KMA boss Martin Munga questioned as MPs probe suspected fraud

The Kenya Maritime Authority (KMA) is facing scrutiny over the disappearance of monies allocated to the construction of its headquarters in Mombasa County.

Lawmakers in the National Assembly's Public Investments Committee on Commercial Affairs and Energy on Tuesday visited the headquarters on an inspection tour, as part of their probe into audit queries from financial years 2018/2019 to 2020/2021.

The MPs, however, postponed their meeting with KMA Managing Director Martin Munga to Wednesday after deciding that they needed to conduct a site visit. They also asked Munga and other KMA staff to take an oath ahead of the questioning as they were doubtful about the figures and explanations given so far.

The committee sought to establish whether Munga was competent as he failed to answer the initial questions. The parliamentarians wanted to know when he received the letter informing KMA of the committee's visit, who the project contractors and subcontractors were, and why some Sh500 million could not be accounted for.

Munga said he received the notification letter two days ago when he returned from Nairobi. He also noted that he needed to prepare himself for the visit as he was new to the office, having served just six weeks so far.

Eldas MP Adan Keynan said the MD must provide a stamped letter indicating when he received the letter, and that he must be questioned on matters arising from the audit.

Kenya Maritime Authority (KMA) Managing Director Martin Munga takes an oath at the company's premises on February 6, 2024, ahead of questioning by MPs on audit queries for financial years 2018/2019 to 2020/2021. (Photo: Farhiya Hussein)

Missing monies

Questions surrounding the mismanagement of funds at the KMA have raised concerns, prompting MPs to insist on thorough explanations from the MD and other staff.

The auditor-general's report for FY 2018/2019 to 2020/2021 shows that Sh40 million was given for an advance payment to a contractor for construction of the authority’s headquarters. However, the committee noted, the validity of the advance payment security lapsed on January 31, 2018 and had not been renewed as at June 30, 2019.

“The balance of Sh29,316,281 or 72 per cent of the advance payment was therefore not secured,” noted the report.

Some Sh36,157,869 was advanced in FY 2019/2020 for the same purpose but the validity of the advance payment security lapsed on January 31, 2018 and had not been renewed as at June 30, 2020.

The AG and the committee noted that a balance of Sh24,588,235 or 68 per cent of the advance payment was therefore not secured. The KMA management, however, did provide a partial advance security of Sh11,569,634 issued by a bank on November 5, 2019, which was valid until February 2, 2020.

The AG and the MPs said the payments were therefore contrary to Section 147(1) of the Public Procurement and Asset Disposal Act, 2015, which provides that under exceptional circumstances, advance payments may be granted and shall not exceed 20 per cent of the price of the tender.

Additionally, these payments shall be paid upon submission of an advance payment security, equivalent to the advance itself, by the successful tenderer to the procuring entity. That security shall be given by a reputable bank or any authorised financial institution recognised by the Central Bank of Kenya, in case the successful tenderer is a foreigner.

The KMA is also expected to explain an expenditure of Sh3 million for the procurement of cars and boat insurance. The management was found in breach of the law after the audit of the quotations revealed that only two out of the six bidders invited responded.

“However, the quotations were evaluated, contrary to Section 106 (2)(d) of the Public Procurement and Asset Disposal Act, 2015, which requires the accounting officer to ensure that at least three  persons shall submit their quotations prior to evaluation,” the audit report says.

It was also revealed that KMA used requests for quotations and that a list of the insurance providers and details on how the bidders were identified wase not provided for audit verification.

A Kenya Maritime Authority (KMA) staff member takes an oath at the company's premises on February 6, 2024, ahead of questioning by MPs on audit queries for financial years 2018/2019 to 2020/2021. (Photo: Farhiya Hussein)

Tenants' resettlement

The KMA must also answer questions on Sh2 million in costs incurred to temporarily resettle tenants of Reef Apartment Building, whose stability was compromised at the start of the construction of the headquarters.

The AG and committee said the capitalisation of the rent expense is contrary to Paragraph 30 (b) of International Public Sector Accounting Standard No. 17 Property, Plant and Equipment. It  provides that the cost of an item of property, plant, and equipment comprises any costs directly attributable to bringing the asset to the location and the condition necessary for it to operate as intended by management.

Further, Paragraph 30.3 of the conditions of contract under liability and insurance provides that, "The contractor shall provide, in joint names, an insurance cover that should have covered loss or damage to property in connection with the contract."

“Therefore, the cost of rent should have been catered for by the cover. Also, the appendix to the conditions of contract clearly provided Sh5,000,000 as the minimum for insurance of other property. Consequently, the validity of Sh2,070,000 in respect of work in progress could not be confirmed,” the report stated.

Further, the audit of the payroll for the year ended June 30, 2019 indicated that the authority engaged two employees on January, 3, 2019 and on March 28, 2019, on three-year contracts, but they were older than the mandatory retirement age of 60.

“This is contrary to Paragraph D.21 of the Human Resource Policies and Procedures Manual for the Public Service, 2016 which provides that all officers shall retire from the service on attaining the mandatory retirement age of 60 years, 65 years for persons with disabilities, or as may be prescribed by the government from time to time. Consequently, the management was in breach of the law,” the report said.

A Kenya Maritime Authority (KMA) staff member takes an oath at the company's premises on February 6, 2024, ahead of questioning by MPs on audit queries for financial years 2018/2019 to 2020/2021. (Photo: Farhiya Hussein)

Other irregular payments

According to the report, the KMA also spent Sh47 million on duty allowances, both domestic and foreign.

However, some Sh6 million for boarding passes, air and bus tickets and approved annual activity plans could not be accounted for as the expense was not submitted for audit verification.

The management was also found to be irregular paying sitting allowances to non-board members, to the tune of of Sh760,000.

The amount paid to the parent ministry’s staff, who were not gazetted board members, as sitting allowances during a recruitment exercise was established to be contrary to the State Corporations Advisory Committee Circula,  Ref No. OP/SCAC.9/1/5/2(3).

This regulation requires persons or officers nominated to represent other substantive members or directors to only attend board or committee meetings after being gazetted by name and issued with appointment letters by the appointing authority.

In the circumstances, the management was in breach of the Mwongozo – Code of Governance for State Corporations.