KQ-JKIA tie up raises operational, policy and financial audit issues – AG Ouko

March 22, 2019 (5 weeks ago) 9:58 am
Terminal 1A at the Jomo Kenyatta International Airport./FILE

, NAIROBI, Kenya, Mar 22 – A special audit report into the Privately Initiated Investment Proposal (PIIP) between Kenya Airways (KQ) and the Kenya Airports Authority (KAA) suggests that the Airports management agency was not consulted during the formulation of Cabinet Memo that seeks to hand over the management of the Jomo Kenyatta International Airport (JKIA) to the national carrier.

Auditor General Edward Ouko told the National Assembly that there is no evidence of KAA and the Board being involved in the Joint Cabinet Memorandum that was prepared and tabled in the Cabinet Meeting of May 29 last year.

“There is no evidence that Kenya Airports Authority Management ever prepared and submitted any proposal to the Board. In fact, there is no evidence of any intervening exchange by Kenya Airports Authority from 19 June 2018 when the Principal Secretary, Transport communicated the decision of the Cabinet until 18 October 2018 when the Special Board of Directors was presented with the information,” Ouko stated in one of his findings.

In the report which was tabled in the House on Thursday afternoon by Majority Whip Benjamin Washiali, Ouko further noted a letter from Head of Public Service to the Managing Directors of Kenya Airports Authority and Kenya Airways which had been quoted by the Transport PS was not availed for audit verification.

“We have not been presented with a feasibility study which could have informed the Joint Cabinet Memo Meeting of 29 May 2018 even though the letter from the Principal Secretary State Department of Transport dated 19 June 2018 stated that the Cabinet Memorandum was seeking approval on actions Kenyan should take to restore Kenya Aviation competitiveness and reclaim the Country’s position as an anchor economy in Africa, with Nairobi as the African Civil Aviation Hub.”

“The Joint Cabinet Memorandum, CAB (18) 28 presented by Cabinet Secretary for National Treasury and Cabinet Secretary for Transport, Infrastructure and Housing and Urban Development was not availed,” the Auditor-General reported.

He notes that the preliminary probe expressed concern that the plan is being rushed through despite the obvious associated risks, such as its viability and the potential loss of jobs at KAA.

“…in board minutes dated 18 October 2018, JKIA accounts for nearly 83 per cent of KAA revenues and therefore a concession could deprive KAA of significant amount of revenues,” Ouko stated as he noted that JKIA reported operating revenue amounting to Sh16.9 billion (a surplus of 5.4billion after tax) but was owned 3.8 billion as at 31 December 2018.

In the PIC sanctioned report, the Auditor-General also questions the procurement process that led to the awarding of a Sh150 million contract to provide Transaction Advisory Services that was later paid a down payment fee of Sh15 million for work not rendered.

The development comes hours after House Speaker Justin Muturi ruled that it was inconceivable to imagine that the Parliament can be locked out of the process.

“It is clear from the foregoing that Parliament’s involvement in the conclusion of the Kenya Airways proposal cannot be overlooked, irrespective of the nature of the commercial arrangement. It is therefore not a matter of “if Parliament will be involved”, rather it is when is the right stage for Parliament to be involved.”

“It is inevitable for Parliament to be involved, particularly if there are any legislative interventions required as part of the process. In this regard, the House ought to exercise restraint at the current initial stages so as not to become prejudiced should the legislative intervention stage become inevitable,” he said.

Based on the finding Muturi pacified a clash that had emerged between PIC and the Departmental Committee on Transport and Public Works who have been jostling to investigate the planned takeover of JKIA by Kenya Airways.

“The Public Investments Committee will be at liberty to resume its inquiry on the matter, but the Committee must confine itself to the financial and expenditure aspects of the reservations of the Auditor General as well as omissions and/or commissions on the part of the Kenya Airports Authority. As for the Departmental Committee on Transport, Public Works and Housing must confine itself to matters of policy, human resource, compliance with due process of law and generally addressing any issues of concern to the people,” Muturi directed while referring to Article 95 of the Constitution.

The Speaker in his ruling also gave parameters that House Committee chairs must comply with before ordering for special audits.

In future a House Committee wishing to request for special audits from the Auditor General shall have to indicate how the matter came before the Committee, the nature of the audit requested, e.g. compliance audit, financial or value for money audit, operational audit, ordinary investigative audit.

“The Committee will have to state the specific matters to be covered in the audit. The Committee is to be specific and accurate where there are names of people, places, projects or programmes; and state the preferred timeline within which the report is required by the Committee,” he ruled.

Muturi disallowed the debate on a Progress Report that PIC had tabled last week and sought the House approval which would have given effect to its recommendations which included halting the PIIP until the watchdog committee concludes the probe on the matter.

He however allowed PIC Chairman Abdullswamad Nassir to on Tuesday present the progress report to the House in form of a statement after which MPs will be allowed to make brief comments on but it will not be subjected to a vote.

Majority Leader Aden Duale sought the ruling two weeks ago after he questioned the admissibility of the recommendation against the takeover of JKIA, which he termed as a fishing expedition because the proposed Cabinet Paper has not yet come to the House.

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