,293KURA 963,100,586 4,828,437,758 5,791,538,344 4,765,802,573 82 N/AKWS 263,246,327 297,979,500 561,225,827 327,749,347 58 215,049,787KRB 152,431,402 624,847,387 777,278,789 544,945,191 70 166,540,35010% KRB Board/Minister’s Allocation

1,304,945,142 1,966,677,012 3,271,622,154 1,625,178,456 50 1,188,094,646

TOTAL 5,762,393,944 26,840,082,098 32,602,476,042 26,530,792,379 81 8,554,756,864

The Road Agencies utilized Kenya Roads Board funds to maintain roads as follows during the financial year as shown below:

Road Agency NetworkCategory PlannedNetwork(KMs)

KMs Achieved % Achieved of planned Network

KeNHA A, B, C Roads 13,644 14,262 104.5%KeRRA D, E & Others 45,566 49,971 109.7%KURA Urban Roads 1,987 1,661 83.6%KWS Parks & Game Reserves 1,693 2,289 135.2%TOTAL 62,890 68,183 108.4%

The total utilization of available funds by Road Agencies was 81% while the extent of implementation of the APRP was at 108%. The reported low level of utilization of funds was due to failure by some Road Agencies to properly report on the progress of

Business Performance (Continued)


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road works and the delayed procurement of road works. A comprehensive report on the expenditure and performance of the Road Agencies for the year can be obtained from the APRP 2012/13 Implementation report and the respective audited financial statements. for each Road Agency. Following is a brief summary of the performance of each Road Agency for the year :-

TheKenyaNationalHighwaysAuthority(KeNHA)KeNHA is responsible for the management of the national highways in the country, categorized as Class A, B and C Roads. The budgetary allocation for KeNHA for FY 2012/13 was Kshs 9,944,180,000 comprising the 40% allocation and transit tolls. By the close of the financial year, KeNHA had received Kshs 10.875 Billion, which includes prior year funds. In total, KeNHA had Kshs 11,316,735,368 available for implementation of works in the FY 2012/13. Out of this, the authority reported an expenditure of Kshs 11,193,685,190 but submitted bank balances amounting to Kshs 3,106,950,788. From the table above, the over-reporting by KeNHA is Kshs 2,983,900,610 and may be attributed to inaccurate reporting and mixing of funds.

KeNHA utilized fuel levy funds to maintain 14,262 KM against a target of 13,644 KMs.

The Kenya Rural Roads Authority (KeRRA)KeRRA is responsible for the management of the rural roads in the country, categorized as Class D, E and Other roads. In FY 2012/13 Kshs. 10,884,075,560 was available for roadworks unde KeRRA and for administrative activities. During the financial year, the Board released fuel levy funds amounting to Kshs. 8.247 Billion to KeRRA. The authority expended Kshs. 8.1 Billion, and achieved 49,971 KM out of the planned road network of 45,566 KM. The detailed releases of funds to KeRRA are shown below:

Coffee CessThe Board approved disbursements amounting to Kshs 90,000,000 in the FY 2012/13. However, these funds were released in the subsequent financial year, upon receipt of work plans. The Board released coffee cess funds for the FY 2011/12 amounting to kshs 149,276,308 to KeRRA. However, KeRRA reported expenditure of Kshs 67,397,193 in FY 2012/13 and Kshs 153,767,946 for carry over works.

Administrative and Operational BudgetKeRRA reported to have spent Kshs 1,785,637,805 for recurrent expenditure both at the headquarters and the regional offices. This was over and above the allowed expenditure of 5.5% of Kshs 1,313,424,750.

KeRRA utilized fuel levy funds to maintain 46,563 Kilometres of road network and 3,408 Kilometres using KRB/Minister’s allocation.

The Kenya Urban Roads Authority (KURA)KURA is responsible for the management of roads in cities and municipalities in the country. In total, KURA had Kshs 5,791,538,344 available for implementation of works in the FY 2012/13. Out of this, the authority reported an expenditure of Kshs 4,765,802,573 and did not submit bank balances. Hence KURA under reported by Kshs 1,025,735,771 in FY 2012/13

The Authority utilized fuel levy funds to maintain 1,661 KM of the road network.



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The Kenya Wildlife Service (KWS)KWS is responsible for the management of roads in National Parks and Game Reserves in the country. A total of Kshs 238,804,500 was budgeted for road works implementation in National Parks in FY 2012/13. The Board released Kshs 238,804,500 (100%) to KWS for road works. In addition, KWS received Kshs 59,175,000 being funds for FY 2011/12 and had Kshs 263,246,327 as opening bank balance.

In total, KWS had Kshs 561,225,827 available for implementation of works in the FY 2012/13. Out of this, KWS reported an expenditure of Kshs 327,749,347, which was used to maintain 2,289 KM of the road network.

Kenya Roads Board OperationsThe audited financial statements indicating the utilization of funds received by the Board for its operations as shown on pages 59-83 KRB had a budget allocation of Kshs 485,609,000 for administering the KRBF. By the close of the financial year, the entire budget had been disbursed.

Out of Kshs.777,278,789 availabe in FY 2012/13, the board reported an expenditure of Kshs 544,945,191 and a bank balance of Kshs 166,540,350 at the end of the financial year.

The Annual Public Roads Programme (APRP)The Kenya Roads Board Act requires the Board to review, individually , the Annual Road Works Programmes (ARWPs) submitted by Road Agencies and consolidate these into an Annual Public Roads Programme (APRP). The APRP forms the basis of funds allocation and auditing of works by the Board and is not to be varied by any Road Agency without prior written approval from the Board. It provides detailed allocations for all the funds accruing from KRBF in the Financial Year and outlines funding for road works to be undertaken by Road Agencies as identified in the KRB Act and subsequent legal statutes.

During the year, the Board allocated and released funds in accordance with the FY 2012/13 Annual Public Roads Programme (APRP) awaiting alignment of the Roads Sector to the Constitution. As the process of alignment of the Roads Sector to the new Constitution continues, road works contained in the APRP for FY 2012/13 continued uninterrupted and were undertaken by the designated Road Agencies.

The summary of APRP implementation achievement in FY 2012/13 is tabulated below:

RoadAgency/KMS KeNHA KeRRA KURA KWS KRB/Ministerallocation

Total

Network Extent 13,687 130,067 12,549 4,583 - 160,886Kilometers achieved 14,262 46,563 1,661 2,289 3,408 68,183% Achievement 104% 36% 13% 50% N/A 42%



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Technical Compliance, Financial and Performance AuditThe Board’s commitment to ensure that there is value for money in the utilization of Kenya Roads Board Fund by Road Agencies cannot be overemphasized. The Board carries out monitoring and evaluation on roads activities and projects funded by the Fund. The Kenya Roads Board Act mandates the Board to coordinate the optimal utilization of the Fund, monitor and evaluate the delivery of goods, works and services through Technical Compliance, Financial and Performance Audits.

The Board also conducts monitoring and evaluation of donor funded road projects, upon request from donors. During the year, the Board was engaged in the audits for road works funded by the European Commission, PALWECO, Stabex, AfD and KfW. These audits are carried out using in-house personnel and through consultancy engagements with engineering and financial audit firms. The current consultants were engaged in FY 2012/13 on a contractual period of three financial years ending in FY 2014/15.

There are a number of audit issues and challenges in the implementation of the Annual Public Roads Programme (APRP) whose impact has been quantified over the years. However, there has been an improvement in implementation of road works in FY 2012/13 as was demonstrated by the reduction of audit issues noted during the period. Audit findings were discussed by the Audit and Risk Committee of the board. Thereafter they were fully deliberated by the board and then forwarded to the respective road agencies, the Ministry and other Government Agencies, for action. Some of the non compliance issues noted include:-a) Non compliance with APRP;b) Payment for ineligible expenses;c) Technical issues including poor quality and performance of completed works, not properly document preliminary investigations,

designs and tender documentation;d) Inadequate financial and progress records and inadequate internal control systems;e) Inappropriate procurement arrangements for roadworks and non compliance with Procurement Act, Rules and Regulations;f) Delays in implementation of APRP/ road works leading to low utilization of funds at the close of the financial year resulting in

maintenance backlog;g) Delays in release of funds by the road agencies from the headquarters to the regional offices resulting to delay in implementation

of works.

However a number of gains have been realized, some of these gains are; a) Progressive increased compliance with APRP;b) Reduced time in disbursement of funds to the implementing units;c) Payments to contractors have been streamlined and take reasonable time; andd) Small works contract document developed under Roads 2000 programme for routine and spot improvement works was being

used where appropriate, among others.

The detailed audit reports are available for review at KRB offices.

The Board shall continue to monitor the implementation of road works funded by the fund to ensure value for money is achieved, and assist in driving the economy towards Vision 2030 goals.

Road Sector Investment Programme (RSIP)The Road Sector Investment Programme (RSIP) forms the basis of prioritization of roads in the APRP. The Board monitors the implementation of the RSIP through regular reports and stakeholders’ meetings. The Board continues to ensure that the APRP prepared by Road Agencies is based on the RSIP in the prioritization of road works.

The implementation of the RSIP requires great cooperation and support, financially or otherwise, from the Government, Road Agencies, Development Partners, Private Sector and other stakeholders.



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Overloading ControlOverloading has become a major challenge for the road asset in Kenya as it reduces the lifecycle of our roads therefore increasing the maintenance, rehabilitation and development costs for roads in Kenya.

The establishment of axle load limits is an important aspect in the management of the road network. The Board is dedicated to monitor compliance with axle load limits, and has engaged two consulting firms to continue monitoring Axle Load. These consultancies cover the urban and rural network in addition to the national road network. The finding and respective recommendations are submitted to the Parent Ministry, Road Agencies and other Government Agencies for action.

The Board uses the collected axle load statistical data to establish historical trends at major trunk roads, critical rural and urban links, and recommends a suitable Axle Control Limits regime. The following improvements have been noted:-• Axle load compliance per axle has improved slightly from 35% in December, 2012 to 44% in June, 2013; • Overloading has decreased over the years;• Axle load compliance per Gross Vehicle Weight has improved from 78% in December, 2012 to 92% in June, 2013;• The management of weighbridge stations have been outsourced to private contractors to enhance efficiency; • Some of the weighbridges have had their operations computerized;• Regular calibration of weighbridge equipments; and• Reduction of the delay time at the weighbridges hence faster movement of goods within the region.

Road Network Management DataIn its role as an advisor to the Minister, the Board is in the process of procuring a consultant, funded by the World Bank, to collect and collate road network management data in Kenya. The components of the study are as follows:-• Road Inventory and Condition Survey (RICS) on Narrow Roads (with road reserve between six (6) and nine (9) meters);• Transport Sector Indicator Framework Study;• Condition Survey on the Classified Road Network (with road reserve nine (9) meters which is estimated at 160,886 km based

on 2009 RICS report);• Road Asset Valuation; and• Traffic Data Collection.

The study will provide essential data for planning, monitoring performance of road network, sourcing and allocation of funds and implementation of maintenance and development programs and is expected to enhance asset management of the road infrastructure in the country. Once completed, the comprehensive data on the entire network will be availed to the public.

Road ClassificationThe Board presented a new classification of the road network to the Minister for Roads in 2011 for approval. The Constitution of Kenya classifies roads into National Trunk Roads and County Roads. There have been meetings with various stakeholders in the road subsector to define and delineate the two types of roads.

During the year, the Board prepared the draft National Trunk Roads maps and road register and submitted it to the Minister for approval. The Board is in the process of compiling the County Roads Maps and register.



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ISO Re-CertificationKRB emphasizes the creation of a quality management system that leads to provision of services/products that meet customer, statutory and regulatory requirements. The Board received its Quality Management System (QMS) ISO 9001:2008 Certification in June, 2010 for a period of three years.

During the financial year, a re-certification process was carried out by Kenya Bureau of Standards (KBS). KBS carried out an ISO audit to determine if the organization demonstrated conformity to the ISO 9001:2008 standard, effectiveness of internal procedures and most importantly, continual improvement in service provision to customers. The audit, which was carried out in June, 2013 required provision of evidence to show that KRB was meeting all the requirements.

The audit findings showed that KRB is committed to the continued establishment and implementation of the QMS as evidenced by:-

(i) Commitment from top management in the provision of resources necessary for the QMS;(ii) Communication of the Quality Policy to all staff; and (iii) Establishment of Quality Objectives at the corporate and departmental level.

KBS therefore re-certified the Board for a further period of three years.

Roads 2000 (R2000) StrategyThe R2000 Strategy is coordinated by the Board. During the year, the Board facilitated and coordinated R2000 activities undertaken by the road agencies. A new plan dubbed Roads 2000 Strategic Plan (2013-2017) intends to use methods of constructing feeder roads that would be cheaper, durable and create employment opportunities in the long run.

The Board has continued to encourage Road Agencies to use R2000 strategy in implementing road maintenance and development activities funded by the fund, hence enabling creation of jobs within the road sub-sector. The strategy has helped in building capacity for small and emerging contractors through various training initiatives financed by the fund in various institutions such as Kenya Institute of Highways & Building Technology.

During the year, the R2000 Strategy supported the creation of 71,500 jobs against a target of 70,000. The Board shall continue to monitor the implementation of the R2000 Strategy and ensure more jobs are created to reduce the unemployment rate in the country and assist in making Kenya a middle income country as envisioned in the Vision 2030.

Customer SatisfactionIn order to measure the impact of its current programs in enhancing the customer satisfaction index and to identify other issues of stakeholders concerns, Kenya Roads Board committed in the 2012/13 performance contract, to conduct a customer satisfaction survey. The purpose of the survey was to assess the level of customer satisfaction with the aim of improving the efficiency of Kenya Roads Board in achieving its mandate. The study targeted customers of Kenya Roads Board (stakeholders, suppliers, Ministries and Government departments, media among others). The survey conducted in June, 2013 established that customer satisfaction index for Kenya Roads Board was at 86.2% (2011/12 – 85%).

Performance ContractingAt the commencement of the FY2012/13, the Board signed an annual Performance Contract with the Government of Kenya through the Parent Ministry which sets out targets that the Board is expected to achieve during the financial year. The deliverables are cascaded to the departments within Kenya Roads Board. The annual targets are monitored on quarterly basis; progress reports submitted to the Board for approval and subsequently submitted to State Corporations Advisory Committee under the Office of the President.



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The Key Performance Indicators outlined in the Performance Contract include financial & stewardship, service delivery, operational and qualitative indicators derived from the Medium Term Expenditure Framework, Vision 2030 and Sector Performance standards.

The Board has continuously endeavored to meet the agreed performance targets. During FY 2012/13, the Board scored an average of 2.8354 (very good) compared to 2.7253 (very good) in FY 2011/12. During the year there was a remarkable improvement in delivery of services as evidenced from improved customer satisfaction by 1.2% from 85% to 86.2%, implementation of the service charter and resolution of public complaints among others. The Board is committed to achieve its mandates, improve service delivery and utilization of funds and to collaborate with Road Agencies and other stakeholders.

