An analysis by the Star of several audits shows that Kenya Urban Roads Authority (Kura) and Kenya National Highways Authority (Kenha) were charged about Sh3.4 billion as interest in the period to June 30, 2022.
Kenha accounted for the highest at Sh3.04 billion while the extra Sh342 million in charges went to Kura.
The reports show that taxpayers are at risk of paying more interest charges in stalled Jubilee-era “transition” projects.
For instance, Auditor General Nancy Gathungu concluded that the additional Sh338 million Kenha was charged as interest on delayed payment in the Kibwezi-Kitui road project was avoidable and irregular.
“This was a cost which could have been avoided had the management made the payments as and when they were due considering that the project had adequate funding at the time,” she said of the Kibwezi-Kitui road project.
“In the circumstances, the interest payable charged to the project is an irregular charge to public funds.”
The auditor says that procuring entities and the National Treasury should liaise to provide budgets and ensure timely disbursement of cash to ministries for prompt payment of pending bills.
“Interest on delayed payments represents unnecessary additional charge to public funds beyond the projects’ cost,” the auditor said.
The situation is likely to get worse across the government as more than Sh700 billion is still owed to suppliers and contractors.
A committee chaired by former Auditor General Edward Ouko has closed the window for receiving the bills from the respective agencies for review.
During the review period, Kura had claims of interest on late payments worth Sh110 million from seven projects alone.
The urban roads agency also owed suppliers and contractors Sh14.1 billion, hence was exposed to more penalties.
Kenha, the report shows, was charged Sh866 million interest for delayed payments in the Mombasa Port Area road project.
“The payment of interest as a result of delayed payments leads to loss of government funds which could have been avoided,” Gathungu said.
The highways authority also paid interest amounting to Sh675 million in the Thika Highway Improvement project.
Gathungu has cast doubt on the bill, saying its final payment certificate was not provided for audit verification.
“In the circumstances, the authenticity of pending bills amounting to Sh674,721,327 could not be confirmed.”
The highway authority was also charged Sh604 million for a road linking Kenya to Ethiopia and another Sh419 million for several projects on the South Sudan route.
Kenha was also charged more than Sh147 million for delayed payments on the Kisii-Isebania road.
For Kura, works on the Rironi-James Gichuru junction road also attracted a total of Sh230 million as interest.
The project, which had taken up about Sh24 billion as of June 30, 2022, has stalled.
“Further delays will lead to increase in avoidable costs of interest and penalties on delayed payments,” the auditor warned.
Kura was also charged Sh2.2 million in the Eldoret Township road works. Several other projects executed in the year are exposed.
A contractor who was dualling Ngong Road (Dagoretti Corner - Karen Roundabout) abandoned the site over unpaid Sh333 million.
In the Eldoret Township roads project, outstanding works were yet to be done and the contractor was not on site.
The outstanding payments amounted to Sh403,711,576 and interest on late payment was Sh2,197,895.
“This was an indicator that the authority had delayed making payments to the contractor,” Gathungu said.
Kenha is exposed to additional charges in the delayed payment of Sh3.2 billion in various urban transport improvement projects.
Gathungu said the “project is at risk of incurring significant unquantified interest costs and penalties.”
At the Nairobi Western Bypass, a pending bill totalling Sh3.9 billion remained unsettled as of June 30, 2022.
The project end date was June 30, 2022, and it was not clear how and when the pending bills would be paid.
Kura also faces escalated costs in the upgrading of roads in Meru county headquarters.
Audit verification exercise carried out in February 2023 revealed that the contractor was not on site and work had stalled.
Due to protracted delays in payments, the contractor demobilised 70 per cent of the labour force and some equipment.
The authority, a review of payment schedules revealed, owed the contractor Sh134 million, and that the contract expired on July 27, 2022.
Works at the Valley Road-Kenyatta Avenue/Ngong/Nyerere Road Interchange and Upper Hill-Haile Selassie overpass and associated road networks in Nairobi County have also been abandoned.
An audit revealed that the contractor’s certified works amounted to Sh975 million out of which Sh678 million had not been paid. The contractor suspended its operations due to non-payment of certified work.
Gathungu warned that in the circumstances, the continued delay in payment was likely to attract interest and penalties.
“Further, delay in completion of the project is an indication that the citizens may not obtain value for money on the project.”
A contractor who was upgrading Mlolongo-Athi River-Joska road has also withdrawn from the site due to non-payment of Sh965 million.
The auditor says the authority breached contractual obligation due to non-payment of certified works.
Works on the Devki-Kinanie Park road also had an unpaid certified amount of Sh237,570,925 at the time of audit.
“The delayed payment may attract interest and penalties thus escalating the project cost.”
A contractor upgrading roads within East Africa Portland Housing Scheme in Machakos county has also abandoned the site.
“It was indicated that he had scaled down operations due to delayed payments,” Gathungu said, further warning that citizens may not get value for money on the Sh1.3 billion project.
A payment of Sh885 million was pending at the Nairobi Outer Ring project.
As a result, the contractor is entitled to receive financial charges compounded monthly on the amount unpaid during the period of delay.
“The contractor shall be entitled to this payment without formal notice or certification, and without prejudice to any other right or remedy,” the project’s agreement states.
Kura was also at the time of the audit yet to settle Sh536 million in the Kapchorwa – Suam – Kitale road project.
Kenha also owed the contractor working on the Mombasa – Mariakani project Sh448 million.
A balance of Sh822 million for works at the Port Reitz area has also been flagged, with Gathungu querying an unexplained increase of Sh792 million.
“Management did not provide documents to support the additions of Sh792,924,139,” she said.
Worse still, Kenha did not make a provision in the approved budget for settlement of the pending bills.
Nairobi’s Southern Bypass project had pending bills of Sh3,623,386,920 way past its end date of June 30, 2016.
The review shows that the project’s approved funding was Sh21.7 billion - all of which had been received and spent as at June 30, 2022.
“It was not clear how and when these pending bills would be paid.”
A similar scenario is likely to play out in the Kisii bypass projects which were to be executed at Sh846 million.
During an audit inspection carried out on March 2, 2023, the contractor was not on site and the works had been suspended.
