Deceit, theft, clumsy and
sham
practices inform revenue collection

 

By Martin Masai

A report of the County Assembly of Machakos now details why the county is unlikely to meet its revenue targets.The report, dated March 2024 shows how county revenue collectors take cash from citizens without issuing receipts then enter the proceeds to the county payment till system. The revenue officers also take half the designated rates without issuing receipts.

The report is as a result of an inquiry by the assembly committee on Revenue Collection. The following are key observations of the committee

(i)            Collection of revenue in Cash: Revenue officers are still collecting of revenue in cash and later deposing it in the MPESA paybill. 

(ii)          Collusion and pocketing of revenue: Revenue officers, inspectorate officers, the Department and business people have been colluding to evade payment of revenue. 

(iii)       Inadequate services provided at County facilities: The County has not provides good services before collecting revenue thus leading to resistance in payment.  

(iv)        Inadequate guidelines of operations: In adequate guidelines have been observed.

The Anchor now brings excerpts of the report verbatim: 

 “This report on inquiry on the state of revenue collection within the county was informed by report on the financial statements of the
County as at 31^st December, 2022 which reported low revenue collections raising concern
whether the County will attain its revenue target for the FY 2022/23. The report indicated that the
county had managed to collect kshs.469 million translating to a
less than a third of the targeted revenue
of Kshs. 1.69 billion for FY 2022/23.

The Committee further compared revenue collections of the previous four
years as follows: FY 2018/19 Kshs.1.5
billion, FY 2019/20 Kshs. 1.3 billion, FY 2020/21 Kshs.1.2 billion and FY 2021/22
Kshs. 1.1 billion and noted
that revenue collection was on a downward trend.

The committee resolved to undertake an inquiry to establish the causes of
decline in revenue collection and if
possible propose suitable measures to enhance revenue collection. The enquiry was undertaken between February, 2023 and
May, 2023, through site visits and meeting with stakeholders. From its findings, the Committee observed the
following as some of the possible causes of revenue decline:

(a)          
Collection of revenue
in cash and depositing in Mpesa paybill later;

(b)         
Collusion and pocketing of revenue
by revenue officers;

(c)          
Inadequate services
provided at county facilities mainly at
slaughter houses and at quarries
where roads are in poor state;

(d)         
Inadequate guidelines of operations such as operating
hours for slaughter
houses, transportation of
quarry materials beyond working time
of revenue officers and failure to
pay officers overtime;

(e)          
Inadequate monitoring and keeping of records including
lack of gadgets to verify payment
of revenue via Mpesa and not keeping record of lorries from National Cement Company
that pass through the pay points;

(f)    
Laxity in revenue collection whereby the county has
not been collecting revenue from business people
including national cement company.

The Committee proposes
to the County Executive Committee
Member, Finance, Economic
Planning, Revenue Management and ICT to:

(i)           
Provide a report to the assembly on how it has
addressed the reasons /areas that have led
to decline of revenue collection.

(ii)         
Fully automate revenue collection across the county and embrace cashless revenue collection to reduce cases of
revenue leakage.

Establishment of the Committee

   The Finance and Revenue Collection Committee is a
sectoral Committee of the County Assembly
of Machakos established pursuant to Standing Order No. 190 whose functions pursuant
to Standing Order 190 (5) are
as follows:

(a)         
To investigate, inquire
into, and report on all matters relating
to the mandate, management, activities, administration, operations and estimates of the assigned
departments;

(b)        
To study the programme and policy objectives of departments and the effectiveness of the implementation;

(c)         
To study and review all county legislation referred to it;

(d)        
To study, assess and analyze the relative success of
the departments as measured by the results obtained as compared with their stated objectives;

(e)         
To investigate and inquire into all matters relating
to the assigned departments as they may deem necessary, and as may be referred
to them by the Assembly;

(f)          
To vet and report on all appointments where the
Constitution or any law requires the Assembly to approve, except those under Standing Order 184 (Committee on Appointments); and

(g)        
To make reports
and recommendations to the Assembly
as often as possible, including
recommendation of proposed legislation.

