Two PSs summoned after audit exposes multi-billion rot in e-Citizen

PARLIAMENT has summoned Treasury PS Chris Kiptoo and his ICT counterpart John Tanui over an explosive audit report exposing alarming irregularities in the operations of eCitizen platform that risks close to Sh9 billion of taxpayers’ money.

The special audit on the government digital payment platform has raised red flags over billions of shillings in questionable transactions at the heart of Kenya’s digital governance.

In a damning report tabled before MPs, the audit reveals systemic gaps including lack of unauthorised diversion of revenue, irregularities in revenue collection and processing and unexplained cash flows that could point to a massive financial heist masked behind Kenya’s most widely used digital service portal.

Appearing before the National Assembly Public Accounts Committee, Deputy Auditor General Isaac Nganga said a staggering amount—running into tens of billions—was transacted through the platform without corresponding documentation, reconciliation or traceable accountability.

The report reveals that the government paid Sh545.6 million for support and maintenance to a company that was not part of the agreement.

The agreement was between the ICT Authority and Webmasters Kenya Limited in consortium with Pesaflow Limited and Olive Tree Media Limited but the government ended up paying a different entity – Electronic Citizen Solutions.

“The total payments as 30 June, 2024 amounted to Sh492, 162, 940 and USD 414,299.60. This amount was paid to a company named ‘Electronic Citizen Solution Ltd’ which was not a party to the agreement,” the report reads.

The auditor warns the move exposes the government to potential legal disputes. Despite the government owning the platform, the audit reveals that it still went ahead to pay Sh195.6 million for the provision of payment gateway services.

“These payments were deemed irregular as the government should not pay external parties for the use of its platform,” Nganga told the oversight committee.

The report that is now being deliberated by the committee chaired by Butere MP Tindi Mwale says some accounts, which were not authorised, were used to irregularly collect public funds.

For instance, Equity Bank statements for eCitizen’s collection account had receipts amounting to Sh6.2 billion from an undisclosed account only named ‘Pesaflow’.

According to the audit report, the account was not listed among the approved collection accounts by National Treasury.

“In this regard, the account was used to irregularly collect funds,” Gathungu’s report indicates. “The total amount irregularly collected in this account could not be established, as the bank statements for this account were not provided.”

Gathungu’s team also detected unauthorised transfer from government Mpesa Paybill 222222 to private accounts in total breach of Article 201 of the Principles of Public Finance.

Under the deal, all payments to the state paybill were to be auto-transferred to the settlement account held at KCB Bank.

“However, review of the 222222 Paybill statements revealed that on 25 January, 2024, there were four transactions made from the paybill account to private entities instead of the designated account,” the report reveals.

“The four transactions amounted to Sh127,850,950 and no documentation was provided to support these transfers of money directly from paybill to the private entities.”

Further, the auditor flagged the irregular collection of convenience fee which, according to 2014 Gazette Notice, was to be a percentage of the amounts paid.

“During the period to 23 January 2023, the National Treasury did not establish a prorating band. Instead, the convenience fee was charged at Sh50 per transaction, contrary to the Gazette Notice.”

The auditor reports that Sh2.2 billion was irregularly collected from Kenyans as convenience fee.

“Similarly, between 14 December, 2023 and 30 June, 2024, National Treasury irregularly collected convenience fee of Sh50 instead of prorating the fee as stipulated in the Gazette Notice No. 17422 of 14 December, 2023,” the report reads.

“This led to an overcharge to the public amounting to Sh30,729,415 for collections made through the previous payment gateway and Sh319,029,250 for collections made through the unathorised new gateway.”

The digital platform was also found to have two Pesaflow payment gateways running parallel of each other without authorisation.

The auditor further reveals that the Government Digital Payment Unit did not provide an authorisation letter for four bank accounts that were configured in the e-Citizen platform.

The revelations paint a troubling picture of a digital platform that, while celebrated for convenience, may have been turned into a conduit for grand-scale corruption.

Lawmakers have since summoned principal secretaries Kiptoo (Treasury) and John Tanui (ICT) for questioning.

“We have invited the PS for Treasury to come on Thursday to react to this report. We also invited PS for ICT,” PAC chairman Mwale said. “We are going to subsequently invite the companies involved.”

MPs Otiende Amolo (Rarieda), Nabii Nabwera (Lugari), Lesuuda Naisula (Samburu West), Marianne Kitany (Aldai) and Joseph Namuar (Turkana Central) termed the e-Citizen a digital crime scene.

“This e-Citizen is a scam; there is clear lack of revenue traceability and accountability,” Namuar said.

“The whole thing is a crime scene. How did Equity Bank come in? I expected all these monies to be collected in a CBK account, which is the National Treasury account,” Kitany said.

Rarieda MP Amolo demanded that the committee invites even the PS in charge of eCitizen to shed light on the revelations. “We are staring at a monumental scandal,” he stated.

The audit report also found the platform lacks a governance structure, legal framework as well as standard operating structures.

The platform also had no service level agreements with financial service providers engaged in collection, with auditors raising fears the providers may be utilising the funds at the expense of service delivery by MDAs.

As at June 30, 2024 a total of Sh7 billion was held in the collection and settlements accounts.

On the ownership of eCitizen, Gathungu’s team queried how the platform was handed over two times to the government, in 2017 and 2023.

According to the findings, the government took possession and ownership of the platform in August 2017 and six years later it was again handed over to the government by the vendors.

“It was not explained how the ownership and control of the eCitizen platform end up back in the hands of the vendor after being handed over to the National Treasury by IFC in 2017,” the report points out.

“Noting that the majority of government services are provided through the platform, the control of the system by the vendor creates a single point of failure and a strategic risk in the delivery of public services to the Kenyan citizens.”

INSTANT ANALYSIS

The revelations throw into question the government’s push for a cashless, tech-driven public service model, even as it continues to onboard more agencies to the platform. As pressure mounts for a forensic audit, Kenyans are left wondering: who exactly is profiting from the shadows of the digital revolution?