Audit: Multi-billion subsidized fertilizer scheme was clouded in irregularities

A farmer looks at CAN fertilizer at the National Cereals and Produce Board (NCPB), Eldoret depot. [Kevin Tunoi, Standard]

The Auditor-General has questioned how Sh8.1 billion was spent to buy fertiliser in a subsidy programme launched by the government in 2006.

The Government had set up the National Accelerated Agricultural Inputs Access Programme (NAAIAP) to address food insecurity and poverty.

However, according to the Auditor General's report, the implementation of the programme and the purchase of the fertiliser in 2017-18 financial year by the State Department of Agriculture and the National Cereals and Produce Board (NCPB) are questionable.

In the year under review, the Government had budgeted for Sh5 billion for procurement of 38,000 tonnes of fertiliser worth Sh1.3 billion for the 2017 short rainy season and 130,480 tonnes worth Sh3.7 billion for the 2018 long rainy season.

The report revealed the budget was later revised upwards to Sh5.6 billion, but there was no revision in the quantity of fertiliser acquired.

The State Department of Agriculture said the budget was revised in a bid to clear Sh8 billion NCPB debts.

However, the audit noted that the department failed to provide documentary evidence that the revision of the budget was related to the debts.

The report shows that the department had then ordered 932,000 bags of various types of fertiliser weighing 46,600 tonnes at the cost of Sh2.4 billion.

Of the amount, 40,000 tonnes were procured from a trading company, while the balance of 6,600 tonnes were ordered from Access to Government Procurement Opportunities (AGPO) firms.

In addition, the department directed the NCPB to order 115,700 tonnes the same year.

At the time, the audit reveals, the department had already entered into a Sh5.5 billion contract with the supplier.

The NCPB however ordered 103,183.5 tonnes only at a cost of Sh5.7 billion.

“No reasons were given for the revision of the contract prices by Sh209 million considering the order was less by 12,516.65 tonnes,” the report said.

The total amount of fertiliser ordered by the two entities in the period was 149,775.25 tonnes, all at a cost of Sh8.1 billion.

Auditor General Nancy Gathungu notes in her report that the procurement exceeded the budget amount of Sh5.6 billion by Sh2.5 billion.

“No reason was given for failure by the State Department to order the full amount of 168,480 tonnes of fertiliser as in the approved budget,” the audit said.

During the year under review, the State department received 920,274 bags of fertiliser, while the NCPB received 1,619,178 bags, totalling 126,972.60 tonnes. All these were handled by NCPB in Mombasa.

The report noted that the delivery was short by 22,802.65 tonnes or 456,053 bags of the order.

The auditors said the CAN fertiliser delivered by the trading company was said to be of poor quality and at one time its loading and distribution had been suspended until quality issues had to be sorted out.

“The fertiliser was said to be caked and attempts to make it free flowing was unsuccessful. It was not clear how the quality issue was sorted out as it was eventually distributed,” the report notes.

Further, the DAP fertiliser was said to have inconsistent weights, which ranged between 46 and 51 kilogrammes.

However, this was eventually sorted out and a minimum average weight of 49.5kg was agreed upon.

The report also noted that NCPB had hired an independent company to carry out weights and quality survey on the fertiliser instead of the Kenya Bureau of Standards.

Although the roles of handling the fertiliser at the port of entry, its distribution to the depots and the sale to farmers was vested in the NCPB, the State Department of Agriculture failed to monitor and obtain feedback on the intended impact of the procured fertiliser.

The Auditor General further questioned the department for failing to prepare a statement of revenue.

“It is also not clear, how much of the fertiliser that was procured by both the State Department and the National Cereals and Produce Board on behalf of the State Department was sold to farmers,” said the report.

This was attributed to failure by the National Treasury to appoint an accounting officer as receiver of revenue.

The State department indicated that NCPB had accumulated sales of Sh1.1 billion as at June 30, 2018, while NCPB reported revenue amounting to over Sh1.4 billion.

“It was indicated that the amount was used to offset debts owed to the NCPB as the State Department had failed to settle its obligations related to subsidy claims by NCPB,” the report reads.

A further examination by the Auditor General shows that 236,217 bags of fertiliser were outstanding at NCPB depots.

The report also notes that NCPB has sold at least 2.3 million bags of fertiliser, which could mean they had earned over Sh2.3 billion.

“Under the circumstances, the total revenue collected could not be confirmed,” the report concluded.