IEBC in cash crunch as supplier debts hit Sh2.8b

The Independent Electoral and Boundaries Commission (IEBC) is facing a serious cash crunch that has left in its wake scores of unhappy suppliers and a Sh2.8 billion debt that is unlikely to be paid this year.

People familiar with the ongoings at the IEBC said the cash crunch has deepened in recent months with legal suits filed by some of the suppliers affecting the agency’s operations.

Issack Hassan, who chairs the commission, said the agency had been left in a difficult financial position, having been allocated only Sh1.1 billion or less than half of the Sh2.8 billion it needs to settle its debts  

The IEBC’s position has been made more difficult by the fact that the Treasury is yet to release the Sh1.1 billion that Parliament set aside for settlement of the agency’s debts, causing some impatient suppliers to sue.

Mr Hassan said the commission has a Tuesday date with Treasury secretary Henry Rotich to find a way out of the debt crisis.

“The amount [Sh1.1 billion] is not enough and we will be asking the Treasury for more money to pay our suppliers,” he said.

The IEBC boss did not indicate when the suppliers will be paid, insisting that he could not predict when the Treasury would disburse the money.

“We will use any money released to us to pay urgent bills as we negotiate for more to settle the rest,” said Mr Hassan.

Private sector operators said the IEBC’s failure to settle its debts had hit some companies hard, forcing them to seek redress in court.

Office Technologies, which is claiming Sh220 million from the IEBC, tops the list of big suppliers who say they are hurting from the chaotic end to last year’s General Election.

The company says in court documents that it had borrowed money from a bank to render services to the IEBC and that the debt is now accruing interest at an annual rate of 21.5 per cent.

Mr Hassan, however, said that the exact amount of money that the electoral agency owes suppliers remains unknown because some of the claims are not supported by valid documents.

READ: IEBC taken to court for Sh220m debt over polls printers

The IEBC says most of the claimants are suppliers who commission officials called in to offer services in the heat of the elections, especially where emergencies arose with no time to follow procurement procedures.

“We have to verify such claims and explain to the Auditor-General how we incurred such debts,” said Mr Hassan.

The Auditor-General Edward Ouko has taken issue with the IEBC’s spending of billions of shillings without supporting documents.

Mr Ouko has reported that the electoral agency spent Sh4.69 billion in the 2012/2013 financial year without supporting documents. That is the period within which the March 2013 elections were held.

The 2012/13 Auditor-General’s report indicates that the IEBC spent a total of Sh13.63 billion charged under 11 items whose accuracy could not be ascertained as at June 30, 2013. Mr Ouko said the expenditure was not supported by documentary evidence and that no expenditure returns were made available.

Mr Hassan has since defended the suspect expenditure saying that “going to election of the 2013 magnitude was like going to war” and that in some cases the officials were forced to procure some services or goods urgently.

The Sh30 billion 2013 election was the first under Kenya’s 2010 Constitution that widened the IEBC’s mandate with the creation of new electoral offices such as those of governors and senators.

The agency managed six elections on March 4, including the highly competitive presidential poll.

The IEBC’s indebtedness is further complicated by the fact that some of the suppliers have obtained court orders requiring full payment of their debts with accrued interest — meaning any further delay increases the amount it will finally fork out.

Office Technologies, for instance, got a court order in July directing the IEBC to pay it Sh220 million plus interest backdated to March 2013 until the debt is settled.

Justice Eric Ogola ruled that the firm having won the tender and delivered 290 printers on February 14, 2013 that were used in the general election should be paid its money.

Office Technologies told the court that the IEBC had failed to pay for the printers despite numerous demands. The firm says the commission had failed to honour its promise to pay for the equipment within 30 days of delivery.

Office Technologies was awarded the contract on December 3, 2012 to supply the printers for use in the tallying of votes during the March 4 election at a price of Sh760,000 per printer.

But the electoral agency, while admitting that it received and used the printers, argued that the firm failed to adhere to the specification it had asked for.

The commission reckoned that the supplier having failed to adhere to the tender specification could not purport to rely on the same document to enforce payment.

The IEBC further argued Office Technologies were to retain the 290 printers until full payment and said it is at liberty to collect and retain pending payment.

It also maintains that, the court order notwithstanding, any payment is subject to availability of funds from the Treasury and subject to budgetary process, noting that it cannot pay for goods at will.

Justice Ogolla, however, noted in his ruling that the IEBC never raised the issue of specification of the printers in its correspondence on the payment but had merely sought for more time.

“I hereby enter judgment for the plaintiff against the defendant on the admitted sum of Sh220.4 million plus interest from March 14 2013 until payment in full,” ruled the judge.

Office Technologies on August 11 wrote to the IEBC chairman asking the commission to settle the award within seven days.

Mr Hassan Wednesday said the payment to Office Technologies has been factored in the Sh1.1 billion, and will be made once the Treasury releases the money.

Transcend Media Group Limited is also in court seeking Sh200 million from the IEBC arising from publicity contracts signed for last year’s General Election.

READ: Transcend Media sues IEBC over poll debt

The firm says in a suit filed on June 18 that it booked print and electronic adverts on behalf of media companies, which are now threatening legal action to enforce payment nearly 18 months after conclusion of the March 2013 elections.

The petitioner says it published in the media lists of all polling stations at a cost Sh106.7 million, Sh23 million was spent on publishing of the presidential results while a further Sh69 million accrued from a “revised media plan”.