How illegal charges have exposed Sh9.4b hole in e-Citizen

Parliament has recommended the scrapping of e-Citizen following an audit report that the platform may have led to the loss of Sh9.4 billion in revenue.

The special audit tabled before the National Assembly Public Accounts Committee also details how Kenyans paid Sh2.6 billion in convenience fees for use of the platform owned by a private vendor identified as Webmasters Kenya Ltd.

Further, the audit found that there was the unauthorised diversion of revenue, citing Equity Bank statements for e-Citizen’s collection amounting to Sh6.3 billion from an undisclosed account named Pesaflow.

“This account was not listed among the approved collection accounts by the National Treasury. In this regard, the account was used to irregularly collect public funds. The total amount irregularly collected in this account could not be established, as the bank statements for this account were not provided for audit,” says the report tabled yesterday.

The committee is now calling for the termination of the contract between the government and the company, terming it a conduit for corruption.

“It is quite clear that if we love Kenya, we should not be using the e-Citizen platform. It lacks the basic structures. It should not be operational given that there are no documents to support its legality,” said committee chair, Tindi Mwale.

Aldai MP Marianne Kitany termed the platform a “crime scene”. “Where did Equity Bank come in when this is an agreement involving Treasury? We also have unaccounted for amounts of Sh6.3 billion, which we should invite the Treasury and the Department of Citizen Services to come and explain.”

The members called for a thorough investigation into the funds channelled through the platform and its ownership.

“We are staring at a monumental scandal. From page one of this report is full of issues. It is also worth noting, chair, that these days people are not using guns to steal but are doing so through such systems,” said Mathioya MP Edwin Mugo.  

According to the Business Registration Service (BRS), Webmasters Africa Ltd was registered in 2010 and is owned by Lexco Company Ltd, which has 50 ordinary shares, while James Ayugi Otieno has 50 shares. Others with one share each are Derick Onyango, Thomas Isack Juma, Robert Obel, Charles Karuri, Kenedy Oduory, Oketch Joash and Samuel Gomba. Abdala Twahir, James Kiarie Gachiu, and Sidney Ngunyi Wachira are directors with no shares.

The Office of the Auditor General report tabled yesterday says Webmasters was contracted to provide software development and maintenance in a consortium with Pesaflow Ltd and Olive Tree Media Ltd in 2017. 

BRS search shows that Olive Tree Media, incorporated in July 2010, has two directors: Charles Wambani Sewe and James Kabiru Kihia. The company's physical location is unclear, even though it has a Nairobi postal code. However, Sewe's address is in Kakamega.

A further search for the real owners of Lexco at the Registrar of Companies shows the company has 1,000 ordinary shares split between Abdala Twahir (400), Goldrock Capital Ltd (300), and James Kiarie Gachiu (300), while Godwin Wangondu is secretary and Sydney Wachira is a director with no shares. 

According to the Auditor General, Nancy Gathungu, Sh549.69 million was paid to a company named Electronic Citizen Solutions Ltd, which was not party to the agreement between Webmasters and the government. The company's details could not be traced in BRS. 

The audit also questions the legality of billions paid in convenience fees. According to a gazette notice of December 2014, the fee was to be a prorated percentage of the amounts paid. The report, however, noted that during the period before January 23, 2023, the National Treasury did not establish a prorating band.

Instead, the fee was charged at Sh50 or $1 per transaction.

The same amount was charged between December 14, 2023, and June 30, 2024.

“This led to an overcharge to the public amounting to Sh30.7 million for collections made through the previous gateway and Sh319.09 million for collections made through the unauthorised new gateway,” notes the report.

Further, the Auditor General shows how unauthorised transfers from the government’s M-Pesa paybill 222222 were made.

The money is expected to be auto transferred to the settlement account held at KCB Bank. However, a review of the paybill statements revealed that on January 25, 2024, four transactions of Sh127.9 million were made from the paybill account to private entities.

The report also exposes the government’s failure to develop a legal framework to govern and manage e-Citizen and a lack of clear governance structures.

“The National Treasury has not signed service level agreements (SLAs) with financial service providers engaged in the collection of and settlement of revenue. As a result, the financial service providers may be utilising the funds at the expense of service delivery by ministries, departments and agencies,” reads the report.

Gathungu notes that despite an agreement that the Webmaster hands over the platform, the government continues to rely on the vendor.

“It was not explained that the ownership and control of the e-Citizen platform ended back up in the hands of the vendor after having already been handed over to the National Treasury by IFC in 2017. Further, it was established that after the 're-transfer' of ownership by Webmasters Kenya Ltd in January 2023, the government did not obtain full control of the systems, resulting in continued over-reliance on the vendor. This creates a single point of failure and strategic risk in the delivery of public services to the Kenyan citizens,” says the report.