Home / Kenya News / Audit reveals massive irregularities at Kenya Power as MD vows action

Audit reveals massive irregularities at Kenya Power as MD vows action

An internal audit at the Kenya Power and Lighting Company has revealed massive irregularities in its procurement department, even as the company battles to clean up its image amid public outrage over its services.

Management is preparing to kick out a number of employees who colluded with firms to pre-qualify them.

The audit initiated by the management reveals how staff collude with unregistered companies, or front proxies, to win tenders at Kenya’s main electricity supplier.

The report on a tender for the supply of Labour and Transport for the 2016-17 financial year exposes an intricate web of collusion between employees and supplier companies — some of which are owned or associated with the staff — in dizzying malfeasance.

Hundreds of companies were pre-qualified despite having no record of legal status, were registered after the pre-qualification or presented fake documentation. 

Kenya Power Managing Director Ken Tarus told the Star that the audit was part of a ‘clean-up exercise’ at the company to get rid of firms that did not meet its standards.

“We are cleaning up to see whether all of them meet our requirements. We instituted an internal audit and the findings are what you have seen. We are taking action,” Tarus said.

He added, “The contractors will be blacklisted. Any staff who was involved will be taken through the disciplinary process of the company because we want to align and clean the institution.”

The MD also said that they were looking at cleaning up the image of the institution as well as ensuring better service delivery.

The report shows that the process was flawed from the beginning as only two members of the tender opening committee were present at the opening of the bids.

This is contrary to Section 78(1) (a) of the Public Procurement and Disposal Act, which states that the tender opening committee shall have at least three members.

In April last year, the company invited bids from eligible contractors for the provision of Labour and Transport Services, attracting 1,354 bidders for the two-year contract.

“729 firms were not responsive both at preliminary and technical evaluation stages. A total of 525 firms were pre-qualified to offer L&T services on a two-year contract beginning 01.10.2017 and ending on 31.09.2019,” the report says.

It adds that out of the 525 pre-qualified contractors, 206 firms had offered L&T services in the previous tender, whereas 319 firms were new entrants in the 2017-2019 L&T contract.

The company outsourced line construction and other related services such as emergency jobs, change of rotten poles, underground cabling and reinforcement schemes, among others.

CONTRACTORS

Although contractors are supposed to be registered companies with relevant certification, the audit revealed massive irregularities.

“A search at the Registrar of Companies Offices revealed that 137 firms out of 525 pre-qualified firms submitted CR12 certificates which were different from what is held by the Registrar of Companies,” the report states.

CR12 forms are issued by the Registrar of Companies and confirm incorporation certificate numbers, incorporation dates and current directorship in a company.

The report also shows that 39 of the firms that were pre-qualified for the tender were incorporated after the bid closure, which is contrary to the law.

Apart from submission of CR12, the tender document required bidders to submit a valid certified copy of the registration certificate issued by the National Construction Authority (NCA) for the category relevant to power line construction work.

“A review of the NCA certificates submitted by the bidders revealed that 262 pre-qualified firms did not comply, with 244 having not been registered but submitted fake certificates,” the report says.

All the 525 pre-qualified firms signed declaration forms to guarantee that they are not associated with any other participating tenderer.

“However, despite having signed the declaration forms, we detected 67 related firms as they were owned by the same directors. Some of the directors were noted to own up to nine firms that had been pre-qualified,” the report says.

The report lists at least 15 Kenya Power employees who are linked to some of the companies that were pre-qualified for the tender.

It contains statements from some of the employees who give various reasons, such as they had already left the companies that they are linked to.

But the auditors noted that some of those employees were still appearing on the companies’ registry as directors despite their denials, exposing their complicity in the crooked schemes.

“The Kenya Power employees, on being questioned, denied any knowledge or relations with the said L&T firms alleging that their documents might have been obtained illegally/irregularly without their knowledge,” the report says.

PROXIES

The report also says that Kenya Power employees continue to use proxy directors to apply for tenders but are the signatories to the bank accounts of those companies.

A previous audit had recommended that directors be required to submit their bank account signatories, which had not been effected.

The report exposes money transfers between directors of the pre-qualified firms and KPLC staff, with some employees taking money from contractors and sharing with others who could influence the tender process.

One such employee in Kiambu received a total of Sh729,800 from directors of four different pre-qualified firms.

Another employee in Nakuru received Sh221,800 from a director in one of the firms and Sh645,350 from a colleague.

Another one working in Nairobi paid Sh100,000 to a director of one of the companies and received Sh10,000 from the same director in January 2018.

A KPLC employee in Nairobi is said to have paid/transferred Sh373,530 to fellow staff believed to have come from a company that is owned by the sister.

Another employee in Eldama Ravine is noted to have received Sh735,000 from a director of one company and Sh790,000 from another, and sent some to one of his colleagues.

“The KPLC employees were found to be working in strategic positions in regard to jobs execution, hence, direct conflict of interest,” the report says.

“We observed that some directors of L&T contracted firms, when requested by Projects Department to come to internal audit division to clarify anomalies relating to their firms, sent brokers in an effort to attempt to induce the Auditors to disregard the anomalies,” the report states.

The report recommends that the contract signing of the jobs should be suspended and legal action commenced against the directors of the companies that submitted fake documents for pre-qualification.

“Ag. General Manager, Infrastructure Development in liaison with General Manager HR and Admin and the respective Regional Manager should take disciplinary action against the members of staff,” the report says.

It says that four of the staff should be disciplined for owning and/or having a direct association with contractors, contrary to the company code of conduct and ethics.

According to the report, seven employees are to face disciplinary action for receiving cash from directors of the pre-qualified firms.

Seven others are to face disciplinary action for being key employees of pre-qualified firms while still employees of Kenya Power.

All News | The Star, Kenya

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