How taxpayers lost Sh16 billion in govt's edible oils programme - Auditor General

An audit report tabled in Parliament on August 6, 2024, has revealed that Kenyans could have lost up to Sh16 billion due to a failed government initiative aimed at reducing the cost of edible oils.

The report, conducted by Auditor General Nancy Gathungu, outlines significant financial mismanagement and irregularities in the program administered by the Kenya National Trading Corporation (KNTC).

According to the audit, Sh9.3 billion was paid to firms contracted by KNTC to help lower the price of cooking oil. These firms were supposed to deliver 2.8 million jerrycans of 20 litres each, but only 2.5 million were delivered.

The audit also uncovered that some unscrupulous dealers may have smuggled additional consignments into the programme to benefit from tax exemptions.

“It is therefore possible that Sh306 million may have been exempted for cooking oil which was not part of the programme,” Gathungu notes in her report.

The audit also reveals that KNTC has no records of the container numbers or quantities of jerrycans delivered by a mysterious supplier. Additionally, the Kenya Revenue Authority records also lack information about this supplier, only listing clearing agents for 147,620 jerrycans.

In the report, Gathungu criticised the deal, saying the products arrived late and did not make the much-needed impact on prices.

She notes that cooking oil prices only saw a minor reduction, from Sh344 per litre in November 2022 to Sh319 per litre in May 2023, and KNTC later sold the oil at a loss.

Of the delivered quantities, KNTC sold 653,174 jerry cans (of 20 litres) of edible oil for Sh2.4 billion by the time of the audit.

The report tabled in Parliament on August 6 shows the oil is being sold at a loss of Sh1,611 for every 20-litre jerry can.

“There is the possibility of the loss being higher,” Gathungu adds.

A file image of packaged edible oils. (Photo: Handout)

The audit also reveals a lack of documentation proving the execution or cancellation of agreements and the non-delivery of 25,000 metric tonnes of oil.

The report also criticises the irregular payments of Sh15.7 billion spent on the programme, including unsupported payments and irregular costs.

“There are irregular payments totalling Sh11 billion to suppliers and other questionable expenditures,” Gathungu notes.

Further, the audit scrutinises foreign exchange losses amounting to Sh2 billion, as contracts were signed in dollars, and questions the legitimacy of firms like Multi Commerce, which was incorporated in Kenya only months after the deal.

“Audit teams couldn’t ascertain if the oil delivered met the specifications and if payments were made through agreed bank accounts,” Gathungu notes.

The report reveals that some suppliers failed to deliver the full quantity of jerrycans, and others are still pending customs clearance. Additionally, the audit found that KNTC paid $30 per 20-litre jerrycan instead of the agreed-upon $23, leading to irregular payments totalling Sh1.8 billion.

“This resulted in an irregular payment to suppliers of $11,471,866 (Sh1.8 billion),” Gathungu said.

Other issues include Sh448 million spent on avoidable demurrage costs and Sh90 million withdrawn from KNTC's operations budget. KNTC's procurement process was also found to be irregular, with discrepancies in tender recommendations and approvals.

Former KNTC boss Pamela Mutua has denied charges stemming from the controversial purchases.

She recently denied the charges in front of Milimani anti-corruption chief magistrate Thomas Nzioki.

Mutua is accused of failing to report to the procurement regulator the tender award to Purma Holdings, Multi Commerce FZC, Standard Petroleum LLC, and Makram Imports and Exports.

The audit recommends that KNTC discontinue pending agreements with the firms and that investigative agencies expedite their work to prosecute those responsible for the mismanagement of public funds.