The Tourism Fund is under fire for accumulating Sh3.4 billion in interest penalties due to delayed payments in the construction of a key project at the Ronald Ngala Utalii College in Kilifi County. According to a report by Auditor General Nancy Gathungu, these additional payments could have been avoided, leading to a substantial increase in the overall project cost. The fund has been accused of mismanagement, which may end up costing Kenyan taxpayers significantly more than expected.
The construction project at the college began in May 2013 with an initial budget of Sh8.9 billion, which was later scaled down to Sh4.9 billion. It was scheduled for completion in June 2018 but has faced repeated delays. As of November 2023, the project was only 79% complete, raising questions about whether the value for money would be realized from the expenditure.
Penalties and Interests Escalate
The penalties arise from delayed payments to the project’s contractors and consultants. The lead contractor is demanding Sh679 million, while various consultants involved in technical works are seeking Sh2.9 billion in interest penalties. Among the consultants, the lead architect is demanding Sh961 million, quantity surveyors are owed Sh617 million, civil and structural engineers Sh459 million, and mechanical engineers Sh724 million.
These interest penalties were not part of the original budget for the Sh4.9 billion project. Auditor General Gathungu has expressed concerns about the increasing financial burden on taxpayers due to these unnecessary interest payments. She noted that the penalties will likely escalate the overall project cost, putting additional pressure on public finances.
Project Delays and Cost Escalation
The delays in the project have been attributed to various factors, including budget constraints and delays in disbursements from the National Treasury. The Tourism Fund management has cited insufficient budget allocations and delayed funds as the primary reasons for the interest penalties. However, the auditor rejected these explanations, emphasizing that the delayed payments were avoidable and have had significant financial implications.
Initially budgeted at Sh8.9 billion, the project’s cost was scaled down in 2014 to Sh4.9 billion, with a revised completion date set for February 2017. In April 2021, the contract was amended again, with the new completion date set for June 2024. Despite this, the project remains incomplete, raising concerns about project management and efficiency.
The Auditor General’s report also highlighted that the delays have caused a significant escalation in the project’s cost. Gathungu noted that taxpayers may not get value for their money, especially given the interest penalties that were not budgeted for. She emphasized that the penalties could have been avoided had the payments been made on time.
Unresolved Audit Queries
In addition to the delays and penalties, Gathungu raised concerns over unresolved issues from past audits. She noted that the Tourism Fund has not satisfactorily addressed several queries relating to the lawfulness and effective use of public resources. Among these issues is the lack of documentation to justify the procurement of architectural and consultancy services. The auditor found no evidence that expressions of interest were publicly advertised, raising questions about the transparency of the process.
Furthermore, the fund has not provided a clear explanation for the reduction of the project’s budget from Sh8.9 billion to Sh4.9 billion. No records were provided to show whether the Cabinet approved this budget cut or to align the consultants’ fees with legally prescribed rates. Additionally, no contracts between the Tourism Fund and the consultants were made available for the audit review.
The report also highlighted a Sh8 million claim by an electrical subcontractor that was flagged for lacking proper analysis and documentation. This amount was part of a certified work value of Sh303 million, but the auditor found the Sh8 million claim unsupported, raising further concerns about financial oversight.
Conclusion
The Ronald Ngala Utalii College project has become a cautionary tale of delayed payments, mismanagement, and cost escalation. With billions in penalties already accumulating, the Tourism Fund must address these issues urgently. The Auditor General’s report underscores the need for stronger financial oversight
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