E-Clips:- Business Pictorial - Report On Sh2.7b Scam Out

The Government audit chief has vigorously questioned how a company at the centre of the Sh2.7 billion passport scandal got advance information on tender variations and Kenya’s inability to meet the extra millions required for the new features.

The Controller and Auditor General, Mr E N Mwai, confirmed the controversial Sh2.7 billion passport tender was flawed and the Government stood to lose billions of shillings.The disclosure made through a special report that was tabled by Finance minister David Mwiraria in Parliament also gave a hint as to why Treasury Permanent Secretary Joseph Magari and his Home Affairs counterpart Sylvester Mwaliko were suspended last week.

Mwiraria tabled Mwai’s report in Parliament as MPs applauded him after he took the bold step of admitting the lapse on the part of the Government’s key players in the project.The significance of the tabling of the self-indicting report by the Minister was discernible from the fact that the President’s principal assistant, Vice President Moody Awori, who initially defended the project saying it was a clean deal was in the House.

Yesterday, the burden of assuaging the nation’s anger over the single most monstrous financial deal in Kibaki’s 15-month-old administration fell on the soft-spoken Mwiraria.The minister, who stood on a point of order after question time, also thanked those who exposed the scam, saying even the Sh91 million that had been paid had been returned.

According to the report by Mwai, the France-based Anglo Leasing and Finance Ltd which had won the tender gave an unsolicited technical proposal for supply and installation of Immigration Security and Document Control System (ISDCS)."It is not clear how the financing firm could have prepared and submitted a detailed proposal for a project similar to the one recommended by Government Information technology Services (GITS) before a request to so had been officially made to it by the Government. But the indications are that the firm may have had prior knowledge of the recommendations to enhance and extend the system,’’ Mwai indicated.

He also raised questions about the manner in which Government officials executing the project went about it without following the A-G’s advice that they first secure a diligence report on the companies before tying the governments in the tender and financing deal.He further says in the report that the proposal by the firm indicated that it could supply and install the system through its officially designated systems sub-contractor in the name of Francois Charles-Obethur Fiduciare of Paris, France.

The firm also submitted alongside the proposal, a proposed financing agreement explaining the contract and financing terms and conditions.

Mwai says the offer in the agreement proposed a facility of Sh2.7 billion for the system repayable at five per cent which was later changed to four per cent per annum quarterly commencing three months after the first payment up to a period of 62 months.The Ministry of Finance is said to have accepted the proposal and in a letter dated September 5, 2003, addressed to the Treasury PS and Home Affairs PS, sought Treasury authority for direct procurement of the ISDCS that was granted in a letter dated November 25, 2003.

Mwai disclosed that although use of direct procurement is provided for in the Public Procurement Regulations 2001, it was not explained why this mode of procurement was adopted for the ISDCS instead of the restricted tendering method which had been used for the earlier tendering process."As a result of the direct sourcing, Government was clearly denied the advantages of competitive bidding," adds the report.

The auditor general also disclosed that in the same letter of September 5, 2003, the PS V-P and Home affairs informed the PS Treasury of the proposal by Anglo Leasing and Finance Ltd.He detailed the amongst other aspects the System components and the proposed financing offer of Sh2.7 billion and requested for a technical review of the proposed systemAccording to the report the PS Home Affairs sought the A-G’s legal comments and advice on the financing agreements submitted by AngloLeasing and Finance Ltd

And in a letter dated September 18, 2003, to the PS the A-G is said to have recommended that diligence test be performed on the Anglo Leasing and Finance Ltd to determine the number of projects of the same nature the firm had competently supplied and completed as its credit rating. However, according to Mwai records so far made available do not show any such tests as having been performed.