KPA MD succession battle intensifies – Weekly Citizen

The abrupt resignation of Daniel Manduku as Kenya Ports Authority managing director has opened a succession battle at the port of Mombasa.
Rashid Salim, the GM engineering services has since been appointed acting managing director. Transport cabinet secretary James Macharia said Salim will act pending the advertisement and competitive recruitment of a substantive managing director.

James Macharia

It has emerged that Salim was picked due to his long working experience at the port. He has been at the port for a record 38 years. He was appointed as general manager after serving as head of marine engineering at the agency. A section of port stakeholders and employees want him confirmed as MD, saying as an insider with long experience, he is the best suited person to bring efficiency at KPA.
But even as Salim settles on the otherwise hot seat, Weekly Citizen understands that he is not the favourite of Mombasa port cartels. He is considered ‘a passing cloud’. It is claimed Vincent Sidai, the port’s GM Infrastructure is being pushed by some government officials in the Transport ministry to be the next MD.
Sidai was a gubernatorial aspirant in Busia county in the last general elections. It is said, the forces who wanted him become governor are the same ones vigorously campaigning for his elevation to apparently take care of their interests ahead of the next general elections.
The GM for Lamu Port Abdulahi Samata is another figure being fronted to succeed Manduku. He is among top managers who were controversially transferred from the port of Mombasa before Manduku’s appointment. Other than Samata, Sudi Mwasinago is another GM who was moved to Kisumu port in unclear circumstances. It is not clear, if Mwasinago will apply for the MD’s post when advertised.
But another camp operating behind the scenes with connections at State House is pushing for the little known Kilifi county secretary Arnold Mkare to be appointed next port MD. Surprisingly, this camp is so confident that it has already told Mkare to prepare himself for the next assignment at the port.

Daniel Manduku

It is claimed, an influential person within the military is among those who want Mkare to succeed Manduku. And if Mkare were to be appointed, both the chairman and MD of port will be from the same region of Kilifi County. Two former KPA MDs namely Catherine Mturi and James Mulewa were also from Kilifi county.
Meanwhile, several senior Kenya Ports Authority managers risks being suspended over several tender malpractices in the parastatal.
An audit and risk report dated March 18, shows that senior managers in, procurement and finance were involved in malpractices which has cost KPA billions of shillings in lost revenue and outright theft.
The KPA board is mulling over the action to take with fears that some top managers are well connected politically and suspending them could backfire on them.
Nevertheless, the KPA board says it is concerned about the issues since they amounted to circumventing set processes and the public procurement and disposal Act 2015. The port’s general manager, finance Patrick Nyoike who is on the spotlight of EACC has since been asked by the board to explain why budget locks are not implemented in the port’s SAP accounting system to avoid the loss of funds.

