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Auditor General faults KRA for giving tender to Swiss printer

By Paul Wafula | February 21st 2018
By Paul Wafula | February 21st 2018
A worker inspects beer bottles on a conveyor belt at the East African Breweries Ruaraka factory in Nairobi, Kenya February 17, 2010. [Photo: Courtesy]

Kenyans did not receive value for money on the Sh4.5 billion contract awarded by the taxman to print security stamps through single-sourcing.

Auditor General Edward Ouko has said the Kenya Revenue Authority (KRA) did not have any justification to hand the excise goods management system contract to a Swiss firm on a silver platter.

In his latest audit report on KRA, Mr Ouko found that the procurement of printing, supply, and delivery of security revenue stamps from SICPA Security Solutions SA Prilly was single-sourced without any reason.

“This is contrary to the Public Procurement and Disposal Act, 2015 and the authority therefore may not have received value for money,” he said in the report for the financial year ended June 2016.

A review of various procurement contracts revealed that the KRA entered into the contract to print the revenue stamps for five years, but was unable to explain five main issues.

The contract, according to the audit report, is silent on the ownership of the equipment that has already been delivered at a cost of Sh2.7 billion.

“As a result, the authority has not capitalised the cost of the assets into their books,” the report adds.

The other matter flagged by the report is that KRA did not disclose in its financial statements for the 2016 financial year under trade creditors an outstanding debt of Sh770 million owed to SICPA for the supply of the equipment.

KRA maintains an excise fund account with the Central Bank of Kenya (CBK) in which revenue from the sale of stamps is deposited, according to the law.

“However, the authority has not disclosed in the financial statements the excise fund account balance of Sh167,942,772.95 as at 30 June, 2016,” said the Auditor General.

The other anomaly was that the financial statements reflected a balance of Sh899 million of work in progress in the excise goods management system with unsupported entry journal voucher number 064 of Sh242 million. Ouko says the balance of Sh899 million cannot be ascertained.

Started investigations

The controversy over the contract began last year when Parliament’s Public Investments Committee (PIC) started investigations and ordered that the system be suspended until the probe was completed.

SICPA initially signed the contract in December 2012 at a cost that was later renegotiated and increased.

The five-year contract worth 20,341,464 euros (approximately Sh4.8 billion) was originally to provide 3.55 billion stamps a year but this was later increased to 158,213,898 euros (Sh17.7 billion at current exchange rates) for 12.87 billion stamps.

The original contract was for making excise stamps for tobacco products, wines, and spirits but the Treasury, through legal notice number 110 of June 2013 increased the scope to cover beer, bottled water, and soft drinks.

Manufacturers have opposed the system on grounds that it would oblige them to part with billions of shillings in system upgrades.

Coca-Cola told MPs probing the system that it would have to part with between Sh8 billion and Sh11 billion annually based on the Sh1.50 stamp duty it is meant to impose on every bottle of water, juice, and soda.

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