Kenya’s Treasury Is Perpetuating Fraud On Tax Payers. This Passat Replacement Scheme Is Uneconomical And Could Facilitate The Outright Theft Of Public Resources. Uhuru Kenyatta’s Legacy At Treasury Is One Of Sheer Incompetence.
Oct 31st, 2009 by Mars Group Kenya
Treasury is perpetuating fraud on tax payers. This Passat replacement scheme is uneconomical and could facilitate the outright theft of public resources. Uhuru Kenyatta’s legacy at Treasury is one of sheer incompetence.
Apart from the obvious blatant contempt for procurement procedures involving single sourcing by Government in its latest vehicle policy scheme, a little known Treasury press statement of December 2008 and missing information in the subsequent 2009 National Budget suggests Kenyan taxpayers should be very concerned.
THE 2008 VEHICLE SURRENDER PROGRAMME PRESS STATEMENT:
On December 14th 2008, the Daily Nation in a story entitled “ Public Vehicles on sale at throw away prices” reported that about 2,000 Government vehicles earmarked for sale under a reformed transport system were being sold off at incredibly low prices. The Nation revealed that the cars were said to have been sold for as little as Sh500. Most of the vehicles already sold were bought by well-connected individuals and companies through questionable deals. The cars were being auctioned in line with a transport policy announced by the then Finance minister Amos Kimunya during the 2006 Budget speech and that the sale was expected to save the Treasury about Sh1.3 billion per year in fuel and maintenance costs.
The Daily Nation story was met with an immediate response from the Treasury. In a press statement, the Financial Secretary “noted with concern an article carried on the front page of Daily Nation newspaper of Monday, 15th December 2008 headlined "Public Vehicles on Sale at Throw Away Prices", which alleged that the disposal of vehicles surrendered under the New Government Transport Policy had not been transparent. Nothing could be further from the truth” said the treasury statement.
The Financial Secretary stated that Treasury records indicated that by then only 488 vehicles had been sold through open tender rather than the 1,210 stated in the Daily Nation article. According to the Financial Secretary the sale had realized a total of Kshs.194,061,335 which had already been paid to the exchequer. The same official stated that another 811 vehicles were advertised for sale which had closed on 25th November 2008 and were awaiting tender awards. Finally, the official claimed that a further 789 vehicles were under the process of being sold and advertisements were due in early January 2009.
In total by December 2008, the Treasury had collected 2,088 vehicles from various Government Ministries and Departments. According to the Treasury, the process of surrender would continue until all 2,213 targeted vehicles were accounted for.
THE 2009 VEHICLE SURRENDER PROGRAMME:
The reason for the surrender of the vehicles in 2008 was the very same as that behind the 2009 surrender scheme. During the presentation of the 2008 Financial Year Budget Statement, the Minister for Finance announced the introduction of a new Transport Policy to address weaknesses observed in the existing transport policy, characterized by mismanagement, high maintenance cost and inefficiency, lack of parity in allocation of transport facilities, proliferation of vehicle models and idle capacity due to imbalance between the number of vehicles and drivers; lack of capacity to enforce regulations on the use of Government vehicles and escalating cost of providing Government transport which stood in excess of Kshs.4 billion per annum without corresponding improvement in service delivery. The 2009 Budget Speech repeated the same reasons.
The Budget estimates reflect the proposal to Parliament by the Government to spend and must show the expected revenues and debts the Government intends to service. It also provides the ACTUAL AMOUNT spent (Expenditure) and received (Appropriations in Aid) in the previous or preceding financial year. When he presented his budget for the financial year 2009/2010, the new Minister for Finance, Uhuru Kenyatta was required to state the revenue received from the sale of motor vehicles for the preceding financial year 2008/2009; and he did so. But is what he reported to Parliament the truth? Mr Kenyatta disclosed the following as monies received from sale of motor Vehicles for the year 2008/2009.
Receipts from the Sale of Vehicles and Transport Equipment
kshs 14,069,080
Receipts from the sale of Vehicles and Transport Equipment – Paid as Exchequer
kshs 756,000
What happened to all the money raised by the Treasury from its reported sale of 2,213 motor vehicles surrendered? What happened to the Kshs.194,061,335 that Treasury claimed to have already received for 488 cars? This money must be in someone’s pocket. What about the money from the sale of the other Cars?
