How taxpayers lost Sh14bn in irregular payouts by land agency

Cases of inflated as well as double compensation, and in some instances false claims, were exposed during the audit of the expenditure for compulsory acquisition of land for public use for the 2014/15 to 2016/17 financial years.

Among the allegedly fraudulent cases is Sh221 million paid for four properties along the Embakasi Station Railway Reserve yet NLC had already revoked the titles, suggesting it was public land.

NLC sanctioned acquisition of parcels worth Sh9.5 billion without conducting searches at the registry to confirm taxpayers were not paying private individuals for public land, or ensure the owners had acquired the property lawfully.

No official search

“NLC did not conduct official search prior to compensation which exposed the public to potential risk of irregular acquisition of public land that could lead to subsequent disputes and compensations for irregularly acquired land,” Auditor-General Nancy Gathungu says in the report.

The commission also paid out Sh7 billion based on valuation compensation schedules that were either not dated or signed.

In some cases, payments were made without evidence of valuation reports, which raised questions how the compensation amount was arrived at, or lands bosses merely approved figures quoted by landowners.  

Further, the investigation revealed that the NLC does not maintain a database of all public land acquired, which is contrary to the Land Act.

The law requires NLC to identify public land, prepare and keep a database of all public land, which should be geo-referenced and authenticated by a statutory body responsible for survey.

The seven state agencies that disbursed a total of Sh22 billion over three years are Kenya Urban Roads Authority (Sh6.6 billion), Kenya National Highways Authority (Sh5 billion) and Kenya Railways Corporation (Sh5.7 billion). Others are Lamu Corridor Development Authority (Sh2.5 billion), Tanathi (Sh1.5 billion), National Water Conservation and Pipeline Corporation, (Sh462 million) and the State Department of Housing and Urban Development (Sh135 million).

Undated valuation reports

The audit reviewed expenditure totalling Sh14.2 billion and established that in most cases, valuation reports provided by NLC management were neither dated nor signed. These documents, therefore, could not be relied upon to give assurance of lawfulness and prudent use of public funds.

The special audit on the accounts of the NLC was ordered by the National Assembly Public Accounts Committee (PAC) chaired by Ugunja MP Opiyo Wandayi. It unearthed the situation that has aided unscrupulous individuals to get paid by government for land that should not have been paid for in the first instance as it is public land.

In order to establish that the parcels to be acquired are not public land, the law mandates NLC to conduct official search at the registry to establish true ownership of the property. This was not the case in most of the transactions.

Searches were not conducted for the acquisition of parcels for various projects for which taxpayers forked out billions of shillings. The Eastern Missing Road in Nairobi cost the taxpayer Sh1.18 billion and Mombasa’s Dongo Kundu Road (Sh220 million), which was paid by KeNHA.

Land for the construction of Lamu Port, for which Lapsset paid Sh2.1 billion, Tanathi Water Services paid Sh1.4 billion for a parcel used for the construction of Thwake Dam. NLC also did not verify ownership of land for which Kenya Railways Corporation released Sh4.5 billion.

The approved development budget allocation for land compensation in regard to SGR for the three financial years was Sh29 billion. The Ministry of Transport released Sh17.7 billion. NLC recommended that the cash be channelled to the accounts of Kenya Railways, because it had inadequate human resource capacity to handle the SGR project.

A total of Sh12 billion was channelled to KRC while Sh5.7 billion was disbursed to NLC. The two entities paid out a total of Sh16.6 billion to people affected by the project (PAPs) but because the special audit was limited to what NLC received, the funds advanced to KRC were never looked into.

Remained unutilised

However, the audit established that land and development valued at Sh750 million that the NLC acquired at Sultan Hamud for the construction of the SGR station remained unutilised despite public funds having been incurred in its acquisition.

Another Sh221 million was paid for four properties that were said to be situated along Embakasi railway reserve even though the NLC committee on review of grants and dispositions had revoked their titles. This suggested the parcels were public land as there was no documentary evidence produced to confirm the ownership of the plots.

