Ouko takes KPA to task over questionable tenders

Sunday January 13 2019

Kenya Ports Authority

Kenya Ports Authority managing director Daniel Manduku. The agency has been accused of financial improprieties. PHOTO | FILE | NATION MEDIA GROUP 

EDWIN OKOTH
By EDWIN OKOTH
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An audit query has put the Kenya Ports Authority (KPA) on the spot, with fears that millions of shillings may have been lost in questionable tenders and payments for services never delivered.

From building contracts that were paid for but could not be physically verified to water supplied without delivery notes, and which cost more than double what was budgeted for, the State is fighting accusations of dishing out several tenders irregularly.

KPA managers are also on the spot for frustrating auditors who were trying to verify various construction works for which Sh2.3 billion was spent as part of the close to Sh5 billion worth of suspicious tenders at the State agency.

“During the course of the audit, efforts to verify the existence and occurrence of these works was not possible since the management failed to facilitate the physical verification of the works,” auditors wrote concerning five works listed in KPA’s financial statements.

One item is simply marked ‘other works’ for which Sh98 million was spent.

FENCING

Although KPA dismissed the allegations of tender improprieties and defended the payments made to the various contactors, the auditors raised multiple questions on fat tenders floated by the State agency whose monthly revenues hit Sh50 billion in July last year.

Top among the audit queries are Sh100 million spent on three contracts to put up perimeter walls around various plots owned by KPA. Auditors maintain that the walls were never erected.

KPA first contracted two firms to fence its land parcel number MN/111/528 in Takaungu, Kilifi County, at Sh71.3 million.

Thereafter, the agency paid another Sh24 million to fence another plot in Jomvu.

The auditors questioned how the firms were identified for the jobs as much as the fences do not exist on the ground.

KPA head of Corporate Affairs Bernard Osero, in response to the Sunday Nation’s queries on the perimeter walls, said one of the plots had completely been fenced but vandals destroyed it.

SQUATTERS

KPA reportedly did not discover when the vandalism was going on and all the materials were stolen.

“The plot was bought in 1993 and is currently occupied by squatters. The contractor, having accomplished their work, were paid accordingly.

"However, a few weeks later, squatters vandalised the wall and took away materials without KPA’s knowledge. KPA was surprised on learning that the wall had been brought down by vandals and squatters,” Mr Osero wrote in response.

The Jomvu plot is said to have suffered the same fate while 70 percent complete.

Both contractors had been fully paid but the auditors maintain that no fence was ever erected.

Auditors also suspect a scheme to swindle some Sh10 million said to have been spent on Pilot boat- Nahodha II.

SPARE PARTS

Mantrac Kenya Limited was hired to do a complete overhaul of the vessel at Sh17.3 million after it attained its 10,000 running hours.

The firm requested for additional spare parts of Sh9.6 million, a request KPA managers approved without even giving their technical department an opportunity to verify if there was need for the extra parts, an oversight the agency admitted.

The engine’s cylinder head, said to have been faulty and which was replaced, had also not been returned to the authority as evidence of replacement by the time of audit.

KPA insists that although it was not produced for audit verification, the cracked cylinder head was returned to the dockyard on December 17 last year.

The auditors were also shocked to find the Local Service Order for the additional parts was dated five days after the invoice used to pay for the parts, indicating that the work was done before approval was made.

“KPA management approved the additional work. Following the external auditors’ need for clarification, we considered this an area of improvement and have since made it a standing order in our practices that whenever our cylinder heads are taken away for further tests, our engineer shall be present,” Mr Osero said.

PRICE REVIEW

The audit also uncovered some significant stink in a Sh24.3 million manhole replacement tender.

First, the firm is said to have been handed the contract in unclear circumstances and the amount spent is said to have been inflated, with some items charged four times higher than the prevailing market rates, a scheme that left KPA with a Sh12.5 million bill for an item they would have bought at Sh3.1 million.

No response was given to the auditors for this disparity. KPA said the items had their prices reviewed upwards by a committee constituted to review prices.

KPA bosses were also required to explain how a Sh12.4 million caretaker-service tender was varied by 48 percent as the contract set to run for two years irregularly went on for three years and two months.

While government agencies are known to delay payments for works done, KPA managers were found to have paid some contractors like Mbaraki Pit Contractors more than they had asked for.

The auditors found that for a three-year contract to provide sewage dislodging and exhausting services in two zones, the firm had been overpaid by Sh3.5 million without any explanation.

DESALINATION

The authority had also spent Sh69 million to set up a water desalination plant as a means of cutting down its ballooning expenses on the commodity.

KPA put up two water tanks of 550 cubic metres for a deal where a vendor would instal a desalination plant and operate it as the State agency bought water.

Auditors were not convinced that the deal was worth the millions spent on it as KPA still spent more money to pay water vendors.

KPA maintains that as much as it had already paid some six firms Sh135.6 million, more than double its budget for water which was at Sh63 million, the desalination plant was still too new to create an impact on its water budget.

No invoices were made available to confirm why the huge water supply bill was still accruing, according to the auditors.

The managers told the auditors that Ethics and Anti-Corruption Commission sleuths had taken the invoices, further deepening the mystery over the water supply deal that may never have been there.

“The letter extending the water supply contract for the six firms is dated April 7, 2017. However, some of the invoices are for deliveries as far back as October 2016.

"In the absence of delivery notes, the genuineness of these transactions could not be verified,” the auditors wrote.

INSPECTION

KPA was also faulted for settling some Sh10.5 million water bills for staff, Bandari College and blocks housing the police, a claim the firm denies, maintaining that only the police station, the port police residential houses at Kilindini High Level, Bandari Clinic and four nursery schools have their water bills footed by the State agency.

Another questionable recruitment of five firms out of 14 to deliver various electrical works amounting to Sh112.8 million puzzled auditors when KPA managers could not explain how the five firms were selected for the multimillion job done every two years.

On verification of the works done, it emerged that no inspection had been carried out on the works already fully paid for, raising fears that taxpayers’ money may have been wasted.

On its books, the management was flagged for being overly optimistic on the value of land which had been invaded by squatters.

Auditors also felt not enough had been done to tame the encroachment, which KPA said it had given the squatters a 90-day notice to vacate in January 2018, without elaborating on what action would be taken on the adamant encroachers.

REVENUE

KPA could also not explain why it chose to spend some Sh5.9 million in the construction of a canteen at gate no 18, a query that had attracted even the attention of the Parliamentary Investment Committee, which directed KPA to recover the wasted millions.

In April last year, Auditor-General Edward Ouko had questioned KPA’s books where revenue and budgeting targets were designed to portray the agency as a prudent spender and a good performer.

The Authority budgeted to collect Sh41.4 billion and surpassed its target by Sh38.6 million in the year ending June 2016.

Strangely, 19 revenue streams recorded more than 10 percent under collection while seven revenue streams collected beyond target by a wider margin.

KPA had also underspent on 22 items, with some like consultation fees and compensation for cargo loss going up to 80 percent.

“In most cases, the revenue targets surpassed the targets, depicting a case of underbudgeting of revenues to portray a positive overall performance,” Mr Ouko wrote in the audit report.

FEEDBACK

Last weekend, KPA managing director Daniel Manduku wrote to ask for more time to give further information on the audit queries.

A week later, Dr Manduku had neither contacted the Sunday Nation nor made any attempt to address the issues which he had described as “weighty”.

“These are weighty issues that require the direct attention of the managing director himself.

"I want to request you to allow me to respond to your questions in person next week. Given that today is a weekend, I am out of station,” the MD wrote.