Uhuru Kenyatta was also required to indicate in his estimates for the current financial year 2009/2010 the amount he would raise from the sale of unneeded or surrendered cars in Appropriation-in-Aid. Here is what he reported to Parliament as expected receipts from sale of motor vehicles during this financial year 2009/2010:
Receipts from the Sale of Vehicles and Transport Equipment
kshs 15,384,640
Receipts from the sale of Vehicles and Transport Equipment – Paid as
Exchequer
kshs 1,726,000
For avoidance of doubt, we go one step further and show you the Motor Vehicle expenditure budget for last year 2008/2009 and the current year 2009/2010. Where are the savings? Is this not yet another Government con?
|
GRAND COALITION GOVT. EXPENDITURE ON CARS |
2008/2009 |
2009/2010 |
TOTAL |
|
3,039,691,101.00 |
2,110,174,736.00 |
5,149,865,837.00 |
|
|
Routine Maintenance – Vehicles and Other Transport Equipment |
1,808,052,660.00 |
1,954,382,630.00 |
3,762,435,290.00 |
|
327,079,222.00 |
260,561,857.00 |
587,641,079.00 |
|
|
3,688,151,883.00 |
6,766,895,748.00 |
||
|
TOTAL SPENT ON CARS |
8,253,566,848.00 |
8,013,271,106.00 |
16,266,837,954.00 |
Source: Estimates of Recurrent Expenditure of the Government of Kenya (2009-10)
|
GRAND COALITION GOVT. INCOME FROM CARS |
2008/2009 |
2009/2010 |
TOTAL |
|
14,069,080.00 |
15,384,640.00 |
29,453,720.00 |
|
|
Receipts from the sale of Vehicles and Transport Equipment-exchequer |
756,000.00 |
1,726,000.00 |
2,482,000.00 |
|
TOTAL RECEIVED FROM SALE OF CARS |
14,825,080.00 |
17,110,640.00 |
29,453,720.00 |
Source: Estimates of Recurrent Expenditure of the Government of Kenya (2009-10)
Can the Kenyan tax payer expect anything from truthful from this Ministry? Recall, that we found substantial errors in both supplementary budgets presented this year in May for the FY 2008-9. Recall also that Parliament unanimously ordered an independent Forensic Audit into the National Budget going back three years. This Audit is yet to begin 6 months later. Kenyans be warned – this Minister of Finance has no competence to manage your money. We insist that the forensic audit ordered by Parliament commences immediately so that we know how much of our money has been stolen and by whom.
CMC HOLDINGS LIMITED AND EXTERNAL DEBT ISSUES:
The current Passat controversy revolves also around the Treasury’s unusual decision to procure without any competition 120 VW Passats from one motor dealer – CMC Holdings Limited. This company features in the external debt register as having lent the Government USD 24.2 million dollars for the purchase from it of 522 Land Rovers for the Office of the President in June 2003. Treasury issued irrevocable promissory notes in this transaction to CMC and later the debt was held and collected on by Standard Bank London UK. Below are extracts from the debt register where CMC is listed as a creditor to the Kenya Government. Repayments are indicated as having taken place as follows:
|
CMC LIMITED – SUPPLY OF 522 LAND ROVERS TO THE OFFICE OF THE PRESIDENT |
|||||
|
Loan US$ 24.2m – Status |
2002 |
2003 |
2004 |
2005 |
2006 |
|
OUTSTANDING |
887,838,124.00 |
1,456,640,620.00 |
0.00 |
0.00 |
0.00 |
|
REPAID |
0.00 |
0.00 |
1,918,951,745.00 |
0.00 |
0.00 |
Source: GOK Statement of Public Debt 2002-6 – Ministry of Finance
Even a school child can tell you something does not look right with these numbers. USD 24.2 million for 522 Land Rovers. The use of irrevocable promissory notes to CMC and later Standard Bank? All this without Parliamentary approval.
These prior dealings with CMC should have made Treasury even more scrupulous in following the Public Procurement laws to the letter and with fidelity to the spirit of competition, economy and transparency.
Is this Passat deal going to blow up in our faces at some time in the future in the Anglo-Leasing vein? Will a debt show up on the External Public Debt Register in the future?
We insist that the External Debt register be tabled in Parliament immediately so that we know what the Grand Coalition Government has borrowed and paid on our behalf. Treasury was asked for the document in Parliament on June 3rd this year and to date has refused to table it in Parliament as a public document for scrutiny.
Kenyans deserve answers from treasury. We do not trust this Treasury with our money! If we were in charge, we would sack the Minister of Finance today!
Mars Group Kenya
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Ministry of Finance Statement on Sale of Public Vehicles
The Ministry of Finance has noted with concern an article carried on the front page of Daily Nation newspaper of Monday, 15th December 2008 headlined “Public Vehicles on Sale at Throw Away Prices”, which allege that the disposal of vehicles surrendered under the New Government Transport Policy has not been transparent. Nothing can be further from the truth.
It will be recalled that during the presentation of Financial Year 2006/2007 Budget Statement, the Minister for Finance announced the introduction of a new Transport Policy to address weaknesses observed in the existing transport policy, characterized by mismanagement, high maintenance cost and inefficiency, lack of parity in allocation of transport facilities, proliferation of vehicle models and idle capacity due to imbalance between the number of vehicles and drivers; lack of capacity to enforce regulations on the use of Government vehicles and escalating cost of providing Government transport which stood in excess of Kshs.4 billion per annum without corresponding improvement in service delivery.
Consequently, the Government put together a Task Force to operationalize the new Policy and to dispose surrendered vehicles through reallocation to essential services including security services and to sell the surplus through open tender in strict compliance with the provisions of the Public Procurement and Disposal Act 2005.