The graph below provides a trend in performance contracting results from 2005/06 to FY 2012/13. PerformanceContractingResultsFY2006/07toFY2012/13

2006/072006/07

3.0

2.5

2.0

1.5

1.0

0.5

0

2007/08

2.69

2.34

2.27 2.4

2

2.30

2.33

2.73 2.8

4

2008/09 2009/10 2010/11 2011/12 2012/13

KeRRA Taita Taveta Regional Manager making a presentation to KRB Board in KeRRA regional office in VOI


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Above: Soil Conservation through construction of Gabions to prevent soil erosion on Road Projects

Below: KRB Staff committment for a common purpose (KRB Vision and Mission)


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Above: Launch of ROADS 2000 Strategic Plan at Kenyatta International Conference Centre

Below: R2000 Strategy guarantees employment and wealth creation


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Corporate Sustainability

IntroductionThe Board recognizes the importance of conducting operations in a manner that meets existing needs without compromising the ability of the future generation to meet their need; therefore it carries out its operations in a manner that ensures the economic life of the community in which it operates. It remains the Board policy to ensure that activities meet and exceed the social, economic and environmental expectations of stakeholders. The Board believes that ethical leadership and corporate citizenship should direct the strategy and operations to build sustainable business.

The Board executes the objectives through the following:-(a) Our people and values;(b) Stakeholder engagement;(c) Protecting the environment; and(d) Corporate Social Responsibility and Investment.

Our People and ValuesAt KRB, people are the primary asset. The Board therefore recruits and invests in the best talent in the market. Our success has been and will continue to be highly dependent on the performance and accountability of our youthful team.

Our Culture and ValuesOur vision of “an efficient road network for a prosperous nation” describes who we are, what we stand for and is what makes our culture distinctive. The staff and directors are committed to live their values of excellence, customer focus, integrity and impartiality, staff focus, diversity and inclusiveness and good corporate citizenship.

The Board strives to create a culture where people have a strong sense of personal accountability and are able to make good personal judgments, based on its values. This is driven by the Board’s mission to fund, oversee and coordinate road development, rehabilitation and maintainance and the commitment to ensure prudent sourcing and optimal utilisation of resources for social-economi development. During the year the Board strengthened this emphasis in the definitions of its values and will continue to reflect them in future strategic and business plans.

The Board values its employees for who they are and what they bring to the Board and recognizes that different views create innovation. The Board encourages its staff to pursue their careers and personal aspirations and strive to create an open and collaborative working environment in which they can maximize their talents.

The Board maintains an open and collaborative dialogue with our employees, through regular staff meetings, open door policy as well as our annual employee opinion survey, in which participation has remained above 70% in the last five years. In addition, providing world-class training and development opportunities remains central to our long-term commitment to invest in its people.

Employee WelfareAt KRB, the staff and directors view each other as part of one big family and each member’s welfare is our collective responsibility. The Board takes every effort to ensure that employees’ well being (physical, emotional and financial) is considered as this affects them both at home and at work.

The Board will continue to invest in out-of-office staff activities such as team-building in reflection of our deep commitment to staff welfare. During the year, the Board held its team building activities and rewarded staff who had exemplary performance and those who had served the Board for long.

The Board has also continued to ensure that all cross cutting issues have been addressed; in particular the policies and work plans for HIV/AIDs, Persons with Disability and Gender have been developed and are being implemented.


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Diversity and Equal OpportunityThe Board endeavours to preserve gender and cultural diversity in our employee mix and takes pride as an equal opportunity employer for all qualified persons. This has created an inclusive environment where individuals and teams harness strengths in diversity to maximize potential and excel in performance.

Staff Training and DevelopmentTo ensure that KRB not only attracts but also retains the best talent, the Board aims to nurture people’s careers by making relevant opportunities accessible and helping them to develop skills, knowledge and experience in different functions or specialism.

Staff training and development are a prerequisite for employees’ growth. In FY 2012/13, training continued to focus on departmental technical competencies and people management skills at all levels.

Strengthening the leadership capability remains a key business priority to ensure that the Board has strong leaders today and in the future. The Board also provides opportunities for groups of existing and future senior leaders to benchmark with best practices on management. Capacity building will remain a key objective for the Board.

Employee EngagementThe staff are committed to the realization of the Board’s mandates. Focus is on delivering an employee experience where staff feel strongly connected to the realization of Board’s mandates and are able to do what they do best each day.

One way in which employees’ experience is enhanced is by conducting the employee opinion survey. In FY 2012/13, 75% of employees took the opportunity to have their say about what it feels like to work for the Board. The overall employee satisfaction survey was at 88.2% which was above the target for the year of 81%.

OccupationalHealthandSafety The Board is committed to providing a safe place to work for all employees and customers; work-spaces are specifically designed with this in mind. Good health and safety standards are ideal and remain an individual and corporate responsibility for the staff and the Board. The Board is committed to proactively managing all health and safety risks associated with its mandates.

During the year, the Board organized several workshops to sensitize staff and evaluated the work environment to ensure it meets the set standards.

The annual health and safety audit was conducted at the Board’s premises. The audit was carried out with the view of evaluating compliance of the work place and the associated operations with the provisions of the Occupational Safety and Health Act, 2007. Specifically, the following areas were assessed:-

• Work place information;• Management of Occupational Safety and Health policies;• Work place safety, Health and Welfare conditions including safety, occupational hygiene conditions as well as general conditions; and• Emergency response plan.

The Board has several medical policies for its staff and directors. The policies are reviewed annually to ensure that the Board maintains a healthy workforce and safe environment.

Corporate Sustainability (Continued)


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Zero Tolerance to CorruptionKRB has a zero tolerance policy towards corruption. The Board has an elaborate corruption prevention programme and has undertaken various sensitization and training activities to prevent corruption.

The Board, under its current performance contract targets an awareness scored 68% against the target of 70% by undertaking activities such as Corruption Risk Assessment and Implementing Corruption Control measures. The Board was issued with unqualified audit report for FY2012/13 by the Auditor-General for both the Fund and its operations. Further, the internal audit reports have not identified any issues on corruption.

EthicsandIntegrityThe Board conducts business in compliance with high ethical standards of business practice. The Board has in place a Code of Conduct and Ethics and a Corruption Prevention Policy. This policy requires employees and members of the Board to conduct business with integrity, in accordance with the Public Officers Ethics Act and ensure the enforcement of corruption prevention plans. Accordingly, corruption prevention, training, risk assessments and surveys form part of the Performance Contract between the Government of the Republic of Kenya (through Ministry of Transport & Infrastructure, state depatrment of Infrastracture) and the Board of Directors.

The Board is cognizant of the financial crime risks that arise from internal and external sources. To this end, the Board has conducted various training courses on anti-corruption and financial fraud practices. The Board has put in place various systems and procedures which are implemented and monitored on regular basis. The internal audit reports have not identified any non-compliance with the ethics policies.

The Board is committed to ensure compliance with all laws and regulations. The compliance is monitored through legal audits which are submitted to the Board.

Stakeholder EngagementThe Board is committed to open dialogue which helps to understand the concerns of its stakeholders and respond to them appropriately. These engagements assist to get feedback on the policies, procedures and ways of working. Stakeholder engagement is done through the following:-

ReportingThe Board is committed to transparency in reporting of its activities to its stakeholders. This is done regularly through the print and electronic media, published annual reports and financial statements. During the Nairobi International Show and the stakeholder’s workshops, the Board gets to interact with the public and provides information on its activities.

Customer FocusThe Board is committed to meeting stakeholder requirements to their satisfaction by ensuring effective and efficient use of resources. It encourages continual improvement of its services and processes. The performance and interaction with its stakeholders is also guided by the Constitution of Kenya - Bill of Rights.

To demonstrate that the Board is living on this promise, a resolved service charter was rolled out, and cascaded to all the staff and is displayed at various strategic places in the organization. The compliance to the service charter is monitored on a regular basis, plans are made on how to reduce or eliminate the non-compliances.



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During the year, the Board carried a customer satisfaction survey which satisfaction levels of 86.2% against the estimate target of 81% which has continued to improve over the years. For the coming financial year, the board plans to carry out a baseline survey on the population accessing public services and establish if the services are provided in an efficient and effective manner. The Board is also committed to implement innovative service delivery methods.

Grievance Mechanisms and ProceduresThe Board has put in place a grievance handling mechanisms for both the directors and employees. The employees’ issues are dealt with by the Management Committee of the Board.

The Board has set up a complaints handling mechanism which is handled by the management. The Board submits quarterly reports on complaints to the Commissioner of Administrative Justice who evaluates the extent to which the Board has complied with the procedures and issues a certificate.

Protecting the EnvironmentEnvironmental Conservation is one of the enablers to the Social Pillar in the country’s economic blue print ‘Vision 2030’. Road projects have the potential of damaging the natural resources upon which economies are based. The environment is the resource base for materials used in road construction. It assimilates road construction waste, hence affecting the lifespan of roads.

To minimize the negative environmental impact, the Board requires the Road Agencies to factor in mitigation measures at the planning stage, during and after construction for all rehabilitation and periodic maintenance projects. These measures include control of soil erosion through construction of gabions, tree planting, covering and enhancing borrow pits to provide water catchment areas for use by local residents.

During the year the Board planted trees in Taita Taveta County. To ensure survival of the trees, the Board partnered with Sagalla Youth Polytechnic, Talio Primary School, Wray Primary School and Mwakichuchu Secondary School. The Board catered for the tree planting while the schools were to ensure that watering and maintenance is done. The trees were purchased from the local community. Further, the Board donated KShs 50,000 to Taita Hills Lodge and the Salt Lick Hotel to replace all trees that had dried up and for maintenance of surviving trees which the Board planted in the previous year.


KRB committment to Environmental Conservation through engagement of stakeholders


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Corporate Social Responsibility and InvestmentThe Board works with its staff and stakeholders to enrich public/community life and participate in charitable projects. The main activities carried out during the year were as follows:-

Research and DevelopmentThe Board has set an interagency Research and Development Committee to explore the innovative technology in road design, construction and maintenance. The committee has requested for proposals from the universities on researches that among others on construction of low volume cost roads. It is also noted that gravel in Kenya is diminishing at a very high rate; the committee is also tasked with the responsibility of research on alternative materials for road construction and maintenance.

During the year, the Board in Consultation with the Minister set aside KShs 50 million for research and development.

Standard Chartered MarathonKRB staff and families participated in the 2012 Standard Chartered Marathon. The theme of the Marathon was ‘Run for a Reason’, which seeks to raise funds to help needy children. The number of participants this year increased as more staff and their family members enrolled for the event. The Boards contribution towards the noble event was KShs 0.25 million.

To ensure sustainability, the annual Standard Chartered Marathon now forms an important part of the Board’s calendar as the Board ‘shares vision’ with needy and disadvantaged persons.

SupporttotheNairobiHospiceAs part of its corporate social responsibility the staff and directors visited the Nairobi Hospice, an institution for the terminally ill, and donated medical supplies and Information Communication and Technology equipment worth KShs 0.63 million.

Roads2000(R2000)StrategyThe R2000 Strategy is a method of road development and management that ensures optimum utilization and development of locally available resources, where technically and economically feasible. The strategy focuses on the optimum use of labor and local resources with the support of appropriate tools and equipment. The use of this strategy provides employment to the local community and saves on foreign exchange substantially. This guarantees sustainable community investment and creation of wealth among the increasing youth population in the country.


Construction of roads using labour based methods promotes youth employment and use of local materials


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Above: Strategy at work - KRB Directors and Staff members strategising on a task at hand ( Teamwork and Consultations)

Below: Corporate Social Responsibility - KRB Staff presenting a donation to Nairobi Hospice


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Corporate Governance

IntroductionThe Board of Directors recognizes the importance of applying the highest standards of corporate governance as a key contributor to its long term success, long term value and prosperity. This enables effective and efficient decision making and gives a structural aid for the Directors to discharge their duty to promote the success of KRB while taking into account the interest of stakeholders. Effective governance is achieved through a combination of strong process and structures, underpinned by the right values and culture.

The principles of corporate governance are contained in the Director’s Code of Conduct & Ethics.

The BoardBoard Size and Composition The size, composition and appointments of the Members of the Board is prescribed in the Kenya Roads Board Act. Kenya Roads Board comprises of thirteen (13) independent non-executive board of directors of which eight (8) are from the private sector institutions and five (5) members representing the public sector. Each member serves for a maximum of two terms of three (3) years each. The Chairman of the Board is appointed by the President from among the eight members from the private sector. Names of all members and changes thereto are published in the Kenya Gazette.

The public sector representatives are the permanent secretaries or designated alternates not below the level of deputy secretary from the ministries responsible for matters relating to roads, finance, local authorities, regional co-operation, transport & communications. The representatives from the private sector are appointed by the Minister for roads from among the three persons nominated by each organization specified in the First Schedule to the Kenya Roads Board Act.

The Board is well composed in terms of range and diversity of skills, knowledge, age and experience in various sectors which makes it effective and provides an appropriate balance for the oversight of the Board’s mandate. On gender, the Board has three(3) women out of eight (8) members from the private sector.

The membership of the Board changed in November, 2013 when the term of the previous Board expired. The directors representing Kenya Association of Manufacturers and Kenya Association of Tour Operators retired and were replaced. The position of the member from Kenya Transport Association remained vacant during the period. The membership from the public sector changes depending on the appointments to the Permanent Secretary(ies) position (s) or designated alternate(s).

The Executive Director’s position is filled through public advertisement. The Executive Director is appointed by the Board in consultation with the Minister. The Executive Director is an ex-official member of the Board but has no voting right at any meeting of the Board and is the secretary to the Board.

The directors’ abridged biographies appear on pages 9 to 10 of this Annual Report. The Board membership is shown on page 33.

IndependenceandSeparationofRoles&ResponsibilitiesThe roles and responsibilities of the Chairman of the Board, the Executive Director and non-executive directors’ remain distinct and separate which ensures a balance of power of authority and provides for checks and balances such that no one individual has unfettered powers of decision making. Their roles have been documented and are expected to be independent and free from conflict upon appointment.

The Chairman provides overall leadership to the Board without limiting the principles of collective responsibility for Board’s decisions. The Chairman builds an effective board and sets the board agenda in consultation with the Secretary/Executive Director and ensures effective communication to stakeholders.


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Corporate Governance (Continued)

The Executive Director is responsible to the Board and takes the overall responsibility for the management of the Kenya Roads Board Fund and takes responsibility for effective and efficient day to day running of the affairs of the Board. The Executive Director recommends the strategy to the Board and implements it and makes operational decisions. Noting that the position also dubs as the secretary to the Board, the executive Director ensures appropriate and timely information flows within the Board, its committees and management.

The non-executive directors are independent of management, they appoint the Executive Director and establish a framework for the delegation of authority and ensure succession planning for the executive director and senior management is in place. Their role is to advise, constructively challenge and monitor the success the management is delivering the agreed strategy within the risk appetite and control framework that is set out by the Board.

Board ResponsibilitiesThe Board’s responsibility is to promote the long term success of the Board. The Board provides leadership and concentrates its efforts on the strategic and governance issues. The Kenya Roads Board Act, the Board Charter and the Directors Code of Ethics defines the governance parameters within which the Board exists and operates, the specific responsibilities to be discharged and powers of the Board, its committees and directors collectively, as well as certain roles and responsibilities incumbent upon directors as individuals.

