159 cars bought 10 years ago but never delivered

More than 10 years after paying Sh460 million for 159 vehicles, the government has yet to receive them.

The controller and auditor-general says an agreement was signed in 1997 with a South Korean motor vehicle firm to supply 520 vehicles for use by the police and Provincial Administration.

A local agent of the company would receive payment and deliver the vehicles in six months.

“In February 1998, the agent assigned the first promissory note to a development bank in East Africa, effectively transferring the debt from the company to the bank,” read the report.

“In May 2000, the agent assigned the remaining two promissory notes to the international export and import bank earlier mentioned,” it further says.

However, the government declined to honour the promissory notes, citing non-delivery of the vehicles.

The report, quoting available records, revealed that the company had, as of May 2000, delivered 361 vehicles, leaving a balance of 159 units.

Due to the company’s unsatisfactory performance, the Attorney General in July 2000 advised that the contract could be terminated and the government would then claim damages for the undelivered vehicles.

Although the contract was eventually terminated on December 16, 2002 as advised, the government was still obliged to honour the two promissory notes held by the bank.

“It appears the Ministry of Provincial Administration and Internal Security did not submit any instructions to the AG to proceed with the legal demand for recovery of the money from the company or local agent,” reads the report.

“... nor does it seem to have effectively pursued supply of the remaining one hundred and fifty nine vehicles,” it says.

Instead, and under unclear circumstances the agent, on July 12, 2007 issued a notice of intention to sue the government for losses amounting to Sh182 million incurred against discounting of the promissory notes, and accrued interest of Sh126 million.

In the meantime, the principal and interest on the two unsettled promissory notes continued to accumulate to Sh460.2 million as at September 23, 2008.

Following a series of meetings in September 2008 between the ministry, the Office of the Prime Minister, Ministry of Finance and the Office of the Attorney General, the Treasury took over and paid the debt of Sh460.2 million to the export and import bank.

“However, and as far as I have been able to establish from the records available, the 159 units have not been supplied and delivered to the police or the provincial administration as at June 30, 2009, although the full bill had been settled.”

“On the basis of records, it has also not been possible to establish how 143 of the 361 delivered cars were distributed to the departments,” it reads.