National Oil insolvent amid Sh4 billion losses
A signpost at a petrol station branded by the National Oil Corporation.
The National Oil Corporation of Kenya (Nock) is technically insolvent and its survival depends on financial support from the government, bankers, and its creditors.
Auditor-General Nancy Gathungu, in a report to Parliament, said the state corporation’s losses increased to Sh4.03 billion in the financial year to June 2021, up from Sh3.06 billion recorded in the previous year. During the period under review, it recorded Sh969.8 million in losses, up from the Sh494.5 million recorded in the previous financial year, making its viability doubtful.
The report indicates that Nock’s current liabilities of Sh8.95 billion exceeded the current assets of Sh2.65 billion, thus worsening its financial situation. “These events or conditions, along with other matters, indicate material uncertainty regarding the corporation’s ability to continue as a going concern,” it reads.
“The corporation is, therefore, technically insolvent and its continued existence is dependent upon the financial support of the government, bankers, and its creditors, unless the management improves its performance to reduce reliance on financial support from the shareholders.”
Other than the huge financial losses, Ms Gathungu has also flagged as irregular the firm’s award of Sh405.76 million tender for the supply of laboratory equipment. Other questionable dealings at Nock include Sh279.98 million in irregular procurement of fuel products, doubtful payment of allowances to staff, non-remittance of statutory deductions, and failure to file annual returns. The audit shows that the tender for the supply and delivery of laboratory equipment—Geochemical and Petro physical—was awarded to a company at Sh405.76 million.
However, an audit of procurement records revealed several anomalies. Under the preliminary evaluation, it was a requirement that all tenders be bound, but the audit established that the firm that won submitted a tender in a box file without binding.
Although the evaluation committee indicated in its report that it was a minor variation, the audit report says it was part of the criteria to be adhered to. At the technical evaluation stage, the bidders were required to prove their financial capability as supported by audited accounts of their financial statements for the previous three years; 10 marks would be awarded for compliance. But the firm that won the tender was awarded the 10 marks without attaching its audited financial statements.
The audit also indicates that the bidders were to demonstrate the maximum accumulated volume handled for the previous two years, by proving a gross turnover above Sh3 million as demonstrated in their audited accounts. The corporation, nonetheless, awarded the firm 15 marks, the maximum, yet its audited financial statements were not attached.
Bidders were also required to attach a list and curricula vitae of four key employees “for purposes of the tender if awarded”. However, the firm was awarded the full eight marks, yet as detailed in the curriculum vitae, most employees were not from the company.
It was also a requirement for the bidders to demonstrate the delivery schedule – shipment – in weeks or months from receipt of the order out of which five marks would be awarded. “The company was awarded five marks yet no commitment was made on any delivery schedule.”
