State corporation, National Oil technically insolvent amid Sh4 billion losses as its depending on the government’s support for its survival.
The National Oil Corporation of Kenya (Nock) is technically insolvent and its survival depends on financial support from the government, bankers, and its creditors.
In a report to Parliament, Auditor-General Nancy Gathungu stated that the state corporation’s losses grew to Sh4.03 billion in the fiscal year ending in June 2021, up from Sh3.06 billion in the prior year.
Its viability is in question because it lost Sh969.8 million during the reviewed period, compared to Sh494.5 million during the preceding financial year.
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.”
The firm’s award of a Sh405.76 million tender for the procurement of laboratory equipment has been noted as irregular by Ms. Gathungu in addition to the significant financial losses. Other dubious business practices at Nock include the irregular procurement of fuel supplies for Sh279.98 million, the questionable payment of employee allowances, the failure to repay statutory deductions, and the inability to file yearly returns.
According to the audit, a company was given a contract worth Sh405.76 million to provide and transport laboratory equipment (geochemical and physical).
However, a review of the procurement records turned up significant irregularities. All bids had to be bound according to the preliminary appraisal, however, the audit revealed that the winning firm had submitted a bid 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 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.”