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KFS fails to account for Sh1.8 billion

Tuesday September 18 2018

MV Likoni

Commuters walk out of Mv Likoni, which was recalled from Mtongwe Channel after Mv Jambo and Mv Nyayo broke down, on March 19, 2018. The Kenya Ferry Services on the spot for failing to to account for Sh1.8 billion it used to buy two vessels from Turkey. PHOTO | FILE | NATION MEDIA GROUP 

EDWIN MUTAI
By EDWIN MUTAI
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The Kenya Ferry Services is in the headlines once again for failing to account for Sh1.8 billion it used to buy two vessels from Turkey.

Auditor-General Edward Ouko says in his latest report on the Mombasa-based parastatal that he could not confirm the validity and accuracy of the building and supply of the ferries at a cost of Sh1,863,000,000 nor the propriety of expenditure totalling to Sh1,519,379,614 paid to the contractor by June 30, 2017.

The report says the contract was awarded to a company ranked fourth during the technical evaluation but no explanation was provided as to how it was ultimately awarded the job.

Besides that, the Auditor-General found that the technical evaluation report indicated that the winning bidder was to supply roll on/roll off ferries and that dead weight at designed draft was 490 tonnes.

However, a review of the winning bidder’s tender document revealed that the company did not provide that information.

GUARANTEE

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KFS was also found to have made a downpayment of $5,920,726.7 (Sh598,023,000) to the local agent in August 2015 despite the requirement that such settlement be made upon the production of an unconditional guarantee issued by a reputable bank in Kenya.

The audit found that the winning tenderer submitted a performance bank guarantee of $931,500 (Sh93,150,000) issued by a bank in Istanbul, Turkey.

"It was further noted that the performance bond dated July 13, 2015 was submitted 16 days after signing the contract, contrary to the general conditions of the deal,” Mr Ouko says in the report submitted to the National Assembly.

“The contractor was required to furnish the employer with the performance security before signing off the contract.”

ADVANCE

The audit found that KFS made an advance payment of $5,920,726.7 (Sh598,020,000) to the company but failed to remit six per cent value added tax, totalling Sh35,881,380 and withholding tax at 20 per cent for non-resident company totalling Sh119,604,380 despite advice from the Kenya Revenue Authority.

The ferries were to be delivered after 17 months or by November 2016, according to the contract signed on June 27, 2015.

“The first ferry — MV Jambo — was delivered in July 2017. At the time of the audit in October 2017, the second had not been delivered. Information available indicates that delivery was suspended by a court order,” the report adds.

“In light of the foregoing, it has not been possible to confirm the validity and accuracy of the building and supply of the two ferries at cost of Sh1,863,000,000 and propriety of expenditure totalling Sh1,519,379,614 paid to the contractor as at June 30, 2017.”

However, KFS says it did not fail to account for money as reported by Mr Ouko.

“How can we fail to account for Sh4 billion? What you wrote is different. I explained all these issues two months ago,” KFS managing director Bakari Gowa said.

Additional reporting by Winnie Atieno

This story was first published in the ‘Business Daily’