Scandal of theft and kickbacks at UN

The United Nations office in Nairobi may have lost Sh10 billion in procurement and administrative scandals over the past three years, an internal audit report has revealed.

The money is suspected to have been stolen by UN employees who colluded with suppliers between 2004 and 2006.

Some of the employees reportedly have links to the companies which were given contracts to do business with the Nairobi office which includes the United Nations Environment Programme (UNEP) and UN-Human Settlement (UN-Habitat).

In some instances, kickbacks were given for the contracts to be procured as no documentation was provided to the auditors to back the expenditure.

Huge sums

Among the contracts where huge sums of money were lost are transport, furniture and information technology.

The damning report by the Office of Internal Oversight Services (OIOS) and dated February 26, 2008 was to be debated in New York on Thursday.

The report, from the OIOS director Dagfinn Knutsen, was handed to the director-general of UNEP and UN-Habitat Dr Anna Tibaijuka on February 28, 2008.

In an obvious case of conflict of interest, a company owned by a senior employee of the UN in Gigiri won a tender to offer travel and ticketing services. The employee’s wife runs the company, situated within the Gigiri complex.

In yet another case, a manager at one of the companies that had a contract to maintain buildings within UNON ended up at the Gigiri complex as a UN employee in charge of a unit.

The employee’s responsibilities include overseeing all ground works within the Gigiri complex that stands on 140 acres of land. All the lucrative contracts to carry out maintenance reportedly ended up with his former employer!

The audit report comes just days after the UN office in Nairobi was a subject of debate in New York where poor management and inadequate accountability were cited as plaguing construction projects valued at Sh2.3 billion.

The construction projects would have seen the Nairobi office upgraded to the same level as the ones in Geneva and Vienna. UN Secretary-General Ban Ki-moon had already agreed to elevate the status of the Nairobi programmes.

To carry out their corrupt activities, the employees in the Procurement, Travel and Shipping Section (PTSS) only limit knowledge of tenders to their friends or vendors on the UN Nairobi office roster.

“Procurement at UNON contravened UN financial regulations and the UN procurement manual. Publicity through advertisement of request of interest was often omitted,” the report states.

In the transport contracts, the auditors found that one company had been awarded three contracts worth US$1,431,052 (Sh107million) for regular and unscheduled shuttle services.

In another contract, Sh200 million was paid for general services staff to and from work but there was no evidence that there had been regular monitoring of contractual conditions.

“On the basis of the documentation provided OIOS concluded that the Procurement, Travel and Shipping Section (PTSS) and requisitioners had not correctly followed procurement and contract management procedures and was unable to satisfy itself that the UN obtained best value from the contracts,” the auditor states.

On furniture, no standard contract format was followed-the legal obligations were based on exchange of documents between parties rather than a formal contract.

The auditors could also not establish the basis on which the companies were selected because of lack of consistent criteria. The PTSS failed to estimate the total value of furniture purchases and monitor it over time. “The value eventually exceeded US$500,000 (Sh37.5million)”, the auditors reveal.

In an abuse of the procurement procedures, UNON purchased executive office furniture for US$4100 (Sh308, 000) although it had negotiated a similar package for US$1228 (Sh92, 000).

This is more than three times the negotiated amount.

The auditors passed the same verdict when they reviewed the Information and Communication Technology (ICT) service contracts worth US$2 million (Sh150 million).

In the case of hardware and software maintenance contract worth US$1.3 million (Sh97.5 million), the work carried out did not fully match the terms of reference and the documentation available did not provide a satisfactory basis for the award of the contract, the auditors state.

Lack of request

Further, it was established that the part of the contract on preventive maintenance had not been fully carried out in accordance with the contract terms. “The limited number of bidders and the lack of request for expression of interest also raised doubts as to whether best value for money was obtained”, the report reveals.

In two contracts for network maintenance services worth US$250,633 (sh19 million), the terms of reference used for the original bidding exercise did not reflect the actual work to be carried out under the contract.

“The basis on which the payments were made and performance evaluated was therefore unclear”, the auditor concludes.

In the case of the systems contract for the provision of computers worth US$606,419 (Sh45million), the company had been holding the contract with UNON since 1998 after bidding exercises in 1998, 2000, 2002 and 2005 and contract extensions in between while awaiting a new request for proposal.

The auditors note that no evidence was provided to show competitive analysis for this contract or to explain the basis for their extension.

The audit report could scuttle efforts to elevate the Nairobi office at a time when everything seemed to be going its way.

Analysts say the elevation of status and the modernisation of the Nairobi Complex could enhance Kenya’s international prestige and eventually result in an expansion of the UN staff in the country.

The UN currently employs about 1,660 Kenyans and nationals of other countries at the Gigiri complex, and hundreds of NGOs and diplomatic missions depend on its presence.