The Auditor-General said the Galana Kulalu food security project left taxpayers with a Sh75 million loss in the 2016/2017 financial year after part of the leased land sat unused.
In a report presented to Parliament, Edward Ouko said the National Irrigation Board leased 20,000 acres for the scheme but was only using 10,000 acres. He questioned why the board committed to the larger parcel when the model farm programme covered only half of it.
The audit said the other 10,000 acres remained idle and was not included in the model farm arrangement. It added that lease payments were still being made for the full 20,000 acres, which created an apparent loss of Sh75 million as at June 2017.
“It has not been possible to establish why the board leased 20,000 acres and only utilised 10,000 acres but making lease payments for 20,000 acres resulting to an apparent loss of Sh75 million as at June 2017,” Mr Ouko’s report said.
The auditors also said management did not explain why it took 20,000 acres when only 10,000 acres was required.
Ouko separately warned that Kenyans could end up paying more on the Sh7 billion loan from Bank Leumi of Israel that was meant to finance the project. He said several of the loan conditions were not in the best interest of taxpayers.
According to the report, the interest rate would be set by the bank from time to time depending on economic conditions. The borrower would also bear additional costs incurred by the bank in mobilising funds for disbursement.
The audit further stated that the National Irrigation Board had confirmed the bank’s books and account entries relating to the loan as correct and binding. It said the board would not be allowed to challenge any payment made by the bank or excuse itself from payment obligations under the agreement.
Ouko concluded that the terms were tilted in favour of the bank rather than the board.
