How NLC made a mess of Sh24b compensation

Close to Sh24 billion released by the government for compulsory acquisition of land could have been misappropriated through illegal payments, a new report by the Auditor General reveals.

The audit, which was commissioned by the National Assembly’s Public Accounts Committee, established that the bulk of the money was paid out to owners of parcels whose value was highly inflated, or for false claims.

According to the report, the National Lands Commission (NLC) received Sh23.1 billion in its National Bank account from the government for compensation on compulsory land acquisition. The money earned an interest of Sh226.2 million.

Special audit report for the Financial Years 2014/2015-2016/2017, released by Auditor General Nancy Gathungu, shows that in most cases NLC did not conduct due diligence before making payments. 

In other instances, it over-compensated some land owners as it also made double payments or failed to carry out the exercise in a transparent and lawful manner.

In some instances, compensation was paid for public land because of failure by the commission to conduct a search at the Lands registry before making payments.

Report raises concerns that NLC, which was then headed by Muhammed Swazuri, does not maintain a database or register of all public land acquired contrary to Sections 8 (a) of the Land Act, 2012.

“In some cases, valuation reports availed by NLC management were not dated, not signed and could not therefore be relied upon to give assurance on lawfulness and effectiveness in utilisation of public funds,” the report.

Report adds: “Special audit prioritised acquiring institutions that had disbursed to NLC an amount of Sh22,194,554,938 as an appropriate sample size for this special audit. Out of this sample, an amount of Sh14, 287,579,994 was reviewed.” 

Government entities that paid NLC include Kenya Urban Roads Authority (Kura), Kenya National Highway Authority (KeNHA), State Department for Housing and Urban Development, National Water Conservation and Pipeline Corporation, Lamu Port South Sudan Ethiopia Transport (Lapsset), Tanathi Water Services Board and Kenya Railways Corporation, for various development projects.

Accurate value

With regards to the establishment of parcel numbers, sizes and independent confirmation of the accurate value of land before acquisition, the report shows that the valuation compensation schedule used to pay Sh7.7 billion was not dated and thus could not be confirmed.

Sh7.7billion was for compensation of land for projects such as construction of Lamu Port under Lapsset worth Sh 2.1billion, construction of Thwake Dam by Tanathi Water Services Board worth Sh3.6 billion, construction of Nairobi Eastern Missing Link roads and the Meru Eastern and Western Bypass at Sh867.6 million, among others.

“Under the circumstances, the special audit could not give assurance that the parcel numbers, precise sizes, and independent confirmation of the accurate value of land was established before acquisition and therefore the aforementioned expenditures were not incurred in a manner that was lawful and effective to guarantee value for money,” notes the report.

On over compensation, double compensation in different areas or false claims for compensation, the audit established that valuation reports amounting to the Sh7.7 billion projects were not dated, not signed or not availed at all thereby raising doubts on their reliability when effecting payments.

Report shows that the there was no evidence to indicate that NLC had conducted an official search at the Lands Registry to confirm whether parcels of land worth Sh9.6 billion had been lawfully acquired and were not public land.

Parcels in question include the Lamu Port, which gobbled up Sh2.1 billion, Thwake Water Dam at Sh1.5 billion by Tanathi, SGR land at Sh4.5 billion, the payment of Sh1.2 billion for the compensation of Eastern Missing Link roads in Nairobi by Kura, payment of Sh220.5million for the compensation of Dongo Kundu bypass in Mombasa by KeNHA, the compensation of construction of way leaves and tank sites in West Pokot county: Muruny ‘Siyoi’ Water Project of 71.6 million by NWCPC.

According to the Auditor, NLC should ensure that before effecting payments, there exists reliable valuation compensation schedules that are dated and signed.

Report raises concerns over the commission’s move to approve payment by KRC of Sh21.8 million for the acquisition of land of 12. 98 hectares for the construction of a station at Sultan Hamud, which was later relocated to Emali.

As a result the land acquired at Sultan Hamud remains unutilised, the report states.

Provides assurance

“Under the circumstances, the special audit could not provide assurance that NLC had confirmed that the aforementioned parcels were lawfully acquired and were not public land as defined by law.”

Audit also raises concerns that payments amounting to Sh221.4million were paid to a company, which had not been listed as property owners.

“On  December 15, 2016, another exception was noted where NLC vide cheque No.435, paid a total of Sh221,375,000 out of its NBK Account No. 01001032980000 for four (4) properties that were said to be situated along the Embakasi Station Railway Reserve. 

All the above payments were effected through a company by the name Keboiwo Investment Limited that had not been listed as owners of the said property. 

“It was not clear, the circumstances under which NLC effected payments to a company that was different from the one that had been listed as the owner of the property,” says the report. 

It notes that the taxpayer could have lost a total of Sh3.4 billion after the commission paid the money to land owners without establishing the true value of land parcels.

Payments, according to the Auditor General, were made between 2014 and 2016.

The report observes that ownership and lawful occupation in regard to the payment of parcels for expansion of Outering Road amounting to Sh3.9 billion was not done before the recommendation for compensation was done.

Acquisition was triggered by the need for expansion of the Outering Road. The road serves the public and is a link road from Northern Airport road to Thika Super Highway.

“The special audit established that NLC valued, issued award letters and paid out compensations amounting to Sh3,943,410,213 in regard to compulsory acquisition of land for Outering Road.

This was without any independent confirmation of the accurate value of the land and developments as there was no adequate internal controls on valuation of property and, there was no segregation of duties in valuations amounting to Sh1,495,450, 158 relating to Barclays Pension Service Limited (Sh14,431,350); Rafiki Export Processing Limited (Sh63,205,957) and LR N0.7879/4 (Sh1,417,812,851) and reports to ensure that valuations are counterchecked by another officer for objectivity, accuracy and fairness,” reads the report.

The auditor further accuses the NLC of utilising the Sh226.3 million interest earned from the Sh23.1 billion to supplement its operational budget and also cover administrative expenditures without any requisite approvals.