The Auditor General has raised questions about expenses by the board of the Kenya Ports Authority (KPA) for the year ended June 2024, where the accuracy and validity of Sh109.5 million directors’ allowances could not be confirmed.

In her report for the year ended June 30, 2024, Auditor General, Nancy Gathungu said the statement of profit or loss and other comprehensive income reflects administrative expenses of Sh5.8 billion, which include directors’ allowances of Sh109.5 million as per the financial statements.

Gathungu said that this expenditure exceeded the Sh30 million maximum amount set by  Circular No OP/CAB.9/1A dated March 11, 2020 on management of state corporations. The circular requires Board expenses for a financial year to be capped at Sh30 million or 5 per cent of the operations and maintenance budget and there were no approvals from the Cabinet Secretary for the extra expenditure.

“Further, amounts totaling Sh45.4 million lacked supporting documents such as receipts, schedules and copies of travel documents, details of activities undertaken among others. A schedule indicating payments made to each director for various activities and attendance to the meetings was also not provided. Under  the circumstances, the accuracy and validity of Sh109.5 million directors’ allowances could not be confirmed,” Gathungu said in her report.

Similarly, Gathungu said the statement of financial position for the year ended June, 30 reflects bank and cash balance of Sh1.2 billion but an account in commercial bank with a balance of USD3,105 was not included in the financial statements.

She said that an analysis of bank reconciliations revealed long-uncredited receipts in three bank accounts of USD 44,299 and Sh604,992 from various uncredited income entries dating back to August 2017.

To this end, she said the accuracy and completeness of the reported bank and cash balances of Sh1.2 billion could not be confirmed.

Other issues the auditor cited included lack of valuation and uncertainties of land leased out.

According to the Auditor General, the property, plant and equipment balance of Sh318.8 billion includes an amount of Sh60 billion in respect of land leased out.

“As previously reported, review of documents provided for audit indicates uncertainties in regards to the ownership and flow of benefits to the Authority. Some 29 parcels of land are in the hands of private developers and have court cases which are at various levels of legal determination. Further, three out of the 29 parcels of land have not been revalued. Under  the circumstance the ownership of land of Sh60 billion could not be confirmed,” Gathungu said.

There were also queries of unsupported sports expenditure within the reporting period.

The report states that statement of profit or loss and other comprehensive income reflects administrative expenses of Sh5.8 billion to the financial statement.

Included in the amount is Sh199.2 million expenditures on sports out of which Sh135 million related to Bandari Football Club.

To this end, she said the expenditure exceeded the Sh125 million budget for the activity and there was no approval for the increase provided for audit.

Similarly, the expenditure was not supported with schedules, invoices, receipts, travel documents amongst others and in the circumstances, the accuracy and completeness of the Sh199.2 million sports expenditures could not be confirmed.

The statement of profit and loss and other comprehensive income also reflected Sh20.2 billion in relation to establishment expenses and included in this amount is Sh1.43 billion as payment for overtime.

“The recomputed overtime expenditure based on data provided for rates and hours indicated Sh1.45 billion and which differs with the reported figure by Sh14.2 million. Under the circumstances, the accuracy and completeness of the Sh1.43 billion payments for overtime could not be confirmed,” the auditor explained.

On non-compliance with the law on Public Finance Management, the report shows that the statement of financial position reflects receivables and prepayments of Sh15.9 million as disclosed to the financial statements.

The balance includes staff receivables balance of Sh95.95 million, which further includes unsurrendered daily subsistence allowance of Sh52.1 million with an amount of Sh2.08 million remaining outstanding for a period of over one year of Sh2.08 million and no explanation was given as to why the subsistence allowance had not been recovered in full from the holders as at the end of the financial year 2023/24.

“This was contrary to Section 93(3) and 93(8) of the Public Finance Management Regulations 2015. ln the circumstances, the management was in breach of the law,” she said.

On design, supply, integration and implementation of an Operations Control Center (OCC), the report shows that the statement of profit or loss and other comprehensive income reflects operating expenses of Sh9.7 billion as disclosed in the financial statements.

The amount includes Sh1.3 billion for operational supplies which further include expenditure of Sh856.5 million to a supplier.

According to the auditor, review of documents revealed that management entered into a contract for design, supply, integration, and implementation of an OCC at a contract sum of Sh2.1 billion.

She cited some of the anomalies identified including that the management did not provide a project concept note detailing the deliverable and benefits of the investment to the Authority and there were also no detailed specifications for furniture and monitors that were to be procured through the project.

She also said the Authority did not provide evidence of regulatory requirements, including necessary approvals and submissions to the National Treasury.

“Possible material risks and potential financial losses were noted due to delays in negotiations for installing cameras, which could incur extra costs of Sh1.79 billion as per request by the contractor. The management did not provide details why various solutions which were available at the port were being procured including provision of additional cameras, fibre cable and multiple display units. ln the circumstances, value for money of Sh856.5 million could not be confirmed,” Gathungu stated.

Similarly, the statement of profit or loss for the year ending June 30, 2024, indicates operating expenses of Sh9.78 billion, which includes Sh1.3 billion for operational supplies. This amount includes Sh13.19 million for the procurement of 150 handheld VHF radios.

However, the audit review revealed several anomalies, including expired performance security, unverified advance payments, failure to withhold contractual retention monies, and non-provision of warranty, thus value for money on the expenditure of Sh13.19 million could not be confirmed.

The audit report also could not confirm value for money on purchase of ferry site management equipment of Sh19.4 million.

Some of the anomalies revealed here included the expiration of the performance guarantee prior to delivery, which left the advance payment of Sh3.3 million unprotected.

Similarly, the report shows that the authority did not retain the required 5 per cent of the contract price, amounting to Sh974,400, intended for release post-warranty period.

“The authority failed to impose liquidated damages on the vendor for delays in delivery, despite the contract stipulating a completion date of November 28, 2023. The vendor’s request for a purchase order extension made after this date, violated contractual terms,” says the report.

She also said a valid performance bond was lacking for a critical period from December 22, 2023, until the goods were eventually delivered on March 14, 2024 and the required evidence and documentation for a 12-month warranty was not available for audit review.

The findings indicated a need for improved procurement oversight and adherence to contractual obligations.