The Board is charged with the following responsibilities:-

a) Defining the purpose of the Kenya Roads Board, that is, its strategic intent and objectives, and its values which should be clear, concise and achievable;

b) Strategy formulation and ensuring there are appropriate policies, systems and structures to effectively and successfully implement the strategies;

c) Provide leadership within a framework of prudent and effective structures which enable risks to be assessed;d) Identify the opportunities as well as the principle risks in its operating environment including the preparation of the risk policy

plans/risk management policies and implementation of appropriate measures to manage such risks or anticipated impact on the corporate business;

e) Review on a regular basis the adequacy and integrity of the internal controls, acquisition and divestures, management information systems including compliance with applicable laws and regulations;

f) In stewardship and in discharging its obligations, the Board assumes responsibility in the following areas:(i) Retaining full and effective control over KRB, and monitoring management in implementing Board plans and strategies;(ii) Ensuring ethical behavior and compliance with relevant laws and regulations, audit and accounting principles, and KRB’s own

governing documents and Code of Ethics; and(iii) Defining levels of materiality, reserving specific powers to the Board and delegating other matters with the necessary written

authority to management and instituting effective mechanisms that ensure Board responsibility for management performance of its functions; among other mandates and responsibilities as stipulated in the Kenya Roads Board Act.

Meetings Attended by Board MembersKenya Roads Board Act provides that the Board holds meeting at least once every month. The Board therefore holds regular scheduled meetings throughout the year and supplementary meetings are held as and when necessary. In case of non attandance due to other commitments, such information was communicated to the chair prior to the date of the scheduled meeting.


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The table below details board membership and attendance at scheduled board meetings during the year :-

Board Membership and Attendance of Meetings

Director Classification Sector Organization Attendance

Eng. Joel M. Wanyoike Non-Executive Chairman

Private Institution of Engineers of Kenya 8/8

Joel Kipkemboi Yego (1) Non-Executive Private Institute of Surveyors of Kenya 7/8Osman H. Ibrahim Non-Executive Private Institute of Certified Accountants of Kenya 8/8Consolata Yambo Migowa Non-Executive Private League of Kenya Women Voters 8/8Rita Kavashe (1) Non-Executive Private Automobile Association of Kenya 5/8Geoffrey Irungu Non-Executive Public Alternate to PS, Ministry of Transport 8/8Alfred Kitolo (1) Non-Executive Public Alternate to PS, Ministry of East African

Community4/8

Chiboli Shakaba (1) Non-Executive Public Alternate to PS, Ministry of East African Community

1/8

Billow H. Abdi (1) Non-Executive Public Alternate, PS, Roads 7/8Grace Kamasara (1) Non-Executive Public Alternate, Ministry of Local Government 6/8Dr. Charles Onchoke (1) Non-Executive Public Alternate to PS, Finance 4/8Monika Solanki (*) Non-Executive Private Kenya Association of Tour Operators 6/8Robert Cullens (**) Non-Executive Private Kenya Association of Tour Operators 1/8Michael Karanja (*) (1) Non-Executive Private Kenya Association of Manufacturers 5/8Betty Maina (**) Non-Executive Private Kenya Association of Manufacturers 1/8

Notes: (*) - joined the Board in October 2013: (**) – retired from the Board in August 2013(1) – Acceptable apologies were received by the Chairman well in advance of the scheduled meeting

Board Committees and ResponsibilitiesThe Board delegates certain functions to well structured committees but without abdicating its own responsibilities. The Board has developed a committee structure that assists in the execution of its duties, powers and authorities. Each Committee is guided by a Committee Charter/Terms of Reference, which outlines its responsibilities as mandated by the Board and is reviewed on a yearly basis. The Committees are appropriately constituted drawing membership from amongst the board members with appropriate skills and experience. The Chairman of the Board, management and external parties/advisors are required to attend the committee meetings only by invitation.

The committees are expected to operate transparently and full disclosure to the Board and also to conduct themselves within the rules and procedures set out by the board. Matters deliberated by the Committees are presented to the board by the respective chairman during the next board meeting. The Board Committees are Audit & Risk Management, Finance & Planning and Management. The responsibilities and attendance of meetings during the year is as summarized below:-

Finance & Planning Committee The Finance and Planning Committee assists the board in fulfilling its oversight responsibilities for funds collection and sourcing, funds allocation & disbursements, review of budgets and APRP and the implementation reports.



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The responsibilities of the committee are as follows:-(a) Review KRB budgeting process, systems and cycle to ensure that they promote openness accountability and prudence;(b) Constantly review and monitor the collections of RMLF including seeking explanations for certain trends;(c) Periodically review the extent of utilization and compliance with budgetary levels and make appropriate recommendations;(d) Review the Ceilings for road agencies to ensure compliance with the KRB Act and the approved Road Sector Investment

Programme;(e) Review the consolidated annual public roads programme to ensure compliance with the guidelines from KRB and the proposals

from the road agencies;(f) Review the reports on works carried out to ensure that they are within specifications, costs and time;(g) Review financial statements, management accounts and audit reports and make appropriate recommendations.

Finance & Planning Committee membership and attendance

Name Organization Attendance

Osman H. Ibrahim (1) Institute of Certified Public Accountants of Kenya 2/2Michael Karanja Kenya Association of Manufacturers 2/2Billow H. Abdi Alternate, PS, Roads 2/2Dr. Charles Onchoke Alternate to PS, Finance 2/2Dr. Francis N. Nyangaga (2) Executive Director 2/2Eng. Joel M. Wanyoike (3) Institution of Engineers of Kenya. 1/2

Notes: (1)- Committee Chair : (2)-Secreatry to the Board: (3)-Attendance by invitation (he is the chairman of the Board)

Audit & Risk Management CommitteeThe Audit and Risk Management Committee assists the board in fulfilling its oversight responsibilities for the works programming and monitoring as well as the advisory role to the Minister for Roads. The Audit and Risk Management committee has authority to conduct or authorize investigations into any matters within its scope of responsibility. The committee has the following responsibilities:-

(a) Review and ensure the integrity of financial statements and appropriate accounting principles prior to review and approval by the Board;

(b) Review audit reports and make recommendations to the Board;(c) Review the effectiveness of the Board’s internal control systems and compliance as well as advise the board on risks and

mitigation measures;(d) Review the effectiveness of the system for monitoring compliance with laws and regulations and ensure business continuity

amongst other responsibilities as may be delegated by the Board.

Audit &Risk Management Committee Membership and Attendance

Name Organization AttendanceConsolata Yambo Migowa (1) League of Kenya Women Voters 2/2Joel Kipkemboi Yego Institute of Surveyors of Kenya 2/2Alfred Kitolo Alternate to PS, Ministry of East African Community 2/2Billow H. Abdi (2) Alternate, PS, Roads 1/2

Notes: (1) Chairperson of Committee: (2) - An accepted apology was received by the Chairman well in advance of the scheduled meeting



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Management CommitteeThe Management Committee oversees strategic planning, staff matters, performance contracting and general management oversight. Specifically the committee is responsible for the following:-(a) Setting the policies and strategic direction of the organization;(b) Review the Strategic Plan and the Business Plan for approval by the Board;(c) Monitoring the implementation of the Strategic Plan;(d) Evaluation of the performance of the organization, Executive Director, staff and departments;(e) Negotiating the annual performance Contract between KRB and the Ministry of Roads;(f) Reviewing of the organization structure of KRB;(g) Reviewing KRB’s staff terms and conditions of service;(h) Reviewing the various management policies aimed at enhancing staff performance;

During the year, the Committee approved the Annual Business Plan and Performance Contract for FY 2012/2013 and reviewed quarterly monitoring of performance. The committee also reviewed the staff matters and results of performance assessment of the senior staff.

Management Committee Membership and Attendance

Name Organization Attendance

Joel Kipkemboi Yego (1) Institution of Surveyors of Kenya 3/3Consolata Yambo Migowa League of Kenya Women Voters 3/3Geoffrey Irungu Alternate to PS, Ministry of Transport 3/3Alfred Kitolo Alternate to PS, Ministry of East African Community 3/3Robert Cullens (2) Kenya Association of Tour Operators 1/3Monika Solanki (3) Kenya Association of Tour Operators 2/3Dr. Francis N. Nyangaga (4) Executive Director 3/3Eng. Joel M. Wanyoike (5) Institution of Engineers of Kenya 1/3

Notes: (1) - Committee Chair : (2) - Term expired in August 2012: (3) - Joined in October 2012: (4) - Secretary to the Board: (5)-Attendance by invitation (he is the chairman of the Board)

Remuneration of the Board The non ex-official Board members are paid taxable sitting allowance as approved by the Minister responsible for Roads following guidelines from the State Corporations Advisory Committee. The Chairman is paid honoraria at a rate approved by the Government. Transport expenses are reimbursed on travel for Board business at the prevailing AA rates. The members are also entitled to outpatient and inpatient medical cover and a personal accident cover as applicable.

DirectorsInductionandTrainingThe Board develops an induction and training programs designed to introduce new directors to the operations of the Board and related governance matters. The programs are also aimed at deepening the understanding of the changes in risks, laws and business and political environment in which the Board operates.During the year, an induction was held through a workshop which included presentations by all heads of departments.

Two field trips were held to various projects funded by KRB fund around the country. This was a new experience especially for the new members which helped them learn about road sector structural arrangements and actual implementation of works which the Board funds



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Directors also received training in corporate governance, road sector financing and reforms including the impact of the Constitution and the prevailing political and economic environment on the functions of Kenya Roads Board.

Board Effectiveness and EvaluationIn order to assess and improve the capacity, functionality and effectiveness of the Board and its committees, an annual evaluation is undertaken in accordance with the widely accepted principles of corporate governance. The self evaluation reviews the capacity, functionality and effectiveness of its performance in the achievement of its goals and objectives. It assesses the performance and independence of the Board and committees jointly, individual members of the Board and the Executive Director. The Executive Director is assessed in his roles as the CEO and the secretary to the Board. The Chairman’s ability to add value, his performance against what is expected of his role and function, is also assessed.

The results of the evaluation form the basis on which action/work plans for the proceeding year are formulated, assists to identify the training needs for directors and it also forms the basis of re-appointment.

During the year, a comprehensive Board Evaluation was conducted under the guidance of officers from the Kenya School of Government. The Board and Committees were evaluated against the following criteria amongst others:-• Effective preparation for and preparation at meetings;• Understanding the business, mandates, strategic thrift of the KRB; • Communication with fellow directors, management and stakeholders;• Ability to take an independent view on matters brought for discussion;• Regular attendance of meetings; and• Keeping abreast with the latest developments including awareness and compliance with regulatory guidelines.

A report on the overall evaluation assessment was submitted to the Minister responsible for Roads in accordance with the best governance practices.

ConflictofInterest,CodeofConductandEthicsThe directors and employees of the Board have a fiduciary duty to act honestly and in the best interest of the Board. Business transactions with all parties must be carried out at arm’s length and with integrity. The Board provides effective leadership based on ethical foundation and ensures all deliberations, decisions and actions are based on the Boards’ core values underpinning good governance. The Board has developed a Code of Conduct and Ethics Manual whose aim is to enhance relationships and fostering teamwork among board members and staff and to build respect, confidence and credibility with its citizens. The Code provides guidance to its members regarding ethical and behavioral considerations as they address their duties and obligations during their appointment and their term in KRB.

The Board has put various measures in place to ensure that there is no conflict of interest amongst its directors and staff. The Board has put in place Corruption Prevention and Code of Conduct & Ethics Policies that binds both the directors and the employees.

At the beginning of the financial year, all directors and employees signed a declaration of interest form declaring that they will disclose any interest that conflicts or possibly may conflict with the interests of the Board. At the commencement of any business to be transacted, all directors/staff are required to declare their interest, if any.

During the year, the Board carried out training on the Leadership & Integrity Act, 2012, Corruption Prevention and Code of Conduct & Ethics Policies, provisions of Constitution of Kenya in particular Chapters 2 (10) –National Values and Principles of Governance, Chapter 4 – The Bill of Rights and Chapter 6 – Leadership and Integrity.

All staff and directors declared their wealth as required to the Public Service Commission.



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During the year, the directors and employees demonstrated their commitment to the public service through professionalism, integrity, moral and ethical requirements, conflict of interest, and political neutrality through compliance with relevant laws as evident from the legal audit, internal audit, and external audit reports presented to the Board.

Accountability & Audit /Control Environment ManagementAnnual Report and AccountsThe Board is required to present an objective and understandable assessment of the Fund’s and Board’s operation position and prospects. The Board has ensured that accounts are presented in accordance with the International Public Sector Accounting Standards and obtained an unqualified audit report.

The Board received unqualified audit report on the activities of the Fund and it operations

ExternalandInternalAudits(i) External AuditorsThe Kenya Roads Board Fund and its operations account is audited by the Auditor-General. The Auditor-General is an independent office established and whose role and responsibilities are defined under the Constitution of Kenya.

(ii) Internal AuditorsThe Board in furtherance of its duties to ensure that the process, structure and internal controls are maintained and adhered to may appoint independent audit consultants or recruit in-house staff to carry out such functions.

The Internal Audit firm was appointed through a competitive open tendering process. The Board engaged the services of M/s CPJ & Associates to carrying out the internal audit function and present reports on compliance. Further, the Board engaged the services of Technical, Financial and Performance consultants to evaluate the efficiency, effectiveness and economy, value for money, on the utilization of funds by Road Agencies.

Internal Controls and Risk Management The Board has the responsibility for identifying internal risk exposures and developing measures to mitigate against the identified risks. The Board reviews and monitors the development and implementation of systems of internal controls. The Board must have an understanding of these risks and mitigate them by implementing sound internal controls and risk management practices. The Board has developed the risk management framework and management control which identifies the risks. The Board recognizes that information technology form an integral part of the risk management process therefore it has developed the business continuity plan, disaster preparedness plan and the IT policy.

The Board reviewed the internal controls, policies and procedures and satisfied that appropriate controls and procedures were in place. This review was done by the internal auditors who report directly to the audit committee. The Board also delegated the day to day management of risks to management through systems and process carried out on a day to day basis.

Relationship with StakeholdersThe Board appreciates that stakeholder perception affect the organizations reputation. Therefore the Board strives to achieve an appropriate balance between its various stakeholders in the best interest of the organization by taking into account their legitimate interest and expectations in decision making.

The Board values the importance of complete, timely, transparent and effective communication with its stakeholders for building and maintaining their trust and confidence by providing regular information on its performance, activities and addressing their concerns whilst having regard to legal and strategic considerations. The Board has developed a Corporate Communications Strategy which encompasses internal & external communication, customer service and public relations.



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The main avenues for communication are through press releases, stakeholder forums and publications on disbursements, APRP and annual reports and financial statements. The Board has continued to encourage electronic communication through publishing documents in the corporate website www.krb.go.ke and has endeavored to ensure that the website is highly interactive and contains all the relevant information.

Additionally, the Board has dedicated staff to deal with complaints and public relations effectively, efficiently and as expeditiously as possible. The Board has an established mechanism of receiving, resolving and giving feedback on complaints referred to it by its stakeholders. The Board submits quarterly reports to the Commission of Administrative Justice on the complaints handling and management. During the year the Board scored 88% on complaints handling and management.

