KPC paid Sh127m for hot air


19 Jun 2015 | by Kelly Simiyu
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KPC paid Sh127m for hot air

An Internal Audit at the Kenya Pipeline Company (KPC) has revealed that senior managers authorized the irregular payment of one hundred and twenty seven million shillings to a local company that did not offer services.The internal audit reveals that Diaspora Design Build Ltd was paid Sh 127 million shillings for installing an automated fire fighting system for the Kipevu Pump Station 14 Hydrant System project which the company never carried out.......

An Internal Audit at the Kenya Pipeline Company (KPC) has revealed that senior managers authorized the irregular payment of one hundred and twenty seven million shillings to a local company that did not offer services.The internal audit reveals that Diaspora Design Build Ltd was paid Sh 127 million shillings for installing an automated fire fighting system for the Kipevu Pump Station 14 Hydrant System project which the company never carried out.

According to the audit report, Diaspora Design Build Ltd was in February 2013 awarded a tender to deliver a functional and automated fire fighting system to secure Kipevu station and other connected installations as well as automating the manual system.The work was later done by KPC staff after Diaspora Design Build Ltd was unable to install yet all the amount was paid.However, when contacted KPC acting Managing Director Flora Okoth while admitting the misappropriation said the matter was under investigation and the company was not under any obligation to share the investigations with the public.

 “This matter is currently under review internally and the review is still ongoing for the next two months or so. For this reason, KPC will not comment on it publicly as it is being handled competently by our own internal structures (Internal Audit Department). Please note that this has not affected our operations in any way. The pipeline and all the other attendant facilities are operating optimally and fuel is reaching our customers and the public at the right time and place. Please note that it is a normal practice for internal audit to look at organizational processes and structures so as to advise management appropriately on the best way to maximize benefits and this is one of the issues that is currently under review. Please note that KPC has, and does not, share publicly internal audit reports (whether complete or not) because the intent of the same is for internal consumption,” the KPC Acting MD Okoth said.

Investigations have revealed that even before the Diaspora Design Build Ltd signed the letter of acceptance and the signing of the contract, senior KPC managers authorized the payment of Sh47.2 million to the company.The internal audit reveals that Sh 21 million was paid for works not done and Sh 15.9m was paid after the cancellation of the contract. Another Sh 5m was paid for material and equipment which were out of the KPC specifications and design and were even returned to the contractor.The audit report reveals that a total of Sh 11.4 m payment was made for non invoiced expenses by the company while Sh 6m was paid for incomplete works and another Sh 2.1 m was paid in excess of the contract sum.

The company also did an unprocedural variation of the contract of Sh 4.8 m and later Sh 2.1 m without the approval of the tender committee as required by the Public Disposal and Procurement Act.The audit established that some payment was done after termination of the contract, payments were made for equipment out of KPC;s specifications, payments were made for milestones not achieved and the work was late done by KPC staff and some payments were made to the contractor before acceptance of offer and signing of contractual agreement.

Consequently, the audit reports recommends for further investigations into the matter.“Management to institute a multi-disciplinary team to investigate circumstances which led to the company not achieving the objective of the project having paid over Sh 127,000,000 and also establish the status/milestones the contractor had achieved before abandoning the site,” the audit report reads in part.The report says that after the contractor had abandoned the site, management approved that the remaining works be done internally and that the company had incurred a Sh 11.4 million yet there was no mechanism for reimbursement.

The internal audit report which was completed in April had not been surrendered to the KPC management until this month.The internal audit report comes after another scandal in which KPC lost Sh 600 million in a questionable equipment purchase deal involving a little known company Aero Dispense Valve Ltd.The two cases which have exposed the rot at KPC are now being investigated by the Ethics and Anti Corruption Commission (EACC).

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