Rashid Salim

The board’s report also shows that KPA’s internal audit department had carried out an audit of the draft financial statements for the period ended December 2019, and found that the agency had overrun its budget by Sh2.3 billion, spending Sh21billion instead of the planned Sh19billion.
The audit has also revealed a growing number of debtors, with the authority’s trade cargo debtors owing Sh4billion as at the end of last year, compared with Sh3.6 billion in the first quarter ending September last year, representing an 11.28pc increase.
This in essence could mean, some corrupt officials could be colluding with outsiders to make the authority offer more services without getting paid. At the same time, the finance department has been put on the spot for advance payment of Sh60 million to suppliers, contrary to the terms of the contract.
The money was paid to three travel agents, Kilindini Travel Centre, Regal Tours and Travel, and Helinas Safaris without any approval, and the provision was not covered in the contract terms. The board wants disciplinary action taken against the staff who circumvented the process. It is claimed, officials collude with the agents to arrange for them private air services at the expense of the authority. The audit revealed that Zara Travels did not bid to provide air travel, yet it was engaged to offer the services.
Tender No KPA/159/2015-16 for the Provision of Air Travel Agency Services had 14 bidders, four of which were awarded as per Memo No 121-005/2015-16. Zara was not among the firms. The port’s acting procurement manager Aza Dzengo is being blamed for the procurement scams.
The report covers the deliberations and resolutions of the 57th Board Audit and Risk Committee meeting held on March 5 and 8 2020 5 at the KPA’s Boardroom, Kipevu.
Members present were Delilah Ngala – committee chairperson, Mary Ngari, Peter Murachia, Beatrice Nyamoita – alternate director (state department of Transport), Festus Kingori – alternate director (National Treasury), Oscar Eredi representing Attorney General, Paul Bor representing general manager, operations, Rashid Salim general manager, Lilian Mwangi – head of internal audit and risk management (secretary) and Samuel Ngumi – principal risk management office.
An audit report revealed ills at the KPA ports where over Sh200 billion was lost in tenders and called for disciplinary action against top managers. Many say, the report had the blessing of powerful forces at the ministry to haunt Manduku out.
The report which covers the deliberations and resolutions of the 57th board audit and risk committee meeting held on the 5 and 8 2020 at KPA’s boardroom, Kipevu was the catalyst that forced then KPA Manduku to resign.
According to the latest report, the repairs and maintenance at the port had a budget overrun of about Sh1.5 billion in the first quarter of 2019/2020.
The budgeted amount for repairs and maintenance for July 2019 – December 2019 was Sh380 million but the actual expenditure incurred totaled Sh3.7 billion which represents an adverse variance of Sh3.3 billion.
The report says between July 2018 and December 2019, Sh12.9 billion was spent on repairs of which Sh8.6 billion was not in the procurement plan.
It adds that between July 2019 and December 2019, 117 LPOs were issued under repair and maintenance but Sh4.247 billion could not be traced in the Authority’s Procurement plan.
A total of Sh2.431 billion has since been paid against the LPOs.
The report says KPA contracted 11 firms to supply 17,940 concrete barriers where 13 LPOs with 1,380 barriers each were issued.
The concrete barriers were procured at a cost of Sh1.22 billion at Sh68,267 per unit but notes that the splitting of works implies the works was of low value hence avoiding open tendering.
It notes that several contracts for provision of various services were extended after the lapse of expiry periods which led to award of construction work or supply of goods to the same firms for an extended period without fresh competitive bidding.
The report says there was a disconnect between funds available at the time orders were placed and when payments were made.
According to the report, the management told the committee the ICT department was carrying out system configuration to allow partial payment of invoices but the challenges included shifting the responsibility of identifying the invoices to be paid/not paid.
It notes that Kwatos Vendor (TSB) is developing the requisite changes that will be a solution to the invoices problem as the first development was rolled out in February 2020.
On a debt to a firm, Zynmat Energy, the Committee was informed that the legal division took up the matter and a notice of forfeiture was published in newspapers in December 2019.
There were cases of customers with outstanding debts whose credit limits were not being adhered to but the finance department has reviewed credit limits and some customers have enhanced their guarantee in line with the current business model.
According to the report, by June 2019, cash clients had accumulated debts to a tune of Sh265 million.
The finance department cited the causes behind the uncollected bills as uncollected cargo.
The head of civil engineering had been directed to respond to the budget overruns by September 2019. The budget overrun was Sh644.7 million.