The Board encourages communication through email by allocating all directors and staff with an email address and intranet. For external communication, the Board has set up an email address – [email protected].

The Board’s Service Charter, which has been cascaded to all staff and displayed at strategic locations, is monitored on a regular basis. The Charter stipulates the service delivery timelines, commitments and expectations of KRB’s customers. During the year, the level of customer satisfaction on the Board’s services increased to 86.2% from 85% in FY 2011/12 while implementation of the service charter was at 90%. The Board is committed to continually improve access to information by the public and provision of efficient and quality public services.


Excellence in Performance - KRB Recognised as Winner in IPSAS reporting during FiRE Awards for the second year running

Kenya Roads Board FundFinancial Statements for the year ended 30th June 2013

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KENYA ROADS BOARD FUND

FINANCIALSTATEMENTSFORTHEYEARENDED30THJUNE2013

Kenya Roads Board Fund Financial Statements for the year ended 30th June 2013

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Report of the Directors

The KRB Directors have the pleasure of presenting Kenya Roads Board Fund annual report together with the audited financial statements for the year ended 30th June 2013 in accordance with the provisions of section 36 of the Kenya Roads Board act.

Principal ActivitiesThe Board is primarily engaged in management of the Kenya Roads Board Fund together with other mandates specified in the Kenya Roads Board Act, 1999.

Results The results for the year ended 30th June 2013 are set out on pages 39-58.

DirectorsThe Board of Directors who held office during the year are shown on pages 9-10.

In accordance with Section 7(4) of the Kenya Roads Board Act, 1999 ‘the Chairman and members of the Board, other than ex-official members shall hold office for a period of three years from the date of appointment but shall be eligible for re-appointment for one further term of a period not exceeding three years.’ The appointment and vacation of office of any member of the Board shall be in accordance with Section 2 of the Second Schedule to the Kenya Roads Board Act, 1999.

Financial StatementsAt the date of this report, the Board was not aware of any circumstances which would have rendered the values attributed to the assets in the financial statements misleading.

AuditorsThe Auditor General is responsible for the statutory audit of the Board’s books of account in accordance with Sections 14 and 39 (i) of Chapter 12 of the Laws of Kenya, Public Audit Act, 2003.

Approval of Financial StatementsThe financial statements were approved and authorized for issue by the Board of Directors on 29th August 2013.

BY ORDER OF THE BOARD

DR. FRANCIS N. NYANGAGA, MBS, OGWSecretary to the BoardNairobi


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Statement of the Board’s Responsibilities

The Kenya Roads Board Act, 1999 requires the Board to prepare financial statements of each financial year which give a true and fair view of the state of affairs of the Roads Board as at the end of the financial year and of the Board’s operating results for that year. It also requires the Board to ensure that the Roads Board keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the Board and to ensure that the Financial Statements comply with the enabling Act. They are also responsible for safeguarding the assets of the Roads Board and taking reasonable steps for prevention and detection of fraud and other irregularities.

The Board accepts responsibility for the financial statements which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with International Public Sector Accounting Standards and the requirements of the Kenya Roads Board Act. The Board is of the opinion that the financial statements give a true and fair view of the state of affairs of the Roads Board and of its financial performance. The Board further accepts responsibility for the maintenance of accounting records which may be relied upon in the preparation of the financial statements, as well as designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statements that are free from material misstatements.

The Board is required to prepare the financial statements on a going concern basis unless it is determined that after the reporting period, the Board intends to liquidate or cease it activities, or that it has no realistic alternative but to do so.

Nothing has come to the attention of the Board to indicate that the Roads Board will not remain a going concern for at least the next twelve months from the date of this statement.

Approved by the Board on 29th August 2013 and signed on its behalf by:-

ENG. JOEL M. WANYOIKE DR. FRANCIS N. NYANGAGA, MBS, OGWCHAIRMAN EXECUTIVEDIRECTORKENYAROADSBOARD KENYAROADSBOARD


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Report of the Independent Auditors

KENYA NATIONAL AUDIT OFFICEREPORT OF THE AUDITOR-GENERAL ON KENYA ROADS BOARD FUND

FOR THE YEAR ENDED 30TH JUNE 2013

Report on the Financial StatementsI have audited the accompanying financial statements of Kenya Roads Board Fund set out on pages 39 to 58 which comprise the statement of financial position as at 30 June 2013, and the statement of financial performance, statement of changes in net assets and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, in accordance with the provisions of Article 229 of the Constitution of Kenya and Section 14 of the Public Audit Act, 2003. I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary for the purpose of the audit.

Board’s Responsibility for the Financial StatementsThe Board of Kenya Roads Board is responsible for the preparation and fair presentation of these financial statements in accordance with the International Public Sector Accounting Standards and for such internal controls as the Board determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

The Board is also responsible for the submission of the financial statements to the Auditor-General in accordance with the provisions of Section 13 of the Public Audit Act, 2003.

Auditor-General’s ResponsibilityMy responsibility is to express an independent opinion on the financial statements based on the audit and report in accordance with the provisions of Section 15(2) of the Public Audit Act, 2003 and submit the audit report in compliance with Article 229 (7) of the Constitution of Kenya. The audit was conducted in accordance with the International Standards on Auditing. Those standards require compliance with ethical requirements and that the audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Board’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board, as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion.

OpinionIn my opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as at 30th June 2013, and its financial performance and cash flows for the year then ended in accordance with the International Public Sector Accounting Standards and comply with the Kenya Roads Board Act, Cap 408 of the Laws of Kenya.

Edward R. O. Ouko, CBSAuditor-GeneralNairobi24th January 2014


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Statement of Financial Performance asat30thJune2013

2012/13 2011/12 Note KShs ‘000 KShs ‘000

Receipts 6 24,929,393 24,402,271 Disbursements 8 (24,370,450) (24,100,000) Fund Balance 558,943 302,271 InterestIncome 7 340,382 668,257 Net Assets Available for Distribution 11 899,325 970,528

The notes on pages 47 to 58 form an integral part of these financial statements.


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Statement of Financial Position fortheyearended30thJune2013

2012/2013 2011/2012ASSETS Note KShs ‘000 KShs ‘000

CURRENT ASSETS CashandCashEquivalents 9 2,655,295 5,019,284

TOTAL ASSETS 2,655,295 5,019,284 LIABILITIES CURRENT LIABILITIES DuestoRoadAgencies 10 1,755,970 4,048,756

TOTAL LIABILITIES 1,755,970 4,048,756 TOTAL NET ASSETS 899,325 970,528

Represented by:

NET ASSETS NetAssetsAvailableforDistribution 11 899,325 970,528 TOTAL NET ASSETS 899,325 970,528


The financial statements on pages 43 to 58 were approved and authorized by the Board of Directors on 29th August 2013 and signed on its behalf by:



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StatementofChangesinNetAssetsfortheyearended30thJune2013

2012/13 2011/12 Note KShs ‘000 KShs ‘000

Net Assets, as at 1st July 11 970,528 385,670

Collections in the year:

Road Maintenance Levy 6 24,814,043 24,240,396

Agricultural Cess 6 115,350 161,875

Interest Income 7 340,382 668,257

Funds available 26,240,303 25,456,198

Disbursements to the Road Agencies 8 (25,340,978) (24,485,670)

Net Assets, as at 30th June 11 899,325 970,528



46 | Kenya Roads Board Fund Financial Statements for the year ended 30th June 2013

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StatementofCashFlowsfortheyearended30thJune2013

2012/2013 2011/2012 Note KShs ‘000 KShs ‘000 Cash Flows from Operating Activities Cash applied to operations 12 (1,733,843) (1,400,146)

Disbursements of prior year funds (970,528) (385,670)

Net cash applied to operating activities (2,704,371) (1,785,816) Cash Flows from Investing Activities Interest received 7 340,382 668,257

Net cash generated from investing activities 340,382 668,257 Net Decrease in Cash and Cash Equivalents (2,363,989) (1,117,559) Movement in Cash and Cash Equivalents:

At the beginning of the year 5,019,284 6,136,843

Net decrease in cash and cash equivalents (above) (2,363,989) (1,117,559)

At the end of the year 9(b) 2,655,295 5,019,284


NotestotheFinancialStatementsfortheyearended30thJune2013


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1.0 Standards and Interpretations Affecting the Reported Results or Financial Position Adoption of New and Revised International Public Sector Accounting Standards (IPSASs)

(i) New Standards and Interpretations In Issue But Not Yet Effective in Year Ended 30th June 2013

New Standards

Effective for Annual periods Beginning on or after

(a) IPSAS28-FinancialInstruments:PresentationIt replaces IPSAS 15, Financial Instruments.

The standard will not impact on the accounting policy and financial position of the Fund.

1st January, 2013

(b) IPSAS29-FinancialInstruments:RecognitionandMeasurement

It prescribes recognition and measurement principles for financial instruments and is primarily drawn from International Accounting Standard 39, Financial Instruments: recognition and Measurement including improvements of IFRS issued in April 2009.


1st January, 2013

(c) IPSAS30-FinancialInstruments:Disclosure

The standard prescribes disclosure requirements for financial instruments and is drawn from the IFRS 7, Financial Instruments.


1st January, 2013

(d) IPSAS32–ServiceConcessionArrangements:Grantor

The standard prescribes disclosure requirements for service concession arrangements by the grantor, a public sector entity. The standard will not impact on the accounting policy and financial position of the Fund.

1st January, 2014

(ii) Amended Standards and Interpretations In Issue But Not Yet Effective in Year Ended 30th June 2013A number of IPSASs were amended as a result of the IPSASB’s Improvements 2011 issued in October 2011. The improvements were made to enhance the quality and transparency of public sector reporting and strengthen public confidence in public sector financial management. The changes included the deletion of the introduction paragraph of twenty one (21) IPSASs and general improvements on the following standards:-

(a) IPSAS 10, Financial Reporting in Hyperinflationary Economies;(b) IPSAS 17, Property, Plant and Equipment;(c) IPSAS 19, Provisions, Contingent Liabilities and Contingent Assets; and(d) IPSAS 21, Impairment of Non-Cash-Generating Assets.

The improvements are effective for annual periods beginning on or after 1st January 2013, an entity may adopt earlier any of the amendments except where specifically noted in the amendment. IPSASs 17, 19, and 21 are applicable while the others are not. The Board is in the opinion that the standards should not be applied before the effective date.

Notes to the Financial Statements (Continued)for the year ended 30th June 2013


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2.0 Summary Significant Accounting PoliciesThe principle accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

(a) Statement of ComplianceThe financial statements for the year ended 30th June 2013 have been prepared in accordance with and comply with International Public Sector Accounting Standards (IPSAS) as issued by International Public Sector Accounting Standards Board (IPSASB), the Government Financial Management Act, 2004, Public Audit Act, 2003 and Kenya Roads Board Act.

For the Government Financial Management Act, 2004, Public Audit Act, 2003 and Kenya Roads Board Act reporting purposes, in these financial statements the “balance sheet”/ “statement of assets and liabilities” is represented by/ equivalent to the statement of “financial position” and the “profit and loss account”/ “statement of income and expenditure” is presented in the statement of “financial performance”.

(b) Basis of PreparationThe financial statements have been prepared under the historical cost convention, unless otherwise stated. The financial statements are presented in the functional currency, Kenya Shillings (Kshs.), and all values are rounded to the nearest thousands (Kshs.‘000) except when otherwise indicated.

(c) Presentation of Financial StatementsThe financial statements comprise of statement of financial performance, statement of financial position, statement of changes in net assets/equity and the statement of cashflows and the notes to the financial statements.

The Board classifies its expenditure by the nature of expense methodology.

The disclosure on risks are presented in the financial risk management objectives and policies contained in note 5.

The statement of cash flows shows the changes in cash and cash equivalents arising during the period from operating, investing and financing activities.

Starting 1st July 2010, Kenya Roads Board adopted the IPSAS 1 on Presentation of Financial Statements. In previous years the financial statements were prepared in accordance with the International Financial Reporting Standards (IFRSs). The change was necessitated by the reporting standards on public entities which are not Government Business Entities (GBE) as defined and required by IPSAS 1-‘Presentation of Financial Statements’ which states that the scope of application is for ‘all public sector entities other than Government Business Enterprises’.

The requirement by the Auditor General to present separate financial statements for the Kenya Roads Board Operations and the Kenya Roads Board Fund has led to reclassification of assets and liabilities including prior year to each set of financial statements.

(d) BudgetInformationInternational Public Sector Reporting Standards allow for non-disclosure where (a) an entity is not required to disclose its budget information publicly and (b) the entity has elected not to present its approved budget publicly.

The Board is not required to publicly avail the approved KRB Operations budget and has elected not to present its budget publicly. Therefore the Board has not attached a Statement of Comparison of Budget and Actual amounts. However it is observed that the Approved KRB Budget amounts for the year have not been exceed.

NotestotheFinancialStatements (Continued)fortheyearended30thJune2013


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(e) Functional Currencies (i) Functional and Presentation Currency

The financial statements are presented in the functional currency, Kenya Shillings (Kshs.), which is the Board’s presentational currency. The financial information is rounded to the nearest thousands (Kshs.‘000) except when otherwise indicated.

(ii) Transactions and Balances i) Translation of Foreign Currencies

Transactions in foreign currencies during the year are converted into the functional currency using the prevailing exchange rates ruling at the datesof the transactions. Assets and liabilities denominated in foreign currencies have been translated at the mean rates of exchange ruling at the end of the reporting period.

The foreign currency exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized through the statement of financial performance in the year in which they arise.

ii) Translation of Foreign OperationsThe Board does not have any foreign operations.

(f) Revenue RecognitionRevenue comprises the fair value of the consideration received or receivable in the ordinary course of business. Revenue earned by the Board is from non-exchange transactions. Revenue mainly comprises of levies whose use is limited by law, the Kenya Roads Board Act, 1999.

The Board recognizes revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the Board. The revenue for the Board comprises of:-

(i) Road Maintenance Levy Fund In accordance with the Kenya Roads Board Act, revenue comprises all proceeds from the Road Maintenance Levy Fund, such moneys, sums or assets that may accrue to the Board, or may be payable to the Board. The revenue is for specified purposes including maintenance, rehabilitation and development of the road network in Kenya.

Proceeds from the Road Maintenance Levy Fund comprises of collections from the Road Maintenance Levy and Transit Toll and any interest that may accrue from the fund. Fuel levy is charged at the rate KShs 9 per litre of petrol and diesel imported in the country. Transit Toll is charged on foreign registered commercial trucks exceeding two (2) tonnes that ply the roads n Kenya and varies based on distance covered and the country of origin of the truck.

Proceeds from the Road Maintenance Levy Fund are generally recognized in the Statement of Financial Performance on accrual basis.

(ii) Agricultural CessThe Agricultural Act provides that 80% of all monies collected as cess in respect of tea and coffee shall be transmitted to Kenya Roads Board Fund for purposes for which the Board was established.

Revenue is recognized in the Statement of Financial Performance on accrual basis.

