Tourism Fund management is facing scrutiny over Sh3.4 billion in interest penalties incurred due to delayed payments to a contractor involved in the construction of a building at Utalii College in Kilifi County.
The contractor has claimed Sh679 million for overdue payments related to the Ronald Ngala Utalii College project. Additionally, the fund is facing a penalty of Sh2.9 billion from various consultants who provided technical services.
A review of the consultants’ fee notes revealed ongoing interest charges for late payments on interim certificates. The project’s lead architect is demanding Sh961 million in interest penalties, while quantity surveyors are seeking Sh617 million. Civil and structural engineers are imposing penalties of Sh459 million, and mechanical engineers are asking for Sh724 million.
Auditor General Nancy Gathungu stated in her review of the fund’s accounts as of June 30, 2024, that these delayed interest payments will unnecessarily burden taxpayers. She emphasized that the interest charges significantly increase the overall cost of completing the project and dismissed management’s claim that insufficient project funding was the cause of the penalties.
Management cited delays in fund disbursements from the Treasury as a reason for rising project costs, noting that these penalties and interest were not included in the original Sh4.9 billion project budget, which had been reduced from an initial estimate of Sh8.9 billion.
Gathungu expressed concerns that the value for money from the project might not be realized due to the interest charges and reimbursement costs to consultants. She also noted that project completion delays raise further doubts about the effective use of funds.
Construction began in May 2013, initially budgeted at Sh8.9 billion with a completion target of June 2018. In August 2014, the budget was reduced to Sh4.9 billion with a revised completion date of February 2017. The contract was amended in April 2021, extending the timeline to June 20, 2024, but the audit found that the project was only 79% complete by November 2023.
Furthermore, a claim of Sh8 million from an electrical subcontractor has been questioned due to lack of analysis and support. The total certified work for the subcontractor was Sh303 million, with the Sh8 million claim lacking justification.
Gathungu also highlighted that the fund has not adequately addressed previous audit queries regarding the lawful and effective use of public resources. Management has failed to implement audit recommendations and has not provided proof of proper procurement processes for architectural and consultancy services.
She noted that no analysis was presented regarding the National Treasury’s capital grants to the college, nor was there clarity on the reduction of the project budget from Sh8.9 billion to Sh4.8 billion or whether Cabinet approval was obtained. Furthermore, no records were provided to link the Sh2.6 billion spent on consultants to legal payment rates, nor were contracts with the consultants available for audit review.
