Cooking oil scandal costs taxpayers billions

Kenyans have lost billions of dollars in a government-backed cooking oil scandal, Auditor General Nancy Gathungu has said.

Gatugu is now calling on the investigative body to conclude its investigation so that guilty individuals and entities can be prosecuted.

She has just released the findings of a special audit into the multi-billion shilling scandal after a probe into the Sh15 billion project was called by the National Assembly’s Public Accounts Committee. Gathugu revealed Kenyans are stuck with high prices for cooking oil due to the troubled Kenya National Trading Corporation (KNTC).

The report said the government spent Sh14.45 billion to import 2807.806 billion 20-litre cans of cooking oil, of which only Sh12.05 billion was paid.

The report stated that 2,518,434 million barrels were delivered, but only 1,710,216 million barrels were actually received.

At the time of the audit, Gathungu said 603 containers, containing 807,864 barrels, had not yet been cleared. A physical count in February found 833,742 barrels. At that time, 301 barrels were unloaded short distances.

The report said the government received only Sh2.4 billion in revenue from the sale of 653,174 barrels despite spending Sh14 billion.

The report questioned how the entire process from conceptualization to budget approval and financing was conducted.

The Supplier is tasked with overseeing the liquidation process and stock release (inventory control) as outlined in the initial offer letter between Kenya Commercial Bank (KCB) and KNTC.

The report highlighted the role of the KCB, accusing it of entering into an agreement with the KNTC to provide it with credit to facilitate imports as part of a Sh100 billion plan covering various food items.

According to the Auditor General’s special audit report, there is no documentary evidence on how KCB was identified from government-approved banks. The Ministry of Finance has requested KNTC is available for selection. No audit is provided for the assessment process.

In his report, Gatugu said the KNTC board had asked its management to apply to the National Treasury for a Sh15 billion credit facility from the KCB.

“However, the Cabinet Secretary, National Treasury, approved on November 4, 2022, to allow a credit line of Sh15 billion from any government approved bank. No documentary evidence on how KCB was identified from the government approved banks and the evaluation process was provided for audit,” the report read in part.

KCB and KNTC signed an initial offer letter on December 7, 2022, for Sh10.77 billion instead of the approved Sh15 billion. Thereafter, the two parties signed a loan supplement letter on January 10, 2023, for a total loan amount of Sh24 billion.

“It is not clear why on December 7, 2022, KCB cannot provide the Company with “The National Treasury approved Sh15 billion, but only Sh10.77 billion was provided, and a month later on January 10, 2023, it was agreed to increase the amount to Sh24 billion,” Gathungu said.

The report also pointed out that there were irregularities in the procurement of collateral management services. On November 1, 2022, the KNTC Supply Chain and Logistics Manager wrote to the General Manager through an internal memorandum seeking approval to procure collateral management services using the restricted bidding method, which was approved on the same day.

Therefore, the process started a month before KNTC accepted and signed the offer letter on November 7, 2023.

“Sales of edible oil may not have met expectations,” the report said.