“In any case, payments for all the four parcels were effected through a company by the name Keboiwo Investments Ltd which had not been listed as owners of the said property,” says Ms Gathungu.

She added that is not clear why NLC effected payments to a company that was different from the one that had been listed as the owner of the property. NLC also received Sh6.6 billion from Kura for compulsory acquisition of land for the expansion of various roads.

Out of this amount, NLC spent Sh6.5 billion in acquiring land for the expansion of the Outer Ring Road (Sh3.9 billion), Eastern Missing Link Road (Sh867 million), Meru Eastern and Western Bypass (Sh676 million), Kisumu-Nyamasaria Road (Sh1.8 million), Lang’ata Road (Sh975 million) and Nairobi Northern Bypass Road (Sh35 million).

The audit only covered Outer Ring Road, Nairobi Eastern Missing Link and Meru Eastern and Western Bypass, which all amount to Sh5.5 billion, translating to 85 per cent of the Kura funding.

The Lands Acquisition Act requires that if the market value of land has been increased, or is currently increased by reason of an improvement made by the owner within two years before the date of publication in the Kenya Gazette notice of the intention to acquire the land, the increase shall be disregarded unless it is proved that the improvement was made bona fide and not in contemplation of proceedings for the acquisition.

Ownership not verified

In making the payments for the expansion of Outer Ring Road, the NLC did not verify ownership and lawful occupation of the land in regard to the two years’ prescription before recommendation for compensation was done.

“The management of NLC based their justification on the repealed Lands Acquisition Act and therefore not having a legal basis to apply this provision in processing land transactions,” the report states.

Further, NLC issued the letters of award without any independent confirmation of the accurate value of the land and developments as there was no adequate internal controls on valuation of property.

Also, there was no segregation of duties in valuations amounting to Sh1.4 billion and reports to ensure that valuations are counterchecked by another officer for objectivity, accuracy and fairness.

In the case of the Eastern Missing Link road, the audit established that NLC valued and awarded parcels of land and improvement amounting to Sh1 billion indicating the sizes, parcel numbers and value. However, the compensation schedule provided for review was neither dated nor signed by the valuer.

“In some cases, the size being acquired was not indicated which opened room for manipulation,” Ms Gathungu says, adding that the process lacked ownership, credibility and objectivity.

“It was not possible to ascertain the period when valuation exercise was carried out and the criteria used in determining of the value.”

In October 2014, KeNHA allocated the commission Sh1.2 billion, requesting them to acquire land for the construction of the Mombasa Southern Bypass and the Kipevu new container terminal link road. The cost of the acquisitions was Sh2.4 billion.

In June 2017, NLC paid Sh220 million to 188 Paps and another 117 awarded Sh1.06 billion have not been paid due to unresolved land succession issues and inconsistencies in bank details they submitted.

Ms Gathungu observes that ownership and lawful occupation was not observed.

NLC also received Sh2.57 billion for the acquisition of land for the Lapsset project. It had paid out Sh2.12 billion to 245 Paps by June 2017. But the schedule supporting payments was unreliable as it did not indicate the area acquired and in some cases lacked details of plot numbers acquired.

Further, NLC did not put out a notice of intention to acquire, which is contrary to the law, and that the land was not geo referenced and authenticated by the departments of survey at both national and county governments.

“Though NLC explained that surveying and demarcation of land for construction of port was carried by the Ministry of Lands, there was no evidence availed to support the assertion.”

The audit notes that NLC awarded entities for land amounting to Sh2.12 billion without evidence of confirmation of ownership and lawful occupation

The commission received another Sh2.9 billion from the Ministry of Water and Irrigation to acquire land for the construction of Thwake dam. By June 2017, the commission had paid Sh1.4 billion to 950 claimants.

In total, NLC valued and awarded improvements totalling Sh3.5 billion, which not only exceeded the approved budget by Sh500 million, but the compensation schedules provided did not indicate respective officers who carried out the valuation.