State agencies listed among debtors owing NCA Sh1.9bn

Economy

Tuesday, January 8, 2019 21:38

By EDWIN MUTAI

Three State agencies are among institutions that owe the National Construction Authority (NCA) Sh1.9 billion that accrued before construction levies were scrapped in January 2017.

The Kenya Railways Corporation (KRC), Kenya Rural Roads Authority (Kura) and Kenya Pipeline Company (KPC) owe the construction regulator Sh963.8 million or 54 per cent of the total debt owed to NCA in the year to June 2017.

Auditor General Edward Ouko said Kenya Railways owes NCA Sh625,132,485, Kura (Sh71,167,350) and KPC (Sh267,542,035) that have remained outstanding for the past two years.

“Management did not provide an explanation as to why the above debtors have remained outstanding for over two years and the efforts being made towards the recovery of the same,” he said in a qualified audit opinion.

Mr Ouko said in the circumstances, the recoverability of debts worth Sh1.79 billion reflected in the NCA’s financial statements for the year to June.

The Cabinet in 2016 scrapped all construction levies charged by State agencies and county governments in an effort to lower project costs.

The government said the levies were a barrier to investments.

Developers, whose projects exceeded Sh5 million, used to pay a levy of 0.5 per cent of the value of the contract to the NCA.

This was reduced between Sh10,000 and Sh40 million depending on the risk levels of their projects shortly before the Cabinet scrapped the fees.

The NCA says its revenue declined by 47 per cent following removal of the construction levy with effect from January 1, 2017.

“The construction levy accounted for over 70 per cent of the total revenue of the authority for the last two financial years,” said the authority.

“The board is aware of this fact and it is working on mitigating the effects by identifying other means of raising the internally generated revenue.”

Data provided by NCA shows that its revenue hit Sh3 billion in the financial year 2015/16 before dropping to Sh1.59 billion in 2016/17.