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SUBMISSION TO THE PUBLIC ACCOUNTS COMMITTEE ENQUIRING INTO MATTERS ARISING FROM THE FINANCE MINISTRY PURCHASE AND SURRENDER VEHICLE SCHEME 2009

Mr. Chairman: This submission is on behalf of the Partnership for Change a non-violent people’s movement dedicated to ending dictatorial impunity and re-establishing democratic accountability in Kenya.

Mr. Chairman: We are interested in sharing information, we have obtained from public domain and official records, which is relevant to the summons you have reportedly issued to the Minister for Finance regarding the Ministry of Finance’s ongoing vehicle surrender and replacement exercise.

Mr. Chairman: In order to better engage the public with public finances the Partnership for Change through Mars Group Kenya conducts detailed studies of budgets at central and local levels.  We have previously had the opportunity to appear before a Joint Parliamentary Enquiry by the Budget and Finance Committees into the Supplementary Estimates of the Financial Year 2008-2009.  Our findings of discrepancies in the Supplementary Estimates triggered the enquiry and resulted in the adoption of a unanimous report which included a recommendation that an independent forensic audit should be done by an independent body to look into past three years of the National Budget including the Consolidated Fund Services to determine whether there might have been other inaccuracies or inconsistencies in the last two years in addition to the current year.  Unfortunately the Independent Forensic Audit has not yet been commissioned.

Mr. Chairman: The press has reported that your Committee is interested in the procurement processes which resulted in the purchase of 120 VW Passat saloon cars by the Ministry of Finance for Cabinet Ministers, Assistant Ministers and Permanent Secretaries.

Mr. Chairman: Apart from the obvious blatant contempt for transparency and fidelity to the letter and spirit of procurement procedures indicated by the single sourcing by the Treasury 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 have reason to be concerned, hence our appearance before your Committee.

THE 2008 VEHICLE SURRENDER PROGRAMME PRESS STATEMENT:

Mr. Chairman: 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. 
Mr. Chairman: 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.
Mr. Chairman: 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:
Mr. Chairman: 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.
Mr. Chairman: 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, Hon. 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.

Income from sale of vehicles 2008/2009	Kshs
Receipts from the Sale of Vehicles and Transport Equipment	17,351,081
Receipts from the sale of Vehicles and Transport Equipment – Paid as Exchequer	760,000

Source: Estimates of Recurrent Expenditure of the Government of Kenya (2009-10)
Mr. Chairman: 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 by the time of its press statement received for 488 cars sold? What happened to the proceeds from the sale of the other 1,725 cars?
Mr. Chairman: Hon. 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 financial year 2009/2010:

Expected Income from sale of vehicles 2009/2010	Kshs
Receipts from the Sale of Vehicles and Transport Equipment	15,584,640
Receipts from the sale of Vehicles and Transport Equipment – Paid as Exchequer	1,726,000

For avoidance of doubt, we go one step further and show you the Motor Vehicle expenditure budget for last two financial years (2008/2009 and 2009/2010).
source: Estimates of Recurrent Expenditure of the Government of Kenya (2009-10)

 

 

 

GRAND COALITION GOVT. EXPENDITURE ON CARS	2008/2009	2009/2010	TOTAL
Purchase of Vehicles and Other Transport Equipment	3,336,455,051.00	2,110,174,736.00	5,446,629,787.00
Routine Maintenance – Vehicles and Other Transport Equipment	1,827,445,679.00	1,954,482,630.00	3,781,928,309.00
Overhaul of Vehicles and other Transport Equipment	254,867,886.00	260,561,857.00	515,429,743.00
Fuel Oil and Lubricants	3,530,633,362.00	3,688,151,883.00	7,218,785,245.00
TOTAL SPENT ON CARS	8,949,401,978.00	8,013,371,106.00	16,962,773,084.00

 

Mr. Chairman: Where are the savings?

Mr. Chairman: The Kenyan tax payer expects truthfulness from its Ministry for Finance.  If there was an intention to implement this new policy for the stated purposes then the fuel, overhaul, routine maintenance and purchase budgets would provide evidence of the cost cutting.  Instead the overall expenditure on three of these items (fuel,overhaul and routine maintenance) actually increased.

Mr. Chairman: If the minister were serious that his actions on the new motor vehicles was to save money, would this not have been reflected in his estimates for the financial year 2009/2010? But fuel has gone up to 3.6 Billion Kenya shillings, he has provided over 2 billion Kenya shillings for buying new cars, almost 2 Billion shillings to maintain the new cars. In fact so extravagant is this minister that he has allocated over 3 billion shillings for hospitality- samosas and cigars for the grand government. All this while our brothers and sisters are still in IDP camps.

Mr Chairman: The Minister for finance presented a budget full of waste. In our calculations it consists of over 240 Billion Kenya Shillings of wasteful expenditure. The minister of Finance has failed to provide resources for Agenda 4 of the National Accord. The Committee must interrogate the 2009 /2010 budget with a view to amending the appropriations bill which is before this Honourable house this month – November 2009 to provide money for Agenda 4 reforms. This can be done by scrapping all wasteful expenditure.

Mr Chairman: The National Accord reforms are a matter of life and death to millions of Kenyans. This Grand Coalition Government has the mandate only to deliver the National Accord Reforms. It should reflect its willingness to implement these reforms by bringing to this honourable house a budget that reflects the National Accord reforms and in particular the Agenda number 4.