(iii) Transfers and other income.The Kenya Roads Board Act provides the Board may receive all monies from any other source provided for or donated or lent



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to the Board. Such monies are recognized as they accrue in the period in which the transfer becomes binding at fair value, in the ‘Statement of Financial Performance’, unless the collectability is in doubt. The fair values can be determined by reference to the market rate.

Where a transfer is subject to conditions that if unfulfilled require a return of the transferred resources they shall be recognized as a liability until the condition is fulfilled.

(g) InterestIncomeandExpenseInterest income and expense, including interest income from non-derivative financial assets are recognized at fair value through the ‘Statement of Financial Performance’ using the effective interest method. Interest income is accrued on a time basis and is calculated on call deposits held with approved banking institutions.

(h) Cash and Cash EquivalentsFor purposes of the cash flow statement, cash and cash equivalents comprise of cash and cash balances held at the bank with less than three months maturity from the statement of financial position date. These include notes and coins on hand and deposits held at call with banks.

(i) ReceivablesReceivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Board provides money or services directly to a debtor with no intention of trading the receivable. Receivables mainly arise from non exchange transactions which accrue in the ordinary course of business and there is no intention of trading the receivable.

Receivables are recognized initially at the fair value (transaction price/ carrying value less any discounts). They are subsequently measured at amortized costs using the effective interest method less provision for impairment.

A provision for impairment of receivables is made when there is objective evidence that the Board will not be able to collect all amounts due according to the original terms of receivables.

The carrying value less discounts and any impairment provision of impairment is assumed to approximate their fair values. For financial instruments such as short term receivables, no disclosure of fair value is required when the carrying amount is a reasonable approximation of fair value.

Receivables are classified as current assets if payment is due within one year or less (or in the normal operating cycle of business, if longer). If not, they are presented as non-current assets.

(j) ImpairmentofNon-FinancialAssetsAt each reporting period end, based on internal and external sources, the Board reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.

Where it is not possible to estimate the recoverable amount of an individual asset, the Board estimates the recoverable value of the asset.

Impairment losses are recognized as an expense in the Statement of Financial Performance whenever the carrying amount of an asset exceeds its recoverable amount. Where an impairment loss subsequently reverses, the carrying amount of the asset



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is increased to the revised estimate of its recoverable amount. A reversal of impairment loss is limited to the assets carrying amount that would have been determined had no impairment loss been recognized in prior years. A reversal of an impairment loss is credited to the Statement of Financial Performance in the year reversals are recognized.

(k) ProvisionsProvisions are recognized when the Board has a present obligation (legal or constructive) as a result of a past event, it is probable that the Board will be required to settle the obligation, and a reliable estimate can be made of the amount of obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the reporting period end, taking into account the risks and uncertainties surrounding the obligation.

(l) PayablesPayables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Payables also include payments in respect social benefits where formal agreements for specific amounts exist. The Board allocates funds to the Road Agencies in accordance with the allocation criteria set out in the Kenya Roads Board Act, 1999. The amounts allocated are referred to as ‘disbursements’ and are released to compliant road agencies. Any amounts not released at any time are referred as payables to road agencies.

Payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. The historical cost carrying amount of payables subject to the normal credit terms usually approximates fair value.Payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of business if longer). If not, they are presented as non-current liabilities.

(m) Guarantees,AcceptancesandLettersofCreditGuarantees are accounted for as off statement of financial position transactions and disclosed as contingent liabilities.

(n) Subsequent EventsThere have been no subsequent events that would have an impact on the financial statements for the year ended 30th June 2013.

(o) ComparativesExcept otherwise required, all amounts are reported or disclosed with comparative information. Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.



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3.0 Critical Accounting Estimates, Judgements And AssumptionsIn the process of applying the Board’s accounting policies, the directors have made estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Although these estimates are based on the directors’ knowledge of current events and actions, actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

(a) Critical Judgments in Applying the Board’s Accounting PoliciesIn the process of applying the Board’s accounting policies, judgments have been made in determining:-• Whether the assets are impaired;• The classification of financial assets;• The going concern.

(b) Critical Accounting Estimates and AssumptionsThe key areas of judgments and sources of uncertainty in estimation are as set out below:

(i) Contingent LiabilitiesAs disclosed in these financial statements, the Board is exposed to various contingent liabilities in the normal course of business.

The directors evaluate the status of these exposures on a regular basis to assess the probability of the Board incurring related liabilities. However, provisions are only made in the financial statements where, based on the directors’ evaluation, a present obligation has been established.

(ii) Provision for Doubtful DebtsThe Board reviews its travel advances portfolio to assess the likelihood of impairment. Provision for impairment of receivables is established when there is objective evidence that the Board will not be able to collect all amounts due. Where necessary, an estimation of the amounts irrecoverable is made in that year. Provision for impairment shall be recognized upon approval by the Board of Directors.

(iii) Other ProvisionsOther provisions are recognized when the Board has legal or constructive obligation as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

(iv) Impairment LossesAt each reporting period end, the Board reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.

Where it is not possible to estimate the recoverable amount of an individual asset, the Board estimates the recoverable value of the asset. Any impairment losses are recognized as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount. A reversal of an impairment loss is recognized as income immediately.



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4.0 Segment ReportingThe Board does not have any branches/reporting segments. All the operations of the Board are managed from the registered office. The core business of the Kenya Roads Board continues to be management of the Kenya Roads Board Fund together with other mandates as stipulated in the Kenya Roads Board Act.

There is no distinguished component of the Board that is engaged in providing an individual service that is subject to risks and returns that are different from the main mandates of the Board.

5.0 Financial Risk Management Objectives and PoliciesThe Board has initiated and facilitated the process that will see the enhancement of risk management. The Board has an integrated risk management framework/strategy. The Board’s approach to risk management is based on risk governance structures, risk management policies, risk identification, measurement, monitoring and reporting. The risk management policies and systems are reviewed regularly to ensure they are in tandem with the micro and macro environment, regulatory guidelines, industry practice, market conditions as well as the services offered.

The Board recognizes the critical role the risk management will continue to play in its endeavor to carry out its business in a dynamic environment. The Board is committed to ensure that corporate governance and risk management are deeply entrenched in the Board’s strategy and culture. An elaborate risk management strategy that will provide direction on matters of policy and guide the implementation and control has been developed.

This risk management framework captures the following among other things:-• The Board’s risk appetite and parameters;• The Board’s risk matrix that highlights the rating of risks;• The structure of managing risks and accountabilities• The processes, procedures and reports that manage risks;• The mitigating factors, prevention, contingency plans and controls.

The Board’s core business involves major engagements with financial transactions and processes which pose certain risks. Three types of risks are reported as part of the risk profile namely operational, strategic and business continuity risks. (i) Operational risks are events, hazards, variances or opportunities which could influence the achievement of the Board’s compliance and operational objectives.(ii) Strategic risk is a significant unexpected or unpredictable change or outcome beyond what was factored into the organization’s strategy and business model which could have an impact on the entity’s performance.(iii) Business continuity risks are those events, hazards, variances and opportunities which could influence the continuity of the entity.

One of the key risks for the Board has identified in both the operational and strategic areas is the sustainability of the Road Maintenance Levy in the provisions of the Constitution. Financial risk as defined in IPSAS 15 and the management thereof, form part of this risk area.

The Members of the Board have the overall responsibility for the establishment and oversight of the Board’s risk management framework. The Board has delegated its risk management to the ‘Audit and Risk Committee’. One of the responsibilities of this committee is to review risk management strategies in order to ensure business continuity and survival. Most of the financial risks arising from financial transactions and processes are managed by the ‘Finance and Planning Committee’ of the Board.

The Board’s exposure to risks, its objectives, policies and processes for managing the risk and the methods used to measure it have been consistently applied in the years presented, unless otherwise stated. The Board aims therefore to achieve an appropriate balance between the risk and return and minimize potential adverse effects on its financial performance.



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The financial management objectives and policies are as outlined below:-a) Liquidity Risk

Liquidity risk is the risk that the Board will not have sufficient financial resources to meet its obligations when they fall due or will have to do so at excessive costs. This risk can arise from mismatches in the timing of cash flows from revenue and capital/ operational outflows, assets and liabilities according to their maturity profiles and can occur where cash flow streams have been discontinued, etc. Funding risk arises when the necessary liquidity to fund illiquid asset positions cannot be met at expected terms and when required.

The objective of the liquidity and funding management is to ensure that all foreseeable operational, capital and loan commitment expenditure can be met under both normal and stressed conditions and the mismatch is controlled in line with allowable risk levels.

The Board has adopted an overall balance sheet approach which consolidates all sources and uses of liquidity, while aiming to maintain a balance between liquidity, cash flows and interest rate considerations. The Board’s liquidity and funding management process includes:-• Projecting cash flows and considering the cash required and optimizing the short term requirements as well as the long term funding,• Maintaining balance sheet liquidity ratios,• Maintaining/soliciting for a diverse range of funding sources with adequate back up facilities,• Managing the concentration and profile of debt maturities, where applicable,• Maintaining liquidity and funding contingency plans.

The table shows the undiscounted cash flows on the Board’s financial assets and liabilities on the earliest possible contractual/maturity date. The liquidity ratio in FY 2012/13 is 1.51 (FY 2011/12: 1.24).

Note 2012/13 2011/12Financial Assets KShs ‘000 KShs ‘000

Cash & Cash Equivalents 7 2,655,295 5,019,284TotalFinancialAssets 2,655,295 5,019,284

Financial Liabilities Payables 8 1,755,970 4,048,756TotalFinancialLiabilities 1,755,970 4,048,756NETLIQUIDITY 899,325 970,528LIQUIDITYRATIO 1.51 1.24

The Board has an established corporate governance structure and process of managing risks regarding guarantees and contingent liabilities. All guarantees issued are approved by the Members of the Board and are administratively managed by the finance department.

The primary sources of revenue for the Board are receipts from the Kenya Roads Board Fund, mainly receipts from fuel levy fund. The Board is pursuing additional sources of revenue for which approval has been sought from Ministries of Finance and Roads.

b) Market RiskMarket risk is the risk that the fair value of future cash flows of financial instruments will fluctuate because of changes in foreign exchange rates, prices and interest rates. The objective of market risk management policy is to protect and enhance



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the Statements of Financial Position and performance by managing and controlling market risk exposures within acceptable parameters, and to optimize the funding of business operations and facilitate capital expansion. The Board is exposed to the following market risks:-

(i) Currency RiskThe currency risk is minimal as most of cash and cash equivalents held with banks are dominated in Kenya Shillings.

(ii) Price RiskThe Board collects Kshs. 9 per litre of diesel and petrol imported into the country. The Board is exposed to the extent that the levy on diesel and petrol is reduced or eliminated due to changes in the international fuel prices, inflation or other macro indicators.

The Road Maintenance Levy is backed up by an Act of Parliament and changes thereof require approval by Parliament.

(iii) Interest Rate RiskThe Board’s financial condition may be adversely affected as a result of changes in interest rate levels. The interest rate risk is minimal as the Board does not have any borrowings.

c) Operational RiskOperational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Board’s processes, personnel, technology and infrastructure and from external factors other than credit, market and liquidity risks such as legal and regulatory requirements and generally acceptable standards of corporate behavior.

The Board seeks to ensure that key operational risks are managed in a timely and effective manner through a framework of policies, procedures and tools to identify, assess, monitor and report such risks.

The Board’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Board’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management. The responsibility is supported by the development of overall standards for the management of operational risk in the following areas:-• Requirements for appropriate segregation of duties, including the independent authorization of transactions;• Requirements for the reconciliation and monitoring of financial transactions;• Compliance with regulatory and legal requirements;• Documentation of controls and procedures;• Requirements for the yearly assessment of operational risks faced and the adequacy of controls and procedures to address the risks identified;• Requirement for the reporting of operational losses and proposed remedial action;• Development of Business Contingency Plans;• Training and professional development;• Ethical and business standards; and• Risk mitigation, including insurance where it is effective.

Operational risks are documented in the ‘Framework for Management Control’ and are managed by the Internal Audit function established to spearhead and coordinate risk management activities. The measures taken include proactively identifying, analyzing and mitigating risks in all facets of the business.



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d) Compliance and Regulatory RiskCompliance and regulatory risk includes the risk of non-compliance with regulatory requirements. The Board has complied with all externally imposed requirements throughout the year.e) Legal RiskLegal risks is the risk of unexpected loss, including reputational loss, arising from defective transactions or contracts, claims being made or some other event resulting in a liability or the loss for the Board, failure to protect the title to and inability to control the rights to assets of the Board (including intellectual property right), changes in law, or jurisdictional risk.

The Board manages legal risk through the legal function, legal risk policies and procedures and the effective use of internal controls and external lawyers.

6.0 ReceiptsRevenue mainly represents receipts of Road Maintenance Levy from the Kenya Revenue Authority.

The Board did not receive any transfers of any form, (including assets, gifts, donations, goods and service-in-kind, advance receipts, pledges, expenses paid on behalf and concessionary loans) from national and local government, public entities, and government, donor & International development agencies.

2012/13 2011/12 KShs ‘000 KShs ‘000

Road Maintenance Levy 24,814,043 24,240,396Agricultural Cess 115,350 161,875

TotalOperatingRevenue 24,929,393 24,402,271

7.0 Interest IncomeThese represent interest, net of withholding tax, earned from the Board’s treasury activities. This amounted to Kshs 340,382,000in FY 2012/13 compared to Kshs.668,257,000 earned in FY 2011/12.

8.0 DisbursementsThe Board allocates funds to the road agencies in accordance with the allocation criteria set out in the Kenya Roads Board Act, 1999 as shown below:

Road Agency: Particulars/ Class of Roads Allocation

Kenya Roads Board Operations 2%Kenya National Highways Authority A, B, C Roads 40%Kenya Rural Roads Authority Constituency/Rural Roads 22%Kenya Rural Roads Authority Constituency Link Roads 10%Kenya Urban Roads Authority Urban Roads 15%Kenya Wildlife Service Park Roads 1%Allocation by Kenya Roads Board/Ministry Development of roads 10%Total 100%



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The Board disbursed funds as follows during the year : 2012/13 2011/12

Agency KShs ‘000 KShs ‘000

Kenya Roads Board 485,609 480,400Kenya National Highways Authority 9,944,180 9,811,000Kenya Rural Roads Authority 7,731,744 7,654,400Kenya Urban Roads Authority 3,582,068 3,550,500Kenya Wildlife Service 238,805 236,700Allocation by Kenya Roads Board/Ministry 2,388,045 2,367,000Disbursements for prior years to Road Agencies 970,528 305,670

Total 25,340,978 24,485,670

9.0 Cash and Cash Equivalents(a)AnalysisofBankandCashBalances:These represent cash held at various banks, as follows:

2012/13 2011/12 KShs ‘000 KShs ‘000

Amounts held in local currency 2,539,946 4,857,409Amounts held in foreign currency 115,350 161,875

Total 2,655,295 5,019,284

The Board is not exposed to credit risk on cash and bank balances as the funds are held with sound financial institutions approved by Central Bank of Kenya.

(b) Cash and cash equivalentsFor the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisition, including cash in hand, deposits held at call with banks and other short term highly liquid investments with original maturities of three months.

