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Companies

Audit finds Sh347m hole in State-owned tourist hotel

Auditor-General Edward Ouko. FILE PHOTO | NMG
Auditor-General Edward Ouko. FILE PHOTO | NMG 

The Kenya Safari Lodges and Hotels is insolvent to the tune of Sh347.3 million, a new audit report shows.

Auditor-General Edward Ouko says the statement of financial position of the hotels as at June 2016 reflects current liabilities balance of Sh494 million, which exceeded current assets balance of Sh147 million by Sh347.3 million.

“Consequently, the company may not be in a position to meet its financial obligations as and when they may fall due and its continued existence as a going concern depends on continued support from the government, bankers and creditors,” Mr Ouko says in a qualified audit opinion tabled in Parliament last week.

The statement of profit and loss and other comprehensive income for the year under review shows total income of Sh189 million against a budget of Sh438 million, representing 43.2 per cent performance level. “Further, the company realised a loss of Sh87,097,000 (2014/15-loss of Sh137,243,000) resulting in accumulated losses of Sh344,284 as at June 30, 2016,” says the auditor general.

“The management has not provided satisfactory explanation as to why the revenue targets could not be achieved.”

The company converted the Tourism Finance Corporation, formerly the Kenya Tourist Development Corporation, loan of Sh75.5 million into equity in the year 2013/14 and waived the interest accrued thereon.

However, despite the conversion of the debt to equity, the working capital position and financial performance has not improved, says Mr Ouko.

The auditor-general also questions the human resource records of the company that revealed irregularities in the hiring of staff.

Mr Ouko said Sh23,400 was paid as acting allowance to an officer appointed as acting procurement officer on April 5, 2016.

He said records made available for audit review indicated that the officer has a diploma in procurement, which is contrary to section 3.5.2 (iv) of the company’s terms and conditions of service which requires one to possess a degree is  in business studies or related field from a recognised university to be appointed to that position.
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