Auditor: Taxpayers losing Sh4.1m daily in repaying NCPB’s bank overdraft
The National Cereals and Produce Board (NCPB) is incurring upwards of Sh1.5 billion in interest and default charges on debts owed to KCB Bank annually, the Auditor-General has revealed.
Noting the loss-making body’s worsening financial situation, Auditor-General Nancy Gathungu reported that NCPB sunk deeper into overdrafts at the lender to reach Sh6.7 billion by June last year, after borrowing a further Sh1.29 billion to finance the government’s fertiliser subsidy.
In the 2020/21 report on the body mandated to manage national food reserves on behalf of the government, the Auditor-General observed that as NCPB losses rose by nearly 200 per cent during the year, its overdraft increased by 24 per cent from Sh5.4 billion in 2019/20.
“The bank overdraft is related to the government fertiliser subsidy programme that was being implemented by the board on behalf of the Ministry of Agriculture. As previously reported, KCB continues to charge 12.5 per cent interest and 10 per cent default rate on the outstanding loan,” Ms Gathungu reported.
The 12.5 per cent interest translates to Sh841 million per year, while the 10 per cent default charges translate to Sh672.9 million per year. In total, NCPB is incurring Sh1.51 billion annually on both charges, or about Sh4.1 million daily.
The report signed on September 2 noted that the overdraft is negatively impacting NCPB’s operations and liquidity.
“In the circumstances, the Board continues to incur default charges and interest on the bank overdraft balance of Sh6,729,563,152, which may affect its liquidity,” it states.
Red flag
NCPB’s revenues have also continued on a downward trend, reducing by 53 per cent in the year to June 2021 to Sh774 million from Sh1.66 billion in 2019/20.
The report observed that NCPB sales declined by Sh885.8 million during the year, even as it raised questions over some fertiliser and maize transactions in the Meru and Nakuru depots.
“Similarly, the operating loss increased from Sh1,098,935,685 reported in 2019/20 to Sh3,128,788,783 in the current year under review. In the circumstances, the Board may not internally generate enough revenue to finance its operations in future without relying on government support,” the report states.
The report further observes that while NCPB continues to face financial turbulence, it has debtors owing it nearly Sh800 million that has been outstanding for over eight years and which it may not recover.
“Included in the amounts are debts totalling Sh725.6 million that have been outstanding for more than eight years. Further, the gross balance of Sh1.6 billion also includes an amount of Sh115.9 million relating to staff debtors. Included in the staff debtors is an amount of Sh62.6 million that has been outstanding for more than eight years,” the report notes. BY DAILY NATION
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