Analysis of cash and cash equivalents is as set out below: 2012/13 2011/12 KShs ‘000 KShs ‘000

BankandCashBalances 2,655,295 5,019,284

10.0 PayablesThese represent funds due to the road agencies, but not released as at 30th June 2013, as follows:-

2012/13 2011/12 KShs ‘000 KShs ‘000

AgencyFundsPayable 1,755,970 4,048,756



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11.0 Net Assets Available for DistributionThese represent amounts received over and above the approved budget for the year, as follows:

2012/13 2011/12 KShs ‘000 KShs ‘000

Road Maintenance Levy 718,601 220,396Interest Income 155,374 668,257Agricultural Cess 25,350 81,875Total 899,325 970,528

The funds are allocated to the road agencies in the subsequent year in accordance with the Kenya Roads Board Act, 1999.

12.0 Cash Generated from OperationsReconciliation of Net Cash Flows from Operating Activities to Surplus for the year :

2012/13 2011/12 Note KShs ‘000 KShs ‘000

Net assets available for distribution 11 899,325 970,528 Adjustments for : Interest income 7 (340,382) (668,257)Operatingincomebeforeworkingcapitalchanges 558,943 302,271 Changesinworkingcapitalbalances: Decrease in other receivables - 28,886Decrease in provisions - (28,886)Decrease in agencies payable (2,292,786) (1,702,417)Netcashflowsappliedtooperatingactivities (1,733,843) (1,400,146)

13.0 Contingent LiabilitiesThe Board is not involved in any legal proceedings. The directors believe, based on the information currently available, that the Board does not have any contingent liabilities which are likely to have a material effect on the results of the Board’s operations, financial position or liquidity. Therefore no provision has been made in the financial statements.

14.0 Fair ValueThe directors consider that there is no material difference between the fair value and carrying value of the company’s financial assets and liabilities, where fair value details have not been presented.

15.0 Capital CommitmentsAll capital commitments contracted for and authorized at the reporting period end have been recognized in the financial statements.

16.0 Post Balance Sheet EventsThe Directors are not aware of any matter or circumstances arising since the end of the financial year, not otherwise dealt with in the financial statements, which would significantly affect the financial position of Kenya Roads Board Fund and results of its operation as laid out in these financial statements.

17.0 ComparativesWhere necessary, comparative figures have been adjusted to conform to changes in presentation of the Financial Statements as required by International Public Sector Accounting Standards and any amendment whenever necessary in the current year.

18.0 CurrencyThe financial statements are presented in Kenya Shillings (KShs ’000).

Kenya Roads BoardFinancial Statements for the year ended 30th June 2013

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KENYA ROADS BOARD

FINANCIALSTATEMENTSFORTHEYEARENDED30THJUNE2013

Kenya Roads Board Financial Statements for the year ended 30th June 2013

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The KRB Directors have the pleasure of presenting Kenya Roads Board audited financial statements for the year ended 30th June 2013 which discloses the state of Kenya Roads Board affairs. This is in accordance with the provision of section 36 of the Kenya Roads Board Act.

Principal ActivitiesThe Board is primarily engaged in management of the Kenya Roads Board Fund together with other mandates specified in the KenyaRoads Board Act, 1999 (See Page 2 and 3)

ResultsThe results for the year ended 30th June 2013 are set out on page 59 to 83. The surplus for the year of KShs 38,691,000 (2012: KShs. 74,507,000) has been added to the accumulated surplus.

DirectorsThe Board of Directors who held office during the year are shown on pages 8 to 9.

In accordance with Section 7(4) of the Kenya Roads Board Act, 1999 ‘the Chairman and members of the Board, other than exofficialmembers shall hold office for a period of three years from the date of appointment but shall be eligible for re-appointment for one further term of a period not exceeding three years.’ The appointment and vacation of office of any member of the Board shall be in accordance with Section 2 of the Second Schedule to the Kenya Roads Board Act, 1999.

Financial StatementsAt the date of this report, the Board was not aware of any circumstances which would have rendered the values attributed to theassets in the financial statements misleading.

AuditorsThe Auditor General is responsible for the statutory audit of the Board’s books of account in accordance with Sections 14 and 39(i) of Chapter 12 of the Laws of Kenya, Public Audit Act, 2003.

Approval of Financial StatementsThe financial statements were approved and authorized for issue by the Board of Directors on 29th August 2013.

BY ORDER OF THE BOARD

DR. FRANCIS N. NYANGAGA, MBS, OGWSecretary to the BoardNairobi

Report of the Directors


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The Kenya Roads Board Act, 1999 requires the Board to prepare financial statements of each financial year which give a true and fair view of the state of affairs of the Roads Board as at the end of the financial year and of the Board’s operating results for that year. It also requires the Board to ensure that the Roads Board keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the Board and to ensure that the Financial Statements comply with the enabling Act. They are also responsible for safeguarding the assets of the Roads Board and taking reasonable steps for prevention and detection of fraud and other irregularities.

The Board accepts responsibility for the financial statements which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with International Public Sector Accounting Standards and the requirements of the Kenya Roads Board Act. The Board is of the opinion that the financial statements give a true and fair view of the state of affairs of the Roads Board and of its financial performance. The Board further accepts responsibility for the maintenance of accounting records which may be relied upon in the preparation of the financial statements, as well as designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statements that are free from material misstatements.

The Board is required to prepare the financial statements on a going concern basis unless it is determined that after the reporting period, the Board intends to liquidate or cease it activities, or that it has no realistic alternative but to do so.

Nothing has come to the attention of the Board to indicate that the Roads Board will not remain a going concern for at least the next twelve months from the date of this statement.

Approved by the Board on 29th August 2013 and signed on its behalf by:-


Statement of the Board’s Responsibilities


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Report of the Independent Auditors

KENYA NATIONAL AUDIT OFFICEREPORT OF THE AUDITOR-GENERAL ON KENYA ROADS BOARD

FOR THE YEAR ENDED 30TH JUNE 2013

Report on the Financial StatementsI have audited the accompanying financial statements of Kenya Roads Board set out on pages 63 to 83 which comprise the statement of financial position as at 30 June 2013, and the statement of financial performance, statement of changes in net assets and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, in accordance with the provisions of Article 229 of the Constitution of Kenya and Section 14 of the Public Audit Act, 2003. I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary for the purpose of the audit.

Board’s Responsibility for the Financial StatementsThe Board of Kenya Roads Board is responsible for the preparation and fair presentation of these financial statements in accordance with the International Public Sector Accounting Standards and for such internal controls as the Board determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.The Board is also responsible for the submission of the financial statements to the Auditor-General in accordance with the provisions of Section 13 of the Public Audit Act, 2003.

Auditor-General’s ResponsibilityMy responsibility is to express an independent opinion on the financial statements based on the audit and report in accordance with the provisions of Section 15(2) of the Public Audit Act, 2003 and submit the audit report in compliance with Article 229 (7) of the Constitution of Kenya. The audit was conducted in accordance with the International Standards on Auditing. Those standards require compliance with ethical requirements and that the audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Board’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board, as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion.

OpinionIn my opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as at 30th June 2013, and its financial performance and cash flows for the year then ended in accordance with the International Public Sector Accounting Standards and comply with the Kenya Roads Board Act, Cap 408 of the Laws of Kenya.

Edward R. O. Ouko, CBSAuditor-General

Nairobi6 February 2014


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Statement of Financial Performance asat30thJune2013

Note 2012/2013 2011/2012 KShs ‘000 KShs ‘000

OperatingRevenue 6 582,567 504,954 Operating Expenses Director Costs 7 49,637 48,440 Staff Costs 8 203,669 182,224 Field Activity Costs 9 38,239 35,869 Other Operating Costs 10 251,755 168,766 Corporate Social Responsibility 11 1,644 833 TotalOperatingExpenses 544,944 436,132 SurplusFromOperations 37,623 68,822 Gain on Disposal of Property & Equipment 15 1,068 5,685

NetSurplusfortheYear 12 38,691 74,507



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Statement of Financial Position fortheyearended30thJune2013

Note 2012/2013 2011/2012 KShs ‘000 KShs ‘000

ASSETS Current Assets Cash and Cash equivalents 13 680,384 919,044 Receivables 14 1,863 4,469 682,247 923,513

Non-CurrentAssets Property & Equipment 15 68,057 58,729 TOTALASSETS 750,304 982,242 LIABILITIES Current Liabilities Payables 16 45,873 44,229 TOTALLIABILITIES 45,873 44,229 TOTALNETASSETS 704,430 938,013

NETASSETS/EQUITY KRB Staff Fund 17(a) 238,228 220,973 KRB Capital Fund 17(b) 300,581 590,110 Accumulated Surpluses 17(c) 165,621 126,930 TOTALNETASSETS/EQUITY 704,430 938,013


The financial statements on pages 63 to 83 were approved and authorised for issue by the Board of Directors on 29th August 2013 and signed on its behalf by:



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StatementofChangesinNetAssetsfortheyearended30thJune2013

KRB Staff Capital Accumulated Fund Fund Surpluses Total Note KShs ‘000 KShs ‘000 KShs ‘000 KShs ‘000

At1stJuly2012 220,973 590,110 126,930 938,013

Growth in Staff fund 17(a) 17,255 - - 17,255Increase in Capital Fund 17(b) - 50,000 - 50,000Transfer from Capital Fund 17(b) - (400,000 ) - (400,000 )Growth in Capital Fund 17(b) - 60,471 - 60,471Net Surplus for the year 17(c) - - 38,691 38,691

At30thJune2013 238,228 300,581 165,621 704,430

At1stJuly2011 117,885 456,658 172,423 746,966

Growth in Staff fund 17(a) 3,088 - - 3,088Transfer to Staff Fund 17(a) 100,000 - (100,000) -Increase in Capital Fund 17(b) - 50,000 - 50,000Transfer to Capital Fund 17(b) - 20,000 (20,000) -Growth in Capital Fund 17(b) - 63,452 - 63,452Net Surplus for the year 17(c) - - 74,507 74,507

At30thJune2012 220,973 590,110 126,930 938,013



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StatementofCashFlowsfortheyearended30thJune2013

Note 2012/2013 2011/2012 KShs ‘000 KShs ‘000

CashFlowsFromOperatingActivities Cash generated from operations 18 61,237 105,803

Netcashgeneratedfromoperatingactivities 61,237 105,803 CashFlowsFromInvestingActivities Interest received 6 7,637 13,110Purchase of property and equipment 15 (36,330) (41,863)Proceeds on disposal of equipment 15 1,069 7,153

Netcash(usedin)investingactivities (27,624) (21,600) CashFlowsFromFinancingActivities Growth in KRB Staff fund (Interest) 17(a) 17,256 3,087Growth in KRB Capital fund (Interest) 17(b) 60,471 63,452Increase in KRB Capital fund (KRBF) 17(b) 50,000 50,000Transfer to KRB Capital fund 17(b) (400,000) 20,000Transfer to KRB Staff fund 17(a) - 100,000Transfer from KRB Accumulated Surpluses 17(c) - (120,000)

Netcashinflowfromfinancingactivities (272,273) 116,539 NET(DECREASE)/INCREASEINCASHANDCASHEQUIVALENTS (238,660) 200,743 MOVEMENTINCASHANDCASHEQUIVALENTS At the beginning of the year 919,044 718,301Net (decrease)/increase in cash and cash equivalents (238,660) 200,743

Attheendoftheyear 13(b) 680,384 919,044



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NotestotheFinancialStatementsfortheyearended30thJune2013


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1.0 Standards and Interpretations Affecting the Reported Results or Financial PositionAdoption of New and Revised International Public Sector Accounting Standards (IPSASs)

(i) New Standards and Interpretations In Issue But Not Yet Effective in Year Ended 30th June 2013

New Standards

Effective for Annual periods Beginning on or after

(a) IPSAS28-FinancialInstruments:Presentation It replaces IPSAS 15, Financial Instruments.


1st January, 2013

(b) IPSAS29-FinancialInstruments:RecognitionandMeasurement

It prescribes recognition and measurement principles for financial instruments and is primarily drawn from International Accounting Standard 39, Financial Instruments: recognition and Measurement including improvements of IFRS issued in April 2009.


1st January, 2013

(c) IPSAS30-FinancialInstruments:Disclosure

The standard prescribes disclosure requirements for financial instruments and is drawn from the IFRS 7, Financial Instruments.


1st January, 2013

(d) IPSAS32–ServiceConcessionArrangements:Grantor

The standard prescribes disclosure requirements for service concession arrangements by the grantor, a public sector entity.


1st January, 2014

(ii) Amended Standards and Interpretations In Issue But Not Yet Effective in Year Ended 30th June 2013A number of IPSASs were amended as a result of the IPSASB’s Improvements 2011 issued in October 2011. The improvements were made to enhance the quality and transparency of public sector reporting and strengthen public confidence in public sector financial management. The changes included the deletion of the introduction paragraph of twenty one (21) IPSASs and general improvements on the following standards:-

(a) IPSAS 10, Financial Reporting in Hyperinflationary Economies;(b) IPSAS 17, Property, Plant and Equipment;(c) IPSAS 19, Provisions, Contingent Liabilities and Contingent Assets; and(d) IPSAS 21, Impairment of Non-Cash-Generating Assets.

The improvements are effective for annual periods beginning on or after 1st January 2013, an entity may adopt earlier any of the amendments except where specifically noted in the amendment. IPSASs 17, 19, and 21 are applicable while the others are not. The Board is in the opinion that the standards should not be applied before the effective date.


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2.0 Significant Accounting PoliciesThe principle accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

(a) Statement of ComplianceThe financial statements for the year ended 30th June 2013 have been prepared in accordance with and comply with International Public Sector Accounting Standards (IPSAS) as issued by International Public Sector Accounting Standards Board (IPSASB), the Government Financial Management Act, 2004, Public Audit Act, 2003 and Kenya Roads Board Act.

For the Government Financial Management Act, 2004, Public Audit Act, 2003 and Kenya Roads Board Act reporting purposes, in these financial statements the “balance sheet”/ “statement of assets and liabilities” is represented by/ equivalent to the statement of “financial position” and the “profit and loss account”/ “statement of income and expenditure” is presented in the statement of “financial performance”.

(b) Basis of PreparationThe financial statements have been prepared under the historical cost convention, unless otherwise stated. The financial statements are presented in the functional currency, Kenya Shillings (KShs.), and all values are rounded to the nearest thousands (KShs.‘000) except when otherwise indicated.

(c) Presentation of Financial StatementsThe financial statements comprise of statement of financial performance, statement of financial position, statement of changes in net assets/equity and the statement of cash flows and the notes to the financial statements.

The Board classifies its expenditure by the nature of expense methodology.

The disclosure on risks are presented in the financial risk management objectives and policies contained in note 5.

The statement of cash flows shows the changes in cash and cash equivalents arising during the period from operating, investing and financing activities.

Starting 1st July 2010, Kenya Roads Board adopted the IPSAS 1 on Presentation of Financial Statements. In previous years the financial statements were prepared in accordance with the International Financial Reporting Standards (IFRSs). The change was necessitated by the reporting standards on public entities which are not Government Business Entities (GBE) as defined and required by IPSAS 1-‘Presentation of Financial Statements’ which states that the scope of application is for ‘all public sector entities other than Government Business Enterprises’.

