AUDIT REPORT

Commission burns Sh148m on failed sale of rundown state firms

Auditor General doubts whether Kenyans got value for money in the transaction advisory cost

In Summary

•Despite the expenditure by the commission domiciled at the National Treasury, the companies are yet to be sold seven years down the line since the process was initiated.

•The commission, in the review of its financials for the year to June 30, 2020, had only one duly appointed member of the requisite eight following the expiry of the previous board’s tenure in June 2019.

The Treasury Building.
The Treasury Building.
Image: FILE:

Auditor General Nancy Gathungu has questioned the value for money in Sh148 million spent by the Privatization Commission to hire transaction advisers for the sale of rundown state entities.

Despite the expenditure by the commission domiciled at the National Treasury, the companies are yet to be sold seven years down the line since the process was initiated.

The transaction advisory services were for the sale of Kenya Meat Commission, Kenya Wine Agencies Ltd, Tourism Finance Corporation as well as the cash-strapped Muhoroni, Chemelil, Miwani, Sony, and Nzoia sugar companies and the Agro-Chemical and Food Company.

But Gathungu is concerned that the sale of some of the entities has been underway for that long with no meaningful returns.

“This is casting doubt on the likelihood of realising value for money from the expenditure of Sh148.6 million incurred on the privatisation programme,” the auditor said.

The delayed sale is among the reasons the government handed over the Kenya Meat Commission to the KDF.

Gathungu has further raised concerns the commission is operating without a fully constituted board, a situation that has equally slowed the privatisation process.

The commission, in the review of its financials for the year to June 30, 2020, had only one duly appointed member of the requisite eight following the expiry of the previous board’s tenure in June 2019.

“The appointment letter of acceptance of the sole board member was not availed for audit review. The commission is therefore in breach of the law to this extent,” the auditor said.

Worse still, the duly appointed member’s term in office is set to expire in December.

In April, the Finance committee of the National Assembly questioned the National Treasury on why it has been unable to complete the recruitment process.

Treasury said it had received more than 100 applications but was yet to conduct interviews, citing the Covid-19 situation.

MPs set a May 25 deadline for the ministry to present a report on the recruitment to the National Assembly for vetting of the nominees.

Treasury officials led by CAS Nelson Gaichuhie and Investments Secretary Stanley Kamau pledged they’d conclude the recruitment by May but that is yet to happen.

When contacted, Finance Committee chairperson Gladys Wanga told the Star on Monday that the Treasury is yet to furnish Parliament, through her committee, with the report.

Positions at the commission fell vacant in 2019 but were not advertised until July last year, the lack of quorum hampering the privatization of the rundown entities as well as Utalii Hotel and Kisumu’s Sunset Hotel.

The transactions on the public investments cannot be done without a substantive board at the commission.

Owing to the prevailing situation, the commission failed to absorb 66 per cent of its Sh896 million budget an under-expenditure of about Sh594 million.

“The under-expenditure affected the planned activities and may have impacted negatively on service delivery to the public,” Gathungu said.

She further reprimanded the privatization agency for defying an Executive Order issued by President Uhuru Kenyatta directing that entities undertake procurement through e-platforms.

The Executive Order No6 of 2016 requires all public entities to migrate to an e-procurement platform as prescribed by the Treasury.

“However, the commission has not complied with the order hence is in breach of the law to this extent,” the audit report reads.

 

Edited by Kiilu Damaris