The National Oil Corporation of Kenya (Nock) is technically bankrupt, and its survival depends on the government, bankers, and creditors.
In a report to Parliament, Auditor-General Nancy Gathungu stated that the state corporation’s losses increased to KES 4.03 billion in the fiscal year ending June 2021, up from KES 3.06 billion the previous year. It lost KES 969.8 million during the period under review, up from KES 494.5 million in the previous fiscal year, casting doubt on its viability.
The report indicates that National Oil’s current liabilities of KES 8.95 billion exceeded the current assets of KES 2.65 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. The corporation is, therefore, technically insolvent. 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.” it reads.
Aside from the massive financial losses, Ms Gathungu has also deemed the firm’s award of a KES 405.76 million tender for the supply of laboratory equipment to be illegal. Other questionable transactions at National oil include KES 279.98 million in irregular fuel procurement, questionable payment of staff allowances, non-remittance of statutory deductions, and failure to file annual returns. According to the audit, a company was awarded the tender for supplying and delivering laboratory equipment (Geochemical and Petrophysical) for KES 405.76 million.
An audit of procurement records, however, revealed several anomalies. All tenders were required to be bound during the preliminary evaluation, but the audit revealed that the winning firm submitted a tender in a box file without binding.
Although the evaluation committee stated in its report that it was a minor change, the audit report states that it was part of the criteria that had to be met. Bidders were required to prove their financial capability at the technical evaluation stage, which was supported by audited accounts of their financial statements for the previous three years; 10 points would be awarded for compliance. However, the firm that won the tender received 10 points despite failing to submit audited financial statements.
The audit also specifies that bidders must demonstrate the maximum accumulated volume handled in the previous two years by demonstrating a gross turnover of more than KES 3 million in their audited accounts. Despite this, the corporation gave National Oil 15 out of a possible 20, despite its audited financial statements not being attached.
Bidders were also required to attach a list and curricula vitae of four key employees “for purposes of the tender if awarded”. However, National Oil received a total of eight points, despite the fact that, as detailed in the curriculum vitae, the majority of employees were not from the company.
Bidders were also required to demonstrate the delivery schedule – shipment – in weeks or months from receipt of the order, for which five points were awarded. “National Oil was given five stars, but no commitment was made on a delivery date.”
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