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The Ethics and Anti-Corruption Commission (EACC) is investigating several governors and senior county officials involved in a fraudulent scheme to loot public funds through integrated automated revenue management systems.

Commission’s Spokesperson Eric Ngumbi said the commission was concerned that while revenue management systems are aimed at enhancing efficiency and sealing revenue loopholes, the systems are being abused to divert county revenue through collusion between senior county officials and the service providers, leading to loss of billions in revenues.

Kilifi County is the first to be caught in the scam whereby it risks losing over Sh103.8 million purported to be the purchase price for a revenue management system and subsequently, 25 per cent of its daily revenue collections to a private company called Aden Construction Company Ltd, which the Commission says has been procured in an irregular and illegal manner, and lacks the required technical capacity, competence and experience to undertake the intended automated revenue management and collection works.

Documents available show that Mustafa Mohammed Ramadhan and Hassan Kitheka are the directors of Aden Construction Company.

In what EACC says is an emerging graft pattern of automated looting of public funds through collision involving governors, senior county officials and proxy companies, contracts for revenue management systems are being designed with inbuilt corruption ranging from irregular tender award to fraudulent dealings within the automated systems for revenue collection and management works.

According to Ngumbi, investigations involving county governments have revealed that corruption that is being perpetrated through integrated revenue management systems begins with sham procurement processes in which the winner is predetermined.

“During tender evaluation, competent and renowned IT providers are knocked out on flimsy grounds while briefcase companies with no expertise at all secure the contracts at astronomical costs and rates of revenue sharing,” said Ngumbi.

 The successful but incapacitated bidders in turn hire competent providers to render the service at the market rates, and then proxy companies pocket the difference.

Revenue management system

The anti-graft agency has since asked Governor Gideon Mungáro to suspend implementation of the contract awarded to Aden Construction Company.

“EACC has asked Governor Mungáro and his officers to stop the planned payment Sh103,797,361.70 in the purported purchase of the revenue management system,” Ngumbi added.

The Commission has cited the Kilifi scandal as a classic example of high-level corruption embedded in the contract for a revenue management system.

Terming the tender as one with all the colours of fraud, the Commission says that its preliminary investigations have established that Aden Construction Company Ltd, does qualify for the revenue management contract.

According to its single business permit, Aden Contractors is licensed as a building and construction firm. The registering body is indicated as the National Construction Authority (NCA).

EACC has since revealed at least four loopholes deliberately created in counties to facilitate the theft of public funds through revenue management systems.

The private service providers have total control of the revenue management systems, with the county governments having no mechanism for ensuring accountability, which makes the systems easily manipulated to steal revenue.

In some cases, senior county officials have access and super user rights to the automated systems with authority to delete or edit revenue data leading to diversion of revenue.

Absence of mechanisms to reconcile revenue management systems where different service providers collect revenue for the county – this has adverse effects on accountability.

Some county governments have multiple bank accounts where collected revenue is deposited, in some cases, over 10 accounts.

As a result, many county governments are not able to meet their revenue targets with some doing worse in revenue collection than even local authorities that existed before them. Others have stagnated at the same levels despite increase in revenue streams.

To address this menace, EACC wants all counties and all county integrated revenue management systems audited to guarantee their security and accountability expressing fears that counties could be losing billions of revenues.