The responses indicated the reasons for the overrun were because of civil engineering department being called upon to undertake works that had not been planned; enhancing capacity of ICD Nairobi; Development of Makongeni yard; presidential visit to Liwatoni to Commission Kenya Coast Guard Services; Development of Kisumu Port and manufacture of concrete barriers for traffic control at a cost of Sh1.1 billion as it had not been planned for.
The report noted three double payments, two reversals and two instances the same vendor invoice number were used to pay running LPOs.
Regarding Enterprise Risk Management, the committee was informed that KPA’s Corporate Risk Register was developed in 2017 and adopted by the Board in April 2018.
The head of internal audit informed the committee that plans were under way to review the corporate risks to ensure they are in line with the strategic objectives in the strategic plan 2018-2022.
It noted that issue of missing logbooks should be pursued through conventional cargo engineering.
The meeting heard that the reconciliation was ongoing by the SGR unit in ICDN but the increase in debtors was as a result of customer disputes on weight band for 40FT containers which had been resolved by KRC issuing a clarification.
The report noted that the inventory balance as at December 2019 was Sh617.126 million, provision for obsolete inventory was Sh35.446 million hence the resultant Net Inventory balance of Sh581.680 million.
It noted that about 45pc of inventory valued at Sh275 million had not been utilised for a period ranging between two years to seven years.
On trade cargo debtors, it noted that debtors totalled to Sh4.013 billion at December 2019 as compared to Sh3.606 billion in the first quarter ending September 2019, representing 11.28pc increase.
The customers’ outstanding balance stood at Sh2.136 billion while Sh1.459 billion was collected in January reducing the outstanding balances to Sh2.119 billion.
The growth in debts was attributed to growth in business.
The outstanding marine debtors was Sh512 million of which Sh474 million is owed from 15 companies but Sh81 million was collected in January 2020 resulting in a balance of Sh393 million.
The report noted that some sub-ledgers for Equity Bank accounts had unreconcilled net balances of Sh28.7 million.
It says the 2nd terminal suppliers had 11 debit entries totaling Sh4.2b and five credit entries totaling Sh2.6 billion dating back 2016 with no corresponding entries.
On Lamu Port Project, a total of 18 debit entries totaling Sh7.5b credit 7 entries totaling Sh3.2b backdated to between 2014 and 2018 with no corresponding entries.
The report says there were inconsistencies in charging depreciation as assets capitalised on the same date had some of them charged depreciation while others were not.
The management responded all the identified assets were capitalised/reclassified on September 2019 and depreciation start date set as September 1 2019.
The report says advance creditors balance as December 2019 amounted to Sh1.5b which includes payments relating to services for which invoices have not been received.
The committee heard that unclaimed staff amounts above Sh1, 000 will be credited to the respective staff bank accounts, whereas for the lower amounts, an email will be sent to the affected staff to collect their allowances within three months.
The Head of Internal Audit also presented Terms of Reference for engagement of a consultant to undertake a forensic exercise.
The preliminary quotes from big four professional services firms had an average cost of Sh81 million inclusive of subcontracting costs for specialised services.
The report noted that the ICT department lacked a disaster recovery team with members that are tasked to orchestrate all matters relating to an actual or potential disaster.
But the management assured that the ICT department was in the process of developing detailed disaster recovery plan.
On advance payment of Sh60 million to supplier’s contrary to the contract terms, it noted that three travel agents namely; Kilindini Travel Centre, Regal Tours and travel and Helinas Safaris were paid without any approval.
It noted that a tender for the Provision of Air Travel Agency Services had fourteen bidders out of which four firms were awarded.
It was noted that Zara Travels did not bid in the tendering process yet were engaged to offer the services.
The report notes the supply of staff uniform contract expired since 2014 and there was no renewed/valid enforceable contract to date.
The report notes that Sh7.4 million relating to Staff Uniform dating back to June 2018 were partly delivered while other remain undelivered beyond the agreed delivery timelines.
It notes that the tender for Biennial Contract for Building Works – Reserved for Disadvantaged Group was signed in April 2015 for a period of two years up to April 2017. The contract was extended for more than two years from the date of expiry.
Consequently, a fresh tender was floated to replace the previous one but was annulled by PPRA due to expiry of the tender validity and to date the old contract is in use.
On the supply of portable water, two LPOs amounting Sh205.2 million were paid without receipt of delivery notes.
It notes that though the price charge per metric ton was not to exceed Mombasa Water Services rates, currently, the price for the supply of water is 125% above the current price charge by MOWASCO.