Auditor General Nancy Gathungu has flagged procurement deals at Geothermal Development Company (GDC) that have left it stuck with unutilised supplies worth billions of shillings.
In her recent report, Gathungu has raised concerns over supplies and equipment worth Sh4.4 billion held by the company when it only utilised items valued at below Sh400 million.
“The company held drilling supplies and equipment valued at Sh4.42 billion as of June 30, 2021. It only utilised items valued at Sh347.9 million, which is eight per cent of the stock,” she says.
Gathungu says the company is overstocked with equipment which puts it at risk of being stuck with obsolete items in an environment of fast-evolving technologies.
“Low rate of use implied the systems were not economical. A large portion of the company’s capital was invested in a slow-moving stock that faced the risk of loss from obsolescence,” she says in the report.
According to the report, the company owns seven drilling rigs bought at Sh15.9 billion, with four of them purchased at Sh8.9 billion having not been used in the four financial years.
“One of the rigs was acquired and used to drill two wells in 2016 and had been idling ever since. Each rig could drill two wells per year. The company may not have obtained value for money on public funds,” the report reads.
Despite the huge investments, Gathungu says GDC lacks a comprehensive inventory management system to indicate dates when items were received and those already obsolete.
“The usability of the items in the stores could not be confirmed from the stores’ records and economy and efficiency in the management of the stores was doubtful,” says the report.
The company also incurred losses of Sh2.89 billion between December 2017 and January 2020 owing to vandalism and theft of key components from four rigs despite the presence of a hired security firm.
“The stolen parts led to the loss of business after the four rigs were reportedly put out of service for two years. Compensation claim against the security firm was denied as the company had irregularly withheld payments to the firm without following the due process,” says Gathungu.
The Office of the Auditor General (OAG) also questioned the direct procurement of legal services despite the company having prequalified lawyers in the 2020/21 fiscal year.
According to the report, the management hired a private law firm to represent it in a constitutional petition filed before the Employment and Labour Relations Court by five senior managers. The management told the OAG that the method was used on grounds that it was impractical to apply other methods as the matter was urgent.
“The direct procurement method applied did not meet the conditions set out in Section 103 of the Public Procurement and Asset Disposal Act, 2015. In the circumstances, the legal services were hired irregularly and may not have been competitive in price and quality,” Gathungu says.
Gathungu said the company was in breach of human resource practices that had seen some of the employees at senior levels hold positions in an acting capacity for six months.
“Payroll data indicated that acting allowances totalling Sh7.1 million were paid to 13 employees appointed in acting capacity for periods lasting more than six months,” she says.