Food agency stands to lose Sh3.1 billion to sugar companies

The Agriculture and Food Authority (AFA), a government agency, risks losing more than Sh3.1 billion in unsecured loans advanced to sugar companies without the authority of its board.

According to the Auditor-General’s office, the loans were advanced to the companies through the authority’s sugar directorate in the 2014/15, 2015/16 and 2016/17 financial years./.

Interestingly, there were no background checks on the companies undertaken by AFA before the loans were given.

The report shows that the loans were disbursed from the grants reserve that was created from the defunct Sugar Development Fund (SDF).

The amounts loaned to the sugar factories also remain a mystery.

The report could not confirm the figures every company was given because the auditors were not provided with the relevant information.

“No documentary evidence has been provided to show that due diligence was done on the firms before the loans were disbursed,” the audit report for the year ending June 30, 2018 says.

FARMERS' WELFARE

In the 2014/15 fiscal year, about Sh2 billion was disbursed, 2015/16 (Sh671.182 million) and Sh548.613 million in the 2016/17 financial year.

The report adds that the loans had not been captured in the authority’s financial statements, an indication of understatement in its books of account.

Though the report does not list the companies that were given the loans, there is indication that the amounts were for the improvement of cane growing for the country and farmers.

With the status of the farmers remaining the same even after the disbursement of the huge amounts, there are fears that most of the money may have been used to import cheap sugar even though the report does not explicitly say so.

The authority has also been criticised for irregularly varying the cost of constructing Tea Board of Kenya (TBK) buildings as well as the questionable renewal of medical insurance cover for its employees.

SHAKY CONTRACT

The audit notes that the authority awarded the contract to M/s Twiga Construction Company for the putting up of the TBK – now Tea Directorate – building at Sh343 million.

The form of agreement indicated that the contract would be for building and civil works.

But the addendum to the contract was not signed by the contractor, meaning the revised contract sums from Sh399.858 million to Sh422.3 million was not supported by a valid agreement, hence an audit matter that is yet to be explained.

According to the report, documents presented to the auditors show that the State agency entered into a one-year contract with the company for the provision of medical insurance cover at Sh83.2 million for a year.

On the expiry of the contract period, the authority renewed the cover without adhering to the law as stipulated in the Public Procurement and Asset Disposal Act.

This means that, in the auditors’ words, it is not possible to ascertain whether the authority got value for the money upon the renewal of the medical cover.