Aug 1, 2021

Mawazo Writing Africa

Writing about the main

KICC faces auction over Sh450m tax debt, says auditor-general

It already owes suppliers Sh928.93 million, with about Sh686.32 million of that amount relatingto supplies made for the 10th World Trade Organization (WTO) ministerial conference held from December 15 to 19, 2015.

The latest damning financial revelations about the KICC, a state corporation, are captured in the 2018/19 report of Auditor-General Nancy Gathungu to Parliament.

Ms Gathungu notes that the corporation’s failure to pay the taxes may attract penalties and interest, making it difficult to settle the amount, given its largely nonperforming revenue streams.

“Failure to pay taxes when due could attract penalties and interest. There is also the likelihood of the corporation’s assets being attached,” Ms Gathungu said, even as she doubted the accuracy and authenticity of the pending bills figure, saying it had its own budget.

The amount due to KRA includes a tax brought forward of Sh22.99 million, reconciled tax by KRA demand letter of Sh413.53 million and tax due in 2018/2019 of Sh14.1 million.

The audit report, however, notes that the amounts were not broken down and that tax return documents were not presented for review.

KRA valuation

This comes after the corportation recorded a paltry Sh1.03 billion in revenue collected compared to the Sh1.35 billion that it projected to collect, painting a gloomy picture of the facility’s financial situation.

But even as KICC faces auction, Ms Gathungu has raised doubts over valuation of the corporation’s assets.

The audit shows KICC is worth Sh4.04 billion as per the valuation of its four categories of assets undertaken during the year under review that was submitted to the auditor-general.

“The valuer did not give a detailed report on how the valuation was undertaken and why the valuation, particularly the freehold land and buildings seem to be undervalued, compared to current market values,” Ms Gathungu says in the audit report.

A breakdown of the valuation that cost the taxpayer Sh7.6 million, as depicted in the audit report, shows that the freehold land on which KICC stands is worth Sh2.3 billion.

The buildings are worth Sh1.66 billion, furniture Sh21.46 million and office equipment Sh55.25 million.

The value of the land excludes land commonly referred to as the Comesa parking area and courtyard, on which the first Kenyan President’s monument stands.

Ms Gathungu has doubted the figures saying the assets were undervalued.

Valuation figures for the four categories of KICC assets differ from amounts reflected in the financial statements presented to the auditors.

As per the KICC financial statements, KICC is worth Sh2.76 billion, depicting a huge variance of Sh1.28 billion compared to the figures in the valuation report.

Broken down, the freehold land has been valued at Sh1 billion, buildings Sh1.66 billion, furniture Sh81.26 million and office equipment Sh14.17 million.

Debt recovery challenges

As the State corporation experiences difficulties paying taxes, the audit report shows that it is equally unable to collect over Sh623.35 million which has been outstanding for over three years.

The bulk of this amount – over Sh60.65 million – is owed by government ministries, departments and agencies.

“The management’s efforts to recover these debts have not been fruitful,” the audit report states.

Out of the amounts owed, Sh36.1 million was accrued by a private secretary to retired President Mwai Kibaki after he failed to honour a tenancy agreement.

The private secretary, whose name has not been revealed in the audit report, occupied the 18th floor of KICC from July 1, 2013, three months after Kibaki retired after serving his two-five-year terms as the country’s third president, to July 1, 2016.

Ms Gathungu notes that the KICC management did not present the lease of agreement entered with the private secretary for review.

The audit report further notes that recoverability of the debt remains doubtful despite a provision for bad and doubtful debts of Sh23.62 million, “which appears inadequate”.

The National Assembly owes KICC Sh47.31 million, which the auditor-general says has been outstanding for “a considerably long period of time”.

The debt relates to the office spaces that the Parliamentary Service Commission (PSC) has rented for members of the National Assembly and senators since 2013, as well as the parking fees for their vehicles and aides.

Interestingly, the audit further notes that an inquiry and comparison with financial statements of the reported debtors showed that the debts were not recognised as payables or pending bills by the owing institutions.

This means that the owing institutions did not budget for the debts and that it will take a long time for KICC to recover its money.

The failure to repay the debts means that KICC’s reliable revenue streams are generated through credit sales extended to conference clients, government and private tenants and leased parking.

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