The East African Portland Cement Company (EAPCC) is set to hire a consultant to carry out a forensic audit of its books on claims of improper accounting at the firm that saw shareholders go without dividend payment in the year to June 2013.
The Nairobi bourse listed cement maker which is majority State-owned is considering engaging Deloitte & Touché —the new auditors of the company for the year to June 2014— to examine EAPCC’s previous financial records for any malpractices.
Ernst & Young were Portland Cement’s external auditors in the period to June last year.
The Treasury and the National Social Security Fund (NSSF) — who jointly own 52 per cent of Portland Cement—raised the audit queries at a stormy shareholders’ meeting held in December last year.
“The board is considering a number of issues. Deloitte are the current auditors, but it is not determined yet who will carry out the forensic audit,” said chairman of EAPCC Bill Lay in an interview.
The allegations of accounting fraud at EAPCC turned the spotlight on the National Audit Office and its appointed agent Ernst & Young who reviewed the cement maker’s books.
The Auditor-General is responsible for the statutory audit of parastatals’ books of account and has powers to nominate private auditing firms to carry out the review on his behalf.
The protracted boardroom tussle at EAPCC has seen shareholders miss out on a Sh0.75 dividend per share passed at last year’s annual general meeting (AGM), after the Capital Markets Authority (CMA) suspended the payout.
The capital markets regulator suspended all of Portland’s AGM decisions including endorsing the company’s accounts, dividends and election of directors.
This resulted in a standoff between the State and French conglomerate Lafarge—which has 41.7 per cent stake at EAPCC — and eventually spilled to the courts. The case is yet to be determined.
The State and NSSF alleged that EAPCC is ‘in the red’ and that the company’s management had cooked the statement of accounts.
The cement maker posted a net profit of Sh1.77 billion for the year to June 2013 compared to a loss of Sh972 million in the same period a year earlier.
NSSF, which owns 27 per cent of Portland Cement; Wednesday maintained that it was rooting for a forensic review of the company’s books of account.
“We are pushing to have a forensic audit of EAPCC’s accounts,” said Mr Richard Langat, the managing trustee of NSSF. “The mandate of Deloitte should be expanded to include a forensic audit to uncover the scam,” said Mr Langat who is also a director of the company.
The boardroom undercurrents at Portland burst to the public domain in December last year when Industrialisation PS Wilson Songa and NSSF executive Gideon Kyengo stormed out of the AGM and fired a letter to the CMA highlighting alleged multiple improprieties at the cement firm.
President Uhuru Kenyatta waded into the Portland saga in January when he sacked chairman Mark Ole Karbolo and replaced him with former CMC chief executive Mr Lay.
Dr Songa has also written to the Competition Authority of Kenya, asking it to investigate Lafarge for abusing its dominant position and ‘unwarranted concentration of economic power.’