• The interests and penalties were not budgeted for in the Sh4.9 billion project – which was initially started at Sh8.9 billion before being scaled down.
• Earlier queries including how the project cost moved from Sh2 billion to Sh4.8 billion remain unresolved.
Image: FILE
Tourism Fund management is on the spot over a Sh3.4 billion interest penalties that the agency has been slapped with for delayed payments to a contractor.
The agency has delayed in settling payments in the construction of a building at the Utalii College campus in Kilifi county.
It has emerged the contractor is demanding Sh679 million, following delayed payments for works at the proposed Ronald Ngala Utalii College.
The fund has been charged a further penalty of Sh2.9 billion from several consultants who handled various technical works.
A review of the consultants’ fee notes for the supervision of the contract revealed continued imposition of interest on delayed payments on interim certificates.
The project’s lead architect is demanding payment of Sh961 million in interest penalty.
Quantity surveyors are pressing for Sh617 million in interest penalties.
Civil and structural engineers have imposed a penalty of Sh459 million while mechanical engineers want Sh724 million over delayed payments.
Auditor General Nancy Gathungu in a review of the fund’s books as of June 30, 2024, said the payments would increase taxpayers burden unnecessarily.
“The delayed interest payments have a huge financial implication to the overall cost on completion of the project,” the auditor said.
She rejected management's explanation that the reason for levying the interest penalties was due to insufficient budgeted amount for the project.
Management had cited Treasury for delayed disbursement of funds to the project over the years, saying it was the reason for the escalation of project costs.
The interests and penalties were not budgeted for in the Sh4.9 billion project, which was initially started at Sh8.9 billion before being scaled down.
“In the circumstances, the value for money on the project expenditure incurred on account of interest charged on delayed payments and reimbursements costs to project consultants may not be realised,” Gathungu said.
The auditor has further queried delays in the project’s completion of the proposed college, saying the value for money may not be realised on the project expenditure.
Construction works on the proposed college started in May 2013 at Sh8.9 billion and was to be completed in June 2018.
In August 2014, the project sum was scaled down to Sh4.9 billion, with a revised completion date of February 2017.
The contract was further amended on April 20, 2021, and was to last 12 months but the fund management extended the same to start from May 2021.
With the extension, the project was to be completed on June 20, 2024, but was found to be far from completion during the audit review.
The project was estimated at 79 per cent complete at the time of the audit in November 2023.
“The project has been delayed in completion since the last approved completion date of February 28, 2017. In the circumstances, the value for money on project expenditure may not be realised,” Gathungu said.
A claim of Sh8 million by an electrical subcontractor has also been queried after the same was unanalysed and not supported.
The certified work for the electrical subcontractor, according to the report, was Sh303 million of which the Sh8 million (which was part) was not supported.
Gathungu has also raised concerns that the fund has not addressed past audit queries on lawfulness and effective use of public resources satisfactorily.
“The management had not resolved the issues or given any explanation for failure to implement the recommendations,” she said.
Among the issues was that the procurement of the architectural and other consultancy services was not backed by proof of an advertisement for the expression of interest by potential contractors.
She said the management of the fund has never provided an analysis of the transfers made by the National Treasury as capital grants to the college.
Also the value of aggregate grants and the detail of the other resources invested in the school.
Gathungu said no records were provided to explain the drawdown of the project from Sh8.9 billion to Sh4.8 billion and whether the Cabinet approved the same.
Further to this, no record was provided to align the expenditure of Sh2.6 billion incurred on the consultants to the payments rates prescribed in the laws.
No record of the contracts entered into between the fund and the consultants were provided for the audit review.