The requirement by the Auditor General to present separate financial statements for the Kenya Roads Board Operations and the Kenya Roads Board Fund has led to reclassification of assets and liabilities including prior year to each set of financial statements.

(d) BudgetInformation

International Public Sector Reporting Standards allow for non-disclosure where (a) an entity is not required to disclose its budget information publicly and (b) the entity has elected not to present its approved budget publicly.

The Board is not required to publicly avail the approved KRB Operations budget and has elected not to present its budget publicly. Therefore the Board has not attached a Statement of Comparison of Budget and Actual amounts. However it is observed that the Approved KRB Budget amounts for the year have not been exceed.


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(e) Functional Currencies(i) Functional and Presentation CurrencyThe financial statements are presented in the functional currency, Kenya Shillings (KShs.), which is the Board’s presentational currency. The financial information is rounded to the nearest thousands (KShs.‘000) except when otherwise indicated.

(ii) Transactions and Balancesa) Translation of Foreign CurrenciesTransactions in foreign currencies during the year are converted into the functional currency using the prevailing exchange rates ruling at the dates of the transactions. Assets and liabilities denominated in foreign currencies have been translated at the mean rates of exchange ruling at the end of the reporting period.

The foreign currency exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized through the statement of financial performance in the year in which they arise.

b) Translation of Foreign OperationsThe Board does not have any foreign operations.

(f) Revenue RecognitionIn accordance with the Kenya Roads Board Act, 1999, the Board is allocated 2% of the Road Maintenance Levy Fund (RMLF) for its operations and is recognized on accrual basis. An inflow of the funds is recognized as revenue and a liability is recognized in respect of the same inflow upon approval of the disbursements by the Board. Revenue is generally recognized in the Statement of Financial Performance on accrual basis.

Interest income from all interest bearing financial instruments is recognized in the Statement of Financial Performance on accrual basis using the effective interest method.

Other incomes are recognized as they accrue unless the collectability is in doubt.

(g) Cash and Cash EquivalentsFor purposes of the cash flow statement, cash and cash equivalents comprise of cash and cash balances held at the bank with less than three months maturity from the statement of financial position date. These include notes and coins on hand and deposits held at call with banks.

(h) ReceivablesReceivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Board provides money or services directly to a debtor with no intention of trading the receivable.

Receivables are amounts due from the Kenya Roads Board Fund which are accrued in the ordinary course of business and there is no intention of trading the receivable.

Receivables are recognized initially at the fair value (transaction price/ carrying value less any discounts). They are subsequently measured at amortized costs using the effective interest method less provision for impairment.

A provision for impairment of receivables is made when there is objective evidence that the Board will not be able to collect all amounts due according to the original terms of receivables.The carrying value less discounts and any impairment provision of impairment is assumed to approximate their fair values. For financial instruments such as short term receivables, no disclosure of fair value is required when the carrying amount is a reasonable approximation of fair value.


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Receivables are classified as current assets if payment is due within one year or less (or in the normal operating cycle of business, if longer). If not, they are presented as non-current assets.

(i) InventoriesGiven the nature of the Board’s operations and mandates, items in stock relate to stationery which is expensed at cost in the Statement of Financial Performance in the year it is purchased.

(j) Property and Equipment and DepreciationAll property and equipment are initially stated at cost and thereafter at historical cost less accumulated depreciation and any accumulated impairment loss. Historical cost comprises expenditure initially incurred to bring the asset to its location and condition ready for its intended use.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Board and the cost can be reliably measured. All other repairs and maintenance are charged to the Statement of Financial Performance during the financial year in which they are incurred.

Depreciation is calculated on straight line basis at annual rates estimated to write down the carrying value of the assets over their expected useful lives. The annual depreciation rates in use are:-Asset Annual Rate of Depreciation

Computer Equipment 33.33%Office Equipment 12.5%Motor Vehicles 25.0%Furniture & Fittings 12.5%

An item of property and equipment is de-recognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or losses on de-recognition of the asset is included in the Statement of Financial Performance in the year the asset is de-recognized.

(k) PayablesPayables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Payables also include payments in respect social benefits where formal agreements for specific amounts exist.

Payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. The historical cost carrying amount of payables subject to the normal credit terms usually approximates fair value.

Payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of business if longer). If not, they are presented as non-current liabilities.

(l) LeasesThe determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement coveys a right to use the asset. Leases are classified as finance leases whenever the terms of the lease transfer substantially all risks and rewards of ownership to the Board as the lessee. All other leases are classified as operating leases.

Where the Board is the lessee, the total payments made under operating leases are charged to the statement of financial performance on a straight line basis over the period of the lease. When an operating lease is terminated before the expiry


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of the lease period, any payment required to be made to the lessor by way of penalty is recognized as expense in the year in which termination takes place.

Rentals payable under operating leases are amortized on the straight line basis over the term of the relevant lease.

(m) ImpairmentofNon-financialAssetsAt each reporting period end, based on internal and external sources, the Board reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.

Where it is not possible to estimate the recoverable amount of an individual asset, the Board estimates the recoverable value of the asset.

Any impairment losses are recognized as an expense in the Statement of Financial Performance whenever the carrying amount of an asset exceeds its recoverable amount. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount. A reversal of impairment loss is limited to the assets carrying amount that would have been determined had no impairment loss been recognized in prior years. A reversal of an impairment loss is credited to the Statement of Financial Performance in the year reversals are recognized.

(n) ProvisionsProvisions are recognized when the Board has a present obligation (legal or constructive) as a result of a past event, it is probable that the Board will be required to settle the obligation, and a reliable estimate can be made of the amount of obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the reporting period end, taking into account the risks and uncertainties surrounding the obligation.

(o) RetirementBenefitObligationsThe Board operates a defined contribution provident fund for eligible employees. The fund is administered by an independent administration company and Trustees. It is funded by contributions from both the employer and employees.

The Board and its employees also contribute to the statutory pension scheme, the National Social Security Fund (NSSF). Contributions are determined by the local statute and are currently limited to KShs. 200 per employee per month. The Board also sets aside on monthly basis the gratuity for its employees who are on contract basis.

The Board’s contributions in respect of staff retirement benefit costs are charged to the statement of financial performance, as they fall due or in case of service gratuity as they accrue to each employee.

(p) Guarantees,AcceptancesandLettersofCreditGuarantees are accounted for as off statement of financial position transactions and disclosed as contingent liabilities.

(q) Subsequent EventsThere have been no subsequent events that would have an impact on the financial statements for the year ended 30th June 2013.

(r) ComparativesExcept otherwise required, all amounts are reported or disclosed with comparative information. Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year


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3.0 Critical Accounting Estimates, Judgements and AssumptionsIn the process of applying the Board’s accounting policies, the directors have made estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Although these estimates are based on the directors’ knowledge of current events and actions, actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The key areas of judgments and sources of uncertainty in estimation are as set out below:

(a) Critical Judgments in applying the Board’s accounting policies

In the process of applying the Board’s accounting policies, judgments have been made in determining:-• Whether the assets are impaired;• The classification of financial assets;• The going concern.

(b) Critical Accounting Estimates and Assumptions(i) Useful Lives of Property, Plant and EquipmentThe directors make estimates in determining the depreciation rates for property and equipment. The rates used are set out in the accounting policy (j) above for property and equipment.

The Board reviews the estimated useful lives of plant and equipment at the end of each reporting period. During the financial year, no changes to the useful lives were identified by the directors. (ii) Contingent LiabilitiesAs disclosed in these financial statements, the Board is exposed to various contingent liabilities in the normal course of business.

The Directors evaluate the status of these exposures on a regular basis to assess the probability of the Board incurring related liabilities. However, provisions are only made in the financial statements where, based on the directors’ evaluation, a present obligation has been established.

(iii) Provision for Doubtful DebtsThe organization reviews its travel advances portfolio to assess the likelihood of impairment. Provision for impairment of receivables is established when there is objective evidence that the Board will not be able to collect all amounts due. Where necessary, an estimation of the amounts irrecoverable is made in that year. Provision for impairment shall be recognized upon approval by the Board of Directors.

(iv) Other ProvisionsOther provisions are recognized when the Board has legal or constructive obligation as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

(v) Impairment LossesAt each reporting period end, the Board reviews the carrying amounts of its tangible and intangible assets to determine


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whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.

Where it is not possible to estimate the recoverable amount of an individual asset, the Board estimates the recoverable value of the asset. Any impairment losses are recognized as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount. A reversal of an impairment loss is recognized as income immediately.

4.0 Segment ReportingThe Board does not have any branches/reporting segments. All the operations of the Board are managed from the registered office. The core business of the Kenya Roads Board continues to be management of the Kenya Roads Board Fund together with other mandates as stipulated in the Kenya Roads Board Act.

There is no distinguished component of the Board that is engaged in providing an individual service that is subject to risks and returns that are different from the main mandates of the Board.

5.0 Financial Risk Management Objectives and PoliciesThe Board has initiated and facilitated the process that will see the enhancement of risk management. The Board has an integrated risk management framework/strategy. The Board’s approach to risk management is based on risk governance structures, risk management policies, risk identification, measurement, monitoring and reporting. The risk management policies and systems are reviewed regularly to ensure they are in tandem with the micro and macro environment, regulatory guidelines, industry practice, market conditions as well as the services offered.

The Board recognizes the critical role the risk management will continue to play in its endeavor to carry out its business in a dynamic environment. The Board is committed to ensure that corporate governance and risk management are deeply entrenched in the Board’s strategy and culture. An elaborate risk management strategy that will provide direction on matters of policy and guide the implementation and control has been developed.

This risk management framework captures the following among other things:-

• The Board’s risk appetite and parameters;• The Board’s risk matrix that highlights the rating of risks;• The structure of managing risks and accountabilities• The processes, procedures and reports that manage risks;• The mitigating factors, prevention, contingency plans and controls.

The Board’s core business involves major engagements with financial transactions and processes which pose certain risks. Three types of risks are reported as part of the risk profile namely operational, strategic and business continuity risks.

a) Operational risks are events, hazards, variances or opportunities which could influence the achievement of the Board’s compliance and operational objectives.b) Strategic risk is a significant unexpected or unpredictable change or outcome beyond what was factored into the organization’s strategy and business model which could have an impact on the entity’s performance.c) Business continuity risks are those events, hazards, variances and opportunities which could influence the continuity of the entity.

One of the key risks the Board has identified in both the operational and strategic areas is the sustainability of the Road Maintenance Levy in line with the Constitution. Financial risk as defined in IPSAS 15 and the management thereof, form part of this risk area.


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The Members of the Board have the overall responsibility for the establishment and oversight of the Board’s risk management framework. The Board has delegated its risk management to the ‘Audit and Risk Committee’. One of the responsibilities of this committee is to review risk management strategies in order to ensure business continuity and survival. Most of the financial risks arising from financial transactions and processes are managed by the ‘Finance and Planning Committee’ of the Board.

The Board’s exposure to risks, its objectives, policies and processes for managing the risk and the methods used to measure it have been consistently applied in the years presented, unless otherwise stated. The Board aims therefore to achieve an appropriate balance between the risk and return and minimize potential adverse effects on its financial performance.

The financial management objectives and policies are as outlined below:-

a) Liquidity RiskLiquidity risk is the risk that the Board will not have sufficient financial resources to meet its obligations when they fall due or will have to do so at excessive costs. This risk can arise from mismatches in the timing of cash flows from revenue and capital/ operational outflows, assets and liabilities according to their maturity profiles and can occur where cash flow streams have been discontinued, etc. Funding risk arises when the necessary liquidity to fund illiquid asset positions cannot be met at expected terms and when required.

The objective of the liquidity and funding management is to ensure that all foreseeable operational, capital and loan commitment expenditure can be met under both normal and stressed conditions and the mismatch is controlled in line with allowable risk levels.

The Board has adopted an overall balance sheet approach which consolidates all sources and uses of liquidity, while aiming to maintain a balance between liquidity, cash flows and interest rate considerations. The Board’s liquidity and funding management process includes:-

• Projecting cash flows and considering the cash required and optimizing the short term requirements as well as the long term funding,• Maintaining balance sheet liquidity ratios,• Maintaining/ soliciting a diverse range of funding sources with adequate back up facilities,• Managing the concentration and profile of debt maturities, where applicable,• Maintaining liquidity and funding contingency plans.

The table shows the undiscounted cash flows on the Board’s financial assets and liabilities on the earliest possible contractual/maturity date. The liquidity ratio in FY 2012/13 is 14.87 (FY 2011/12: 20.88)

Note 2012/13 2011/12Financial Assets KShs ‘000 KShs ‘000

Bank and Cash Balances 13 680,384 919,044Receivables 14 1,863 4,469

TotalFinancialAssets 682,247 923,513

Financial Liabilities Payables 16 45,873 44,229

TotalFinancialLiabilities 45,873 44,229

NETLIQUIDITY 636,374 879,284LIQUIDITYRATIO 14.87 20.88


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The Board has an established corporate governance structure and process of managing risks regarding guarantees and contingent liabilities. All guarantees issued are approved by the Members of the Board and are administratively managed by the finance department.

The primary sources of revenue for the Board are receipts from the Kenya Roads Board Fund, mainly receipts from fuel levy fund. The Board pursuing additional sources of revenue for which approval has been sought from Ministry of Finance.

b) Market Risk Market risk is the risk that the fair value of future cash flows of financial instruments will fluctuate because of changes in

foreign exchange rates, prices and interest rates. The objective of market risk management policy is to protect and enhance the Statements of Financial Position and performance by managing and controlling market risk exposures within acceptable parameters, and to optimize the funding of business operations and facilitate capital expansion. The Board is exposed to the following market risks:-

(i) Currency RiskCurrency risk arises primarily from purchasing imported goods and services from overseas or indirectly via local supplies. The currency risk is minimal as cash and cash equivalents held with banks are dominated in Kenya Shillings and there are minimal dealings in foreign currency.

(ii) Price RiskThe Board is exposed to the price risk of the fuel levy. The Board collects KShs. 9 per litre of diesel/petrol imported into the country. The Board is exposed to the extent that the levy on diesel and petrol is reduced or eliminated due to changes in the international fuel prices, inflation or other macro indicators.

The Road Maintenance Levy is backed up by an Act of Parliament; changes thereof require approval by Parliament.

(iii) Interest Rate RiskThe Board is exposed to various risks associated with effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Interest margin may increase as a result of such changes but may reduce losses in the event that unexpected movement arises.

The Board closely monitors interest rate movements and seeks to limit its exposure by managing the interest rate and maturity structure of assets and liabilities on the statement of financial position. The interest rates on call deposits held in financial institutions are fixed and agreed upon on monthly basis. The management is in regular contact with the approved banks in a bid to obtain the best interest rates and therefore able to plan for the resulting income.

The interest rate risk is minimal as the Board does not have any borrowings.c) Operational Risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Board’s processes,

personnel, technology and infrastructure and from external factors other than credit, market and liquidity risks such as legal and regulatory requirements and generally acceptable standards of corporate behavior.

The Board seeks to ensure that key operational risks are managed in a timely and effective manner through a framework of policies, procedures and tools to identify, assess, monitor and report such risks.

The Board’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Board’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.