Mandate
of the Committee

In accordance with the second schedule
of the Standing Orders, the Committee is mandated
to consider all matters relating to the management of County public finance and revenue collection. In executing its
Mandate, the Committee oversees the following Departments which are under the County Executive Committee
Member for Finance,
Economic Planning, Revenue
Management and ICT;

(h)         
Finance;

(i)           
Revenue Management

 

Committee Membership

The Finance and Revenue
Collection Committee comprises of the following Members:-

1.                 
 Francis Kitaka                               – Chairperson and MCA, Ndalani

2.                 
Paul Wambua                                 – Vice Chairperson and MCA, Kibauni

3.                 
 Judas Ndawa                                 – MCA, Matuu

4.                 
 Jackson Ndaka                              – MCA, Tala

5.                 
Francis Kavyu                                – MCA, Kinanie

6.                 
 Philip Ndolo                                  – MCA, Mitaboni

7.                 
Hellen Ndeti                                   – Special
Elect

8.                 
 Daniel Muindi                               – MCA, Muthesya

9.                 
Paul Muli                                        – MCA, Kithimani

10.             
Grace Bahati                                   – MCA, Kyeleni

11.             
Lloyd Mutua                                   – Special
Elect

12.             
 Irene Mulu                                     – Special
Elect

 Anna Ndilo                                    – Special
Elect

 

 Background

Article 185(3) of the
Constitution provides that, a County Assembly, while respecting the principle of the separation of powers, may
exercise oversight over the County Executive
Committee and any other County
Executive organs. Pursuant to Article 185(3) of the Constitution, the Committee inquired
into revenue collection for the County as at 31^st
December, 2022 and observed that the County had managed to collect Kshs. 469,698,367 translating to a 27.2
percent of the targeted revenue of
Kshs. 1.69 Billion. This low collection of revenue made the Committee to look
into the state of revenue collection of the County.
The Committee further
noted that revenue
collection was on a downward trend since the financial year 2018/2019.
Table 2.1 presents data on revenue collection from FY 2018/19 to FY 2021/22.

Table 2.1: Trends of Own Source
Revenue Collection for the
last four Years

 

	Financial Year	Collection (Ksh)	Change
1.	2018/19	1,557,211,640.00
2.	2019/20	1,376,171,810.00	– 181,039,830.00
3.	2020/21	1,296,364,668.00	-79,807,142.00
4.	2021/22	1,118,461,753.00	-177,902,915.00

 

From Table 2.1, revenue
collection has recorded a declining trend from Kshs. 1.557 Billion recorded in FY 2018/19 to Kshs. 1.118
Billion in FY 2021/22. This phenomenon made the Committee carry out an inquiry on the state of
revenue collection in the County.

The objective of the inquiry
was to establish the causes of declining trend in revenue collection in the County
and to propose suitable measures to enhance revenue collection.

The Committee
resolved to undertake
site visits to observe the process of revenue collection and also where possible
interview different stakeholders who are involved in the revenue collection. The exercise was carried out between February,
2023 and May, 2023.

Investigation
into the causes of decline in revenue collection

The Committee carried out investigations on the state
of revenue collection within the County
through:

(a)          
Site visit to selected revenue
collection points and offices

(b)         
Meeting with various stakeholders

 

Site Visits

The Committee
conducted site visits in some selected revenue collection points as well as visiting revenue head office.
The areas visited were:

(c)          
Mutituni slaughter house on
10^th February, 2023.

(d)         
Katani and Lukenya
quarries and Movoko
sub-county revenue offices on 16^th February, 2023.

(e)          
Athriver Slaughter House on 17^th February, 2023.

(f)             
Mavoko, Lukenya and Matungulu quarries
on 16^th March,
2023.

(g)         
National Cement Company
Limited (Simba cement) Company
on 27^th March,
2023.

(h)         
Machakos County Revenue
Head Office on 6^th April, 2023.

 

Site visit to Mutituni
slaughterhouse

The
Committee undertook a site visit at Mutituni/Ngelani Ward in Machakos Sub –
County to check the mode of revenue
collection at the slaughterhouse and the Committee made the following findings:

(i)           
That the mode of revenue collection was not clear and
Members suspected that the revenue
collection was done in cash and deposited by the revenue clerks to a MPESA PAYBILL
1616160. The risk of this was that officers may deposit part of the collection and pocket the rest of the amount.

(ii)         
That the revenue officers could not verify whether the
traders had really paid the slaughterhouse
fees as they did not have a gadget to confirm the payment done by the traders. The risk was that traders could
edit the text messages. In addition, there was
no officer at the entrance area to check whether those who paid were the
actual ones who used the facility.

(iii)      
When, asked on the mode of revenue collection, the
officers stated that they receive cash and later deposit the amount in the paybill.

(iv)       
That revenue officers did not have a receipt book
since mid – October, 2022 when the new
paybill 1616160 was introduced.

(v)         
That there is no slaughterhouse manager to oversee
the operations.

(vi)       
That the officers slaughtering did not
have protection equipment.

(vii)      That the slaughterhouse
was in dilapidated state.

 

Site visit to Athi-river slaughterhouse

 

The Committee visited Athi-river slaughterhouse to check on the mode of revenue collection. The Committee made the following findings:

(i)           
That revenue collection was cashless using paybill 1616160.

