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Sh12 billion pending bills at Defence Ministry shocks auditors

By Moses Njagih | June 12th 2016
Auditor General Edward Ouko

An audit at the Ministry of Defence has questioned validity of Sh12.5 billion in pending bills accumulated over three years, after the ministry failed to provide details of the alleged payees.

Auditor General Edward Ouko further reveals that in excess of Sh145.3 million of taxpayers money could have been misappropriated in a suspicious deal that saw overpricing of two excavators bought at Sh185.5 million yet a market survey undertaken by the user indicated that the same could have cost as less as Sh40 million.

On the pending Bills, Ouko questioned what he says is a similar trend in the ministry for the last three years where bills chargeable to the financial year’s recurrent vote are carried forward to the next year.

But the Auditor says while this anomaly has persisted for the last three financial years, his office’s attempt to authenticate the bills by getting the individual debtors were fruitless after the ministry failed to provide details of the payees.

“Consequently, it is not possible to confirm the validity and completeness of pending bills amounting to Sh4,187,353,000, Sh3,924,997,000 and Sh4,463,081,170.85 purportedly incurred during three consecutive financial years 2014/15, 2013/2014, and 2012/2013,” says Ouko in his audit report for the last financial year tabled in Parliament last Thursday.

In another audit query, the ministry is put on the spot over the procurement and utilisation of two hydraulic excavators, Caterpillar 374DL, done through direct procurement from Mantrac Kenya Ltd in 2011/2012, and which cost the ministry Sh185,323,994.10.

The auditor first questions why open tender was not employed in procuring the excavators, yet they were not urgently needed and have since been stationed at the Kahawa Barracks and the 12 Engineers Batallion in Thika since 2012.

The ministry explains that the purpose of the two heavy duty excavators was road construction, civil works and disaster management. However, the auditor reveals that his inspection of records at the Thika Batallion shows that they have never been used for the intended functions, and are only used in training.

“The ministry has not justified the basis for incurring huge expenditure on under utilised excavators,” says the Auditor General, who also questions delays in servicing of one of the machines, whose quick coupler cylinder was allegedly broken during training last year.

Ouko noted that the supplier of the machine carried the component for repair, but had not returned it as at October 16,2015, leaving the machine grounded.

But it is the cost that ministry spent on the machines that the auditor sees as questionable, saying the expenditure could have resulted in “excess and illegal payment of Sh145,323,994.50”, almost five times the actual market price of the machines.

He says it was not clear how the ministry ended up paying Sh185,323,994.10 for the machines, when a market survey undertaken by the user, on the prevailing market prices indicated that the same could be bought for Sh40 million.

“Under the circumstances, it is not possible to confirm that the value for money was obtained in the expenditure, as required by Section 68(1)(b) of the Public Finance Management Act. The Auditor further faults the ministry for an alleged over-payment of Sh85.9 million to a contractor awarded tender to put up 144 housing units at Kenyatta Barracks in Gilgil.

Ouko notes that the ministry engaged a contractor, Capital Construction Company, to put up 144, three bed-roomed houses in 24 blocks a contract sum of Sh 346,658,629. The contract also included other associated civil works on roads and sewerage, electrical and mechanical works and high and low water storage tanks, all to be done within 100 weeks.

The auditor notes that the contract period was revised and extended by an extra 88 weeks after the contractor failed to meet the initial period, with the term expected to end by June 30, 2009.

The ministry terminated the contract, allegedly after the contractor failed to meet the new deadline, having only done 61 percent of the work.

Ouko questions why the contractor was paid Sh 297,354,059.74, representing 86 percent of the contract sum, when he had done only 61 percent of the work.

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