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The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management. The responsibility is supported by the development of overall standards for the management of operational risk in the following areas:-

• Requirements for appropriate segregation of duties, including the independent authorization of transactions;• Requirements for the reconciliation and monitoring of financial transactions;• Compliance with regulatory and legal requirements;• Documentation of controls and procedures;• Requirements for the yearly assessment of operational risks faced and the adequacy of controls and procedures to

address the risks identified;• Requirement for the reporting of operational losses and proposed remedial action;• Development of Business Contingency Plans;• Training and professional development;• Ethical and business standards and• Risk mitigation, including insurance where it is effective.

Operational risks are documented in the ‘Framework for Management Control’ and are managed by the Internal Audit function established to spearhead and coordinate risk management activities. The measures taken include proactively identifying, analyzing and mitigating risks in all facets of the business.

d) Compliance and Regulatory Risk Compliance and regulatory risk includes the risk of non-compliance with regulatory requirements. The Board has complied

with all externally imposed requirements throughout the year.

e) Legal Risk Legal risks is the risk of unexpected loss, including reputational loss, arising from defective transactions or contracts, claims

being made or some other event resulting in a liability or the loss for the Board, failure to protect the title to and liability to control the rights to assets of the Board (including intellectual property right), changes in law, or jurisdictional risk.

The Board manages legal risk through the ‘Audit and Risk Committee’, legal function, legal risk policies and procedures and the effective use of internal controls and external lawyers.


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6.0 Operating Revenue

2012/13 2011/12Particulars KShs ‘000 KShs ‘000

Revenue 485,609 480,400Interest Earned 7,637 13,110Other income 89,321 11,444TotalOperatingRevenue 582,567 504,954

Revenue mainly represents the 2% portion from the Kenya Roads Board Fund which is allocated in accordance with Section 6(2) (e) of the Kenya Roads Board Act.

Interest is earned on the balances held in the bank accounts. Included in other income is KShs 89.3 million being allocation of prior year funds from Kenya Roads Boards. The operating revenue is recognized in accordance with the accounting policy on revenue recognition set out in policy 2 (f) above.

The Board did not receive any transfers of any form, (including assets, gifts, donations, service-in-kind, advance receipts, pledges, expenses paid on behalf and concessionary loans) from national and local government, public entities, and government, donor & International development agencies.

7.0 Directors Costs


Emoluments 27,581 26,195Insurance 223 441Field Activities 10,625 9,899Training 10,163 10,601Board Evaluation & Induction 1,045 1,304TotalDirectorsCosts 49,637 48,440

These are expenses incurred by the members of the Kenya Roads Board in management of the Kenya Roads Board Fund.

8.0 Staff Costs


Salaries & Wages 144,422 131,237Pension Costs 16,374 15,313 Training & Development 24,986 17,000 Staff Insurance 13,190 12,708Other Costs 4,697 5,966 TotalStaffCosts 203,669 182,224

The average number of employees during the year was:-No. of Employees 2012/13 2011/12Permanent Employees 57 56Contract Employees 6 6TotalEmployees 63 62


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9.0 Field Activity Costs

2012/13 2011/12Departments/Sections KShs ‘000 KShs ‘000

Planning & Programming 8,486 7,985Technical Compliance 8,497 7,980Finance 6,488 6,427Human Resource & Administration 6,233 5,500Legal & Corporate Affairs 5,485 5,483Information Communication & Technology 1,484 1,247Procurement 1,566 1,247TotalFieldActivities 38,239 35,869

10.0 Other Operating Costs


Advertising & Publicity 37,958 18,750Audit fees 2,500 2,500Conferences & Seminars 17,999 11,960Depreciation 27,002 25,718Consultancies 101,775 55,668Rent & Rates 29,723 24,749Telephone, Postages & Internet 6,941 5,501Travelling, Vehicle Maintenance & Repairs 13,070 12,122Other Operating Costs 14,787 11,798TotalOtherOperatingCosts 251,755 168,766

11.0 Corporate Social ResponsibilityThe Board’s contribution towards the Corporate Social Responsibility (CSR) amounts to KShs 1.645 million (2011/12: KShs 0.833 million).

In FY 2012/13 the Board participated in the ‘Standard Chartered Marathon’, environment sustainability implementation projects in Taita, capacity building in HIV/AIDS and donated KShs. 50,000 to Taita Hills Hotel for tree-planting.

12.0 Operating SurplusThe operating surplus is arrived at after charging/ (crediting):

Note 2012/13 2011/12Particulars KShs ‘000 KShs ‘000

Staff Costs 8 203,669 182,224Depreciation 15 27,002 25,718Directors’ emoluments 7 27,581 26,195Auditors remuneration 10 2,500 2,500Rent & Rates 10 29,723 24,749Gain on Disposal of Assets 15 (1,068) (5,685)Interestearned 6 (7,637) (13,110)


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13.0 Cash and Cash Equivalents(a) Analysisofbankandcashbalances:


Cash at Bank and in Hand 167,066 127,961KRB Staff Fund 17(a) 213,228 220,973Bank Term Deposit 17(b) 300,090 570,110

Total 680,384 919,044

The Board is not exposed to credit risk on cash and bank balances as they are held with sound financial institutions approved by Central Bank of Kenya. The carrying amounts of the Board’s cash and cash equivalents are dominated in Kenya Shillings.

(b)Cashandcashequivalents:For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisition, including cash in hand, deposits held at call with banks and other short term highly liquid investments with original maturities of three months.Analysis of cash and cash equivalents is as set out below:


BankandCashBalances 13(a) 680,384 919,044

14.0 ReceivablesReceivables constitute short term liquid assets which are recoverable within one year.


Advances to staff 618 684Prepayments & Deposits 1,245 3,785

Total 1,863 4,469 The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Board does not hold any collateral as security. The aged analysis of receivables is as follows:-

0-3 months 3-12 months Total Particulars KShs ‘000 KShs ‘000 KShs ‘000

Advances to staff 618 - 618Deposits & Prepayments - 1,245 1,245

Total 618 1,245 1,863


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15.0 Property and Equipment Computer Office Motor Furniture Equipment Equipment Vehicles & Fittings Total

Particulars KShs ‘000 KShs ‘000 KShs ‘000 KShs ‘000 KShs ‘000

Cost At1stJuly2012 48,637 46,420 57,158 60,5472 12,763Additions 2,291 353 32,621 1,065 3 6,330Disposals (99) - (5,599) - (5,698)At30thJune2013 50,829 46,773 84,180 61,6122 43,395 Depreciation At1stJuly2012 44,121 20,164 37,044 52,704 154,034Charge for year 3,946 4,758 15,721 2,577 27,002Disposals (99) - (5,599) - (5,698)At30thJune2013 47,968 24,922 47,166 55,2811 75,338 NetBookValue At30thJune2013 2,861 21,850 37,014 6,331 68,057At30thJune2012 4,516 26,256 20,114 7,8435 8,729

The net book value of non-current assets increased from KShs. 58.72 million from prior period to KShs. 68.05 million in the review period. This is as a result of asset additions amounting to KShs. 36.33 million, net of depreciation charge for the year amounting to KShs. 27.00 million.

Gain on disposal of fully depreciated assets during the year ended 30th June 2013 amounted to KShs. 1.06 million (2011/12: KShs. 5.6 million).

The Board is of the opinion that the net book values represent the fair value of the equipment.

16.0 Payables

Payables are expected to be settled in KRBs normal operating cycle and within twelve months after the reporting period and are not attached to an unconditional right to defer payment of the liability for at least twelve months after the reporting period. Provisions and accruals relate to accrued expenses during the year. 2012/13 2011/12Particulars KShs ‘000 KShs ‘000

Provisions and accruals 39,901 39,920Other Payables 5,972 4,309Total 45,873 44,229

The maturity analysis of payables is as follows: 0-3 months 3-12 months TotalParticulars KShs ‘000 KShs ‘000 KShs ‘000

Provisions and accruals 39,901 - 39,901Other Payables - 5,972 5,972

Total 39,901 5,972 45,873


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17.0 Net Assets

The net assets are made of up of designated funds and accumulated reserve which are explained as follows:

(a) KRB Staff FundThe Board established independently managed Car Loan and Mortgage Scheme Funds for members of staff.


Car Loan Staff Fund 52,834 52,600Mortgage Scheme Fund 185,394 168,373

Total 238,228 220,973

Staff funds increased from KShs. 220.97 million in prior period to KShs. 238.22 million. The growth is represented by KShs. 17.25 million being bank interest earned during the year.

Included in Kshs. 52.83 million Car Loan Staff Fund, is an amount of Kshs. 25.0 million being cash in transit from Operations to Staff Car Loan account.

(b) KRB Capital FundThe Board established a Capital Fund in FY 2009/10 for the purpose of purchase of office premises.

The KRB Capital fund amounted to KShs. 300.58 million (FY 2011/12: 590.11 million). The decrease is mainly represented by transfer of KShs. 400.00 million from KRB Capital fund to the KRB Fund (being emergencies funding).

During the year, the Capital fund received KShs. 50.0 million being a transfer from KRB Fund (share of prior year surplus funds), and KShs. 60.47 million being bank interest earned during the year.

(c) Accumulated SurplusesAccumulated surpluses of KShs. 165.62 million represents excess operating revenue over expenditure which has accumulated over the years (FY 2011/12 – KShs. 126.93 million).

Net surplus for the current year amounted to KShs. 38.69 million (FY 2011/12 – KShs. 74.50 million).


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18.0 Cash Generated from OperationsReconciliation of Net Cash Flows from Operating Activities to Net Surplus from Ordinary Activities

2012/13 2011/12 Notes KShs ‘000 KShs ‘000

Netsurplusfromoperatingactivities 12 38,690 74,507Adjustments for : Depreciation 15 27,002 25,718Interest Income 6 (7,637) (13,110)Gain on disposal of property and equipment 15 (1,068) (5,685)Operatingincomebeforeworkingcapitalchanges 56,987 81,431 Changesinworkingcapitalbalances: Decrease in receivables 2,605 61,765Increase in payables 1,645 (37,393)Netchangesinworkingcapitalbalances 4,250 24,372Netcashflowsgeneratedfromoperatingactivities 61,237 105,803

19.0 Contingent Assets & Liabilities 2012/13 2011/12 KShs ‘000 KShs ‘000

Guarantees 3,393 2,620

a) GuaranteesGuarantees commit the Board to make payments on behalf of the guaranteed in the event of a specific act and carry a certain risk.

The Board has given a guarantee for rent to Kenya Reinsurance Corporation (Kenya Re) for KShs. 2,620,379.50 and KShs 772,219.40 which shall expire on 1st February and 1st April 2016 respectively. This guarantee covers the obligation to Kenya Re of three months’ rent. The guarantee was issued by the Board’s bankers in favor of Kenya Reinsurance Corporation. The Board has entered into counter indemnity with the same bank. The guarantee was issued in the normal course of the business, after the end of the financial year and does not affect the Board’s financial position as at the reporting date.

b) Legal mattersThe Board is not involved in any legal proceedings. The directors believe, based on the information currently available, that the Board does not have any contingent liabilities which are likely to have a material effect on the results of the Board’s operations, financial position or liquidity. Therefore no provision has been made in the financial statements.

20.0 Commitments : Operating Lease RentalsNon-cancellable operating lease rentals are payable as follows:

2012/13 2011/12 KShs ‘000 KShs ‘000

Not later than one year 27,471 16,976Later than one year and not later than five years 137,355 84,880

164,826 101,856


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The Board has leased office premises under an operating lease. The lease typically runs for 5 years with an option for renewal. Lease payments are increased accordingly to reflect market rentals. The Board does not have an option to purchase the leased asset at the expiry of the lease period. There are no contingent rents recognized in the Statement of Financial Performance.

21.0 Retirement Benefits Scheme ObligationsThe Board operates a defined contribution retirement benefit plan for eligible employees. The assets of the plan are held separately from those of the Board in funds under the control of trustees. The scheme is administered by an independent administration company and is funded by contributions from the Board and employees. The Board’s obligations to the staff retirement benefits plan are charged to the Statement of Financial Position as they fall due or, in the case of service gratuity, as they accrue to each employee.

The Board also makes contributions to the statutory defined contribution scheme, National Social Security Fund. This is a defined contribution scheme registered under the National Social Security Act. The Board’s obligations under the Scheme are limited to specific contributions legislated from time to time, which are currently at KShs 200 per employee per month.

The total expense recognized in the income statement of KShs 16.37 million (FY 2011/12: KShs 15.31 million) represents contributions payable to the plan by the Board at rates specified in the rules of the plan. The expense has been included within the staff pension costs under staff costs.

22.0 Fair ValueThe directors consider that there is no material difference between the fair value and carrying value of the company’s financial assets and liabilities, where fair value details have not been presented.

23.0 Capital CommitmentsAll capital commitments contracted for/authorized at the reporting period end have been recognized in the financial statements.

24.0 Post Balance Sheet EventsThe Directors are not aware of any matter or circumstances arising since the end of the financial year, not otherwise dealt with in the financial statements, which would significantly affect the financial position of Kenya Roads Board and results of its operation as laid out in these financial statements.

25.0 ComparativesWhere necessary, comparative figures have been adjusted to conform to changes in presentation of the Financial Statements as required by International Public Sector Accounting Standards and any amendment whenever necessary in the current year

26.0 CurrencyThe financial statements are presented in Kenya Shillings (KShs ‘000).

NOTES

NOTES

ROAD SAFETY SIGNS

Road Sign Brief Description Road Sign Brief Description Road Sign Brief Description

Stop

Speed Limit

Direction to be followed – Straight on or Turn to the Right

Yield / Give Way

End of Speed Limit Restriction

Facility for the handicapped

No Entry

No Parking

Parking

No – Overtaking

No Stopping

Sharp Curve (Right)

No entry for motor cars

Turn Right Ahead

Combined Curves (Right – Left)

No entry for Goods Vehicles

Steep Descent

Two – Way Traffic

No entry to any Motor Vehicle

Cyclists Only

Traffic Signals

No Left Turn Ahead

(Foot path for) Pedestrians Only

Pedestrian Crossing

ROAD SAFETY SIGNS

No U – turn

Give Way to Oncoming Traffic

Children

No Right Turn Ahead

Road Closed to all Vehicles in both Directions

Cyclists

Road Narrows Both Sides

Road Narrows From Right Side

Speed Humps

Falling Rocks (From Left)

General Warning

Railway Crossing

Sharp Curve Chevron (Triple) (To the Right)

Road Works

Wild Animals

head and left direction

Stop/Bus/Taxi/Slow Down

No Overtaking Line

Stop Line

Give Way Line.

Channelizing Island – Do not drive over the marking except in emergency

Kenya Roads Board Re-Towers,3rdFloorOffRagatiRoad,UpperHillP.0.Box73718-00200,CitySquareNAIROBI,KENYATel.No.:+254204980000,2722865/6FaxNo.:+254202723161E-mail:[email protected]:www.krb.go.ke

Documents

KENYA ROADS BOARD Annual Report 2014.pdf · KWS Kenya Wildlife Services MBS Moran of the Burning Spear MTEF Medium Term Expenditure Framework PALWECO Programme for Agriculture and