Mr. Chairman: Recall, that we found substantial discrepancies 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 want the forensic audit ordered by Parliament to commence immediately so that we know our true financial position and not continue to operate in ignorance as Treasury is keeping us.  We seek your Committees support for the immediate commencement of the Independent Forensic Audit, and your lobbying the Implementation Committee in this regard.

CMC HOLDINGS LIMITED AND EXTERNAL DEBT ISSUES:
Mr. Chairman: The current Passat controversy revolves also around the Treasury’s unusual decision to procure apparently without any competition 120 VW Passats from one motor dealer – CMC Holdings Limited. 

Mr. Chairman: There are too many things Kenyans don’t know about this contract.  It isn’t listed on the Public Procurement Oversight Authority website.  Treasury hasn’t told the public the terms of the agreement.  Kenyans don’t even know how the CMC dealer will be paid.  In reality all we know is that Government has taken delivery and is distributing over 120 cars from CMC, which has yet to be paid according to an interview with its Chief Executive Officer by The Star newspaper of November 4th 2009.

Mr. Chairman: This company, CMC, 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 25 irrevocable promissory notes in this transaction to CMC and later the debt was held and collected on by Standard Bank London UK who held the irrevocable promissory notes.  Below are extracts from the Government of Kenya’s Statement of Public Debt where CMC Limited and Standard Bank London are listed as creditors to the Government of Kenya.  Repayments are indicated as having taken place as follows:

Creditor:  CMC Limited/ Standard Bank London – 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

Mr. Chairman:  Without transparency about the terms of the Passat deal Kenyans fear that this could blow up in our faces at some time in the future in the Anglo-Leasing vein with a new debt appearing on our External Public Debt Register in the future?  CMC’s CEO is reported as stating that his firm hasn’t been paid yet, so it is important that your Committee ask the Minister of Finance for the terms of the purchase and after service contracts which have presumably been executed.

Mr. Chairman: We request that your Committee support Hon. Gitobu Imanyara’s June 3rd request for the tabling of the Statement of Public Debt for the years 2007, 2008 and 2009 which will reveal what borrowings have been undertaken by the Government of Kenya.  The Treasury has claimed that the document sought is voluminous which is not true. Mars group Kenya obtained the same for several years in 2007 from the Permanent Secretary for Finance, through the Head of Debt Management at the Treasury and it was submitted by letter in an official A4 envelope.  Parliament must have these vital documents in order to fulfil its representative function in querying odious debts such as Ken Ren Fertiliser Factory in the National Budget.  Incidentally, Ken Ren was condemned by the Controller and Auditor General’s Report which the Minister of Finance himself tabled in Parliament in June this year. 

Mr. Chairman: All these matters require a longer probe than the short one you have embarked on and we are sure the public would appreciate your solidarity in demanding that Treasury and the Ministry of Finance is fully accountable to Parliament by submitting to the Independent Forensic Audit immediately.

Mr. Chairman: We insist that the External Debt register (in the form of the updated Statement of Public Debt) 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. 

Mr. Chairman: Kenyans deserve answers from the Ministry of Finance and Treasury, and we are grateful that this Committee is prepared to ask the questions.

Mr. Chairman: Finally, it is our considered view that a censure motion against the minister of finance is deserved. Kenyans simply don’t trust the current minister of finance with the management of our public resources. 

Mr. Chairman:  We trust our information will be useful to you in your ongoing enquiry and hope that it will contribute towards the ability of the National Assembly watchdog role over the funds of the Kenyan people.  We appear before you in good faith.  We mention this because during the Supplementary Estimates enquiry some members of Parliament held public rallies to condemn us and one member used his privileges to attempt to implicate us on the floor of the House in the high crime of espionage.  We do what we do because we believe in parliamentary democracy and accountability, and are only desirous to make Kenya a better governed and corruption free country.  That is the only way we will develop in an equitable manner.  Kenya belongs to all Kenyans not just the rich and powerful.  The people own the Government and its funds.

Mr Chairman: We are grateful to your Committee, our elected representatives, for taking time to hear us.  With your kind permission we wish to support our Memorandum with supporting documents which we will take you through now.
Dated at Nairobi this 6th day of November 2009, and signed: for the Partnership for Change

Jayne Mati                                           Cyprian Nyamwamu                            Mwalimu Mati

Related Documents

1. Approved Total Expenditure GOK 2008/2009
2. Estimates  – Total Expenditure GOK 2009/2010
3. Approved AIA – 2008/2009
4. AIA  – 2009/2010
5. GOK Motor Vehicles Establishement at 2008
6. Purchase of Vehicles 2009/2010
7. Fuel, oil lubricants 2009/2010
8. Routine Maintenance Vehicles 2009/2010
9. Overhaul of Vehicles 2009/2010
10. Loans by year as tabled by Peter Kenneth
11. Loans as tabled by Peter Kenneth by Creditor
12. Ken Ren Repayments
13. Statement Ministry of Finance
14. Daily Nation story ‘Treasury Denies’
15. Daily Nation Story   ‘Public vehicles on sale at throw away prices’
16. Debt Register – CMC and Standard Bank
17. Memorandum

 

 

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