Economy

Property developers owe NCA Sh1.6bn after levies scrapped

dan

National Construction Authority chief Daniel Manduku. FILE PHOTO | NMG

edwinmutai_img

Summary

  • The NCA is owed Sh1,644,891,596 as at June 2016.
  • The NCA has not provided a plan for audit review on how it intends to recover the money.

Real estate developers owed National Construction Authority (NCA) Sh1.6 billion in fees that are unlikely to be recovered after they were scrapped last year.

Auditor-General Edward Ouko says the NCA is owed Sh1,644,891,596 as at June 2016. 

This came after a Cabinet memo of November 2016 scrapped all construction levies charged by State agencies and counties in a bid to lower project costs.

“The balance increased by more than 300 per cent during the year from Sh404,902,060 in 2014/15 to Sh1,644,891,596 as at June 30, 2016 with government institutions owing the largest portion,” Mr Ouko said.

He said the NCA did not provide a plan for audit review on how it intends to recover the money.

“In the circumstances, the recoverability of these receivables totaling Sh1,644,891,596 reflected in the statement of financial position as at June 30, 2016, remains doubtful,” Mr Ouko said in the latest audit report on the NCA books of accounts tabled in Parliament before the House went on an indefinite end-of-term recess.

The government removed fees imposed by the NCA and other agencies such as the National Environment Management Authority, arguing that they have been a barrier to investments.

READ: Nema levies waiver to slash building costs

Contractors pay environmental audit fees of between Sh10,000 and Sh40 million, depending on the risk levels of their projects.

Developers, whose projects exceed Sh5 million, also pay a levy of 0.5 per cent of the value of the contract to the NCA before they can start work.

“The Cabinet secretary for National Treasury in the budget policy statement for the year 2016/17 made a proposal for removal of the construction levy. The levy accounts for over 70 per cent of the authority’s revenue hence its removal will greatly affect its operations,” said Daniel Manduku, NCA executive director, in the brief on the books of accounts for the audit.