The Task Force charged with this responsibility include nine qualified Mechanical Engineers to inspect, value and lot the surrendered vehicles and four Senior Procurement Officers to manage the sale process. The disposal process is in compliance with instructions given under the Office of the President Circular letter ref. OP.CA3.23/ 1A of 30th June 2006.
At this point it is important to point out the specific falsehoods carried by the article in question.
Three of the vehicles listed as sold at throw away prices i.e. Toyota Land Cruiser GKA 565G, Mitsubishi Pajero GK A644G and Toyota Land Cruiser GKA 069F are in fact currently deployed at the Ministry of Justice, Constitutional Affairs and National Cohesion to facilitate the work of the Kriegler Commission.
Other surrendered vehicles have been allocated to facilitate the work of the Task Force on Mau Forest and in the Resettlement of the Internally Displace Persons (IDPs)
The Range Rover vehicle registration number GKA 507G said to have been sold at Kshs.1.5 million was actually sold for Kshs.4 million. Vehicles GKA 652K a Toyota Land Cruiser, GKA 799D a Pajero, GKA 811E a Pajero, GKA 344D a Land Cruiser and KAL 0220M a Mercedes Benz all of which are alleged to have been sold at give away prices have in fact been sold through the open tender at prices above reserve price.
The figures of the vehicles and monies realized from the sales as quoted on the said article are incorrect and only represent the rich imagination of the author since they were not verified with our records.
Our records indicate that so far 488 vehicles have been sold through open tender and not 1210 as quoted in the article. The sale has realized a total of Kshs.194,061,335 already paid into the Exchequer.
Another 811 vehicles were advertised for sale which closed on 25th November 2008 and are awaiting tender awards.
Another 789 vehicles are under process to be sold and will be advertised in early January 2009.
In total therefore, the Government has collected 2088 vehicles from various Government Ministries and Departments. The process of surrender will however, continue until all the targeted 2213 vehicles have been accounted for.
Many vehicle-shells lie around Government yards and are now targeted for disposal. Such shells must be distinguished from whole vehicles and it is to be expected that their sales will fetch poor returns.
As it is usual with sales, vehicles realizing prices below the Reserve will normally be withheld for re-tendering.
Section 33 of the Public Procurement and Disposal Act forbid employees of the procuring entity from participating in such sales.
It is the Ministry’s view that the article in the Daily Nation was meant to mislead Kenyans and to bring the Government into disrepute. This Ministry wishes to call upon the Media to refrain from irresponsible journalism particularly the type that can destroy the careers of officers who are carrying out their duties with diligence and honesty.
This Ministry has confidence with the members of the Task Force assigned to operationalize the new Transport Policy and they should be allowed to do their job. Skewed articles like the one in question will not help and should be treated with contempt.
CHIBOLI SHAKABA
For: Financial Secretary
Treasury Denies Cars Are Being Sold Cheaply
Date: Tue 16th December 2008
Mediahouse: Daily Nation
Page: 8
By SAMUEL SIRINGI
The Treasury on Monday said it was not selling more than 2,000 Government vehicles at throw-away prices. Financial Secretary Mutua Kilaka said the process of disposing of the vehicles was being done according to Government regulations.
He was reacting to a Nation story on Monday that, however, only said the Government had merely put up the vehicles for sale without giving details on which ones had actually been taken up. The story was based on a Report of the Board of Survey on Stores (Unserviceable and Surplus to Requirements), which showed vehicles that had been put up for sale. Such vehicles may not be sold for lack of interested bidders or if the bids are lower than the quoted prices.
Mr Kilaka said three vehicles were surrendered for use in the Justice Ministry, when in fact they appear in the official board document. Other vehicles were being surrendered through reallocation to essential services, Mr Kilaka said in a statement he released through a Mr Chiboli Shakaba.
The surplus vehicles, he said, were being sold through an open tender “in strict compliance with the provisions of the Public procurement and Disposal Act”. He did not explain why the vehicles were still listed in the documents if they were not meant for sale.
Mr Kilaka listed one vehicle, a GKA 507G, as having been sold at Sh4 million when the reserve price listed in the official document was only Sh1.5 million. The Nation report quoted private valuation experts saying the vehicles were grossly undervalued before they were put up for sale, even if depreciation rates are generously catered for.
A Chev/Up car bought in 1981 was selling at only Sh500. A Range Rover bought at Sh10 million in 2003 when the Narc administration came to power has been put up for sale at Sh1.5 million. Independent valuers said it should cost Sh5.5 million.
Mechanical
It had no mechanical problems and is only described as “excess” by the report of the board of survey on stores, which made the valuations.
Another vehicle, a Toyota Land Cruiser bought in 2002 at Sh10 million is selling at Sh1 million, although the private valuation experts suggested it should sell at Sh4.2 million. A Sh6 million Toyota Land Cruiser bought in 2004 is expected to sell at Sh600,000 in the open tender advertised in May.