Audit report blames council officials for loss of millions
City Hall, Nairobi. An audit report has accused unnamed officials of favouring some suppliers, leading to loss of millions of shillings. Photo/FILE
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The auditors said that the officials, who were the contact persons for the audit, showed preferences for some creditors to be verified for approval of payment ahead of others.
The audit conducted between February and April this year shows that the council owed Sh2.4 billion, out of which Sh1.3 billion had been paid.
The report also reveals that a number of claims by law firms were not genuine as there was no evidence that the advocates had handled any brief for the council.
External auditors have accused top City Hall officials of interfering with a forensic audit of City Council of Nairobi (CCN) debts, leading to payments of unverified claims.
“A lot of interest was shown by some City Hall officials and councillors in what the consultants were doing, which interfered with our work,” says a report by Wachira Irungu and Associates.
The auditors said that the officials, who were the contact persons for the audit, showed preferences for some creditors to be verified for approval of payment ahead of others.
The report containing the allegations was handed to Parliament’s Local Authorities and Funds Account Committee by Town Clerk Tom Odongo two weeks ago. The committee chaired by Wundanyi MP Thomas Mwadegu.
Mwadegu investigated the controversial Sh5 billion Equity Bank loan the council took to offset its statutory debts as well as other debtors and is due to table its findings for adoption by the House before going on recess next week.
The audit conducted between February and April this year shows that the council owed Sh2.4 billion, out of which Sh1.3 billion had been paid.
The report also reveals that a number of claims by law firms were not genuine as there was no evidence that the advocates had handled any brief for the council.
In particular, the auditors singled out the disappearance of vouchers and subsequent payment of Sh4.9 million to Cami Contractors before the firm was cleared by auditors.
“We noted some instances where tender prices were significantly higher than the market price to justify the award of the tender. Despite this discrepancy, the tenders were approved as the lowest,” the audit report says.
Cami Contractors had been contracted by the council to supply seven tanks to various rehabilitation centres at a price of Sh700,000 per tank yet the average market price was Sh65,000.
The auditors found that the tanks supplied were of 8,000 litres instead of 10,000 litres ordered, resulting in over-pricing by Sh4.4 million.
Site verification proved that the prices Cami had quoted were almost ten times the market price. However, the vouchers for payment were approved outside the council’s laid down creditors’ verification and payment system.
They were then sneaked into the Electronic Funds Transfer forms and paid despite the auditors’ efforts to stop the irregular transaction.
The auditors approved payments to 1,463 creditors ranging from law firms, media houses and construction companies among others.
At the time of the audit, suppliers of essential goods and services had stopped rendering services like garbage collection and parking tickets.
“Suppliers of these vital services were verified as priority and the services resumed within the first week of the audit,” the report says.
The consultants also found instances where the services or goods for which claims were being made had not been delivered.
An example was the Mugo Muhuri Road which had not been repaired yet Cosniprof Investment, the contractor, had raised Sh1.3 million invoices and certificates.
The team rejected a Sh3.2 billion compensation claim raised by Kyavee Holdings for loss of the Mariakani Primary School playground, L.R/No 209/8254, which the company claimed to have been allotted by CCN.
The council’s lawyer, M/s Wachira Mburu Mwangi Company Advocates, is still claiming payment of Sh69 million as legal fees over the case.
“Our recommendation is that this amount is not payable, and the law firm should refund the Sh10 million that has already been paid on account of this case,” adds the report.
The auditors also deemed cheques payable to Akide & Company Advocates amounting to Sh19 million as ineligible for payments because negotiations between CCN, Akide and Company Advocates, the Ministry of Local Government, Laptrust management and their lawyers were not tabled in the Finance Committee of the council and adopted by Full Council.
