11 February 2018

Kenya: MPs to Summon KAA Officials Over Airport Deals, Tenders

The Public Investment Committee of the National Assembly is on Monday expected to summon the management of the Kenya Airports Authority over alleged misuse of public funds.

Chairman Abdulswamad Nassir said that among the issues the watchdog committee wants clarified were the dealings worth billions of taxpayers' money KAA has had with Transglobal Limited over its land, which hosts Jomo Kenyatta International Airport.

DEALS

"We are concerned at how these government agencies are blatantly involved in dealings of this kind without following the law. If the law requires you to procure through tendering, why do it directly? It is a habit that needs to stop, and we will ensure that it stops," Mr Nassir, who is also the MP for Mvita, said.

He added: "This committee exists to ensure that public funds are utilised prudently and that there must be value for money for the projects they undertake."

PIC exists to ensure that projects undertaken by state corporations are viable and comply with the provisions of the procurement law, Public Finance Management Act, among others.

The committee is acting on the findings of Auditor-General Edward Ouko's report, which has questioned the financial dealings at KAA that could see the taxpayer lose billions of shillings in shady dealings.

AUDIT

Among the issues the auditor has questioned touch on KAA's land, award of tenders and lack of seriousness of the management to ensure that the projects are completed on time.

At the centre of this is the Sh65 billion new Greenfields terminal that was expected to handle 8.7 million passengers annually once completed.

However, the project, which had been awarded to M/S ACEG- CATIC JV, was cancelled by the Ministry of Transport and Infrastructure in 2016 before construction works began.

But Mr Ouko noted in the audited report before PIC that an expenditure of Sh78 million was incurred on the project on May 23, 2014 and described as contract variation.

"There was no further information being availed and it was not clear how a contract, which has not commenced, could have a variation," Mr Ouko said in his June 30, 2017 report.

Mr Ouko noted that PricewaterhouseCoopers was contracted at Sh29.8 million to provide technical advisory service for borrowing but the contract would later be terminated in unclear circumstances after incurring Sh19.4 million, which he said amounts to nugatory expenditure.

PAY

According to the auditor general, a review of the project revealed that the contractor had been paid Sh4.3 billion while Sh129.9 million had been paid to the consultant as at June 30, 2016 but there was no evidence of work done.

The auditor further indicates that although the letter of notification of November 2011 indicated that the Sh65 billion was inclusive of all taxes, the KAA management entered into a contract indicating that the contract sum was inclusive of 16 percent VAT.

He said that this was done in unclear circumstances and had the project taken off, it would have incurred billions in illegal VAT in what would be seen as schemes by government officers to misuse public funds.

It was also noted that the final contract was to be executed only after financial negotiations with the financier were concluded.

REPORT

The audit report also noted that the management has not explained how Sh228 million allocated for construction projects at Tseikuru Airstrip was used from 2013 to 2016.

There are also issues on the Sh399 million rehabilitation of runway, apron and a car park at Nanyuki Airstrip.

The contract was awarded to Doch Company on September 3, 2014 and was to be completed within 12 months.

However, the auditor noted slow progress, missing progress reports, unapproved variation scope and lack of inspection report.

The report says the contractor placed a demand of Sh120.6 million, 30 percent of the awarded contract sum, which is over and above the authorised limit for variation.

The overpayment on materials for the Sh963 million proposed construction of terminal building at Isiolo Airport, contract variation on the Sh1.7 billion for the runway strengthening and widening, parallel taxiway and cargo apron at Kisumu have also been questioned.

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