(ii)         
That some customers who bring camels for slaughter get
services and pay later and this is a loophole which may lead to revenue loss.

(iii)      
The slaughterhouse operates
from 7.00 a.m. to 9.00 p.m. with camels being slaughtered
from 6.00 p.m. to 9.00 p.m. The revenue officer and meat inspector were overworked without overtime claim and this
may lead to compromise thus revenue losses. The officers indicated that the slaughterhouse could efficiently operate from

7.00 a.m. to 11.00 a.m. and from 6.00 p.m. to 9.00 p.m. for camels. This
calls for some guidelines of operations
to be put in place.

(iv)       
The Committee was also informed that the
slaughterhouse needed repairs, removal of the
asbestos roofing and water supply. The butchers had come together to repair the slaughter house and provide gun powder and
water using water boozers. This made it difficult
for the revenue officers to be firm when asking for payment of slaughter fees. There was need for the County Government to offer quality
services at the slaughterhouses if it wanted to continue collecting
revenue.

Site visit to Lukenya
quarry sites and Mavoko sub – county
revenue office

The
Committee undertook a comprehensive visit to Lukenya quarry sites because they
are among the key revenue sites in
the County on 16^th February, 2023, 16^th and 25^th
March, 2023. The Committee visited
the quarry sites to establish the number of trucks/lorries that leave the quarries everyday so as to compare
the same with the records that revenue clerks
had at the Lukenya
pay point / check point.

Among the
sites visited was one of the quarries operated by a company contracted by National Cement Company Limited (Simba
cement) to extract pozzolana (raw material) and
deliver to its factories along Mombasa road in Mavoko sub-county and at
Kaloleni in Mombasa. The quarry
foreman informed the Committee that, on average, the company could make 150 trips on tipper trucks per
day. At the rate of Ksh. 2,000 per trip per lorry, the County can collect Ksh. 300,000 per day translating to Ksh.
9,000,000 per month and Ksh. 108,000,000 per year.

The
Committee established that National Cement Company Limited (Simba cement) had contracted three companies to extract and deliver pozollana
(raw material) to them, implying
that, on average
National Cement Company
Limited (Simba cement)
was receiving at least 400
trucks per day. Each truck paying Kshs. 2,000.00 per trip, this translates to a revenue of Kshs. 800,000
per day and Kshs. 24 million per month. The revenue
collected from Simba cement on pozolanna alone would therefore be at least
Kshs. 200 million per year.

At the Lukenya quarries pay point/ check point, the Committee observed that:

(i)           
That the revenue clerks could not confirm whether a
customer had paid or not. The clerks
relied on the customers’ text messages. This was prone to manipulation and one text
could be used to clear many trucks
or trips.

(ii)         
That the enforcement officers manning the pay point /
check point, were colluding with the
traders by allowing them to pay half amount of the cess fee. This was discovered by one of the Committee members
who collected half the amount after pretending to be an
enforcement officer.

(iii)      
That the amount of revenue collected through the pay
point was very little. By noon that
day of visit, only 15 trucks had paid cess whereas, the committee had met over 100 trucks as it was going into the
quarries. In addition, while at the pay point and within an hour, over
50 trucks had made their way out the quarries.

(iv)       
That the officers
could not explain
some variations on the collections. The Committee compared
collections of Wednesdays and Thursdays of 1^st and 2^nd
and 8^th and 9^th
March, 2023 and observed that, on 2^nd of March, 2023 the officers
collected 13,200 while the other
three days they collected between Kshs. 26,000 and Kshs. 30,000 (see annex 2(a)&(b)).

(v)         
That the contracted companies delivering pozollana
(raw material) to National Cement Company Limited (Simba cement) and
other companies did not pay cess at the
pay point.

(vi)       
That transportation of pozzolana and other building
materials happened past 6.00

p.m. after revenue clerks and enforcement officers left work and this
occasioned loss of revenue.

(vii)     
The road to the quarry sites was in a deplorable condition.

 

The
Committee visited the Mavoko sub –
county revenue office to find out more on revenue
collection at Lukenya quarry sites and authenticate some of the sample receipts acquired
at the Lukenya pay point / check point. The Committee found out that some of

the
payments were not authentic because they never reflected in the revenue payment system. (See annex 1(a)&(b)). The
Committee took some samples of text messages and found that they were not reflecting in the system. For instance,
a truck had only paid cess four times
between 1^st December, 2022 to 27^th February, 2023. On
this particular day, 16^th March, 2023, the truck had not paid but it had acquired a receipt of payment.

Site visit to National
Cement Company limited
(Simba Cement)

Further, the Committee visited
National Cement Company
Limited (Simba cement)
Company to find out whether the Company was paying cess and through
which mode. The Committee found out that:

 

(i)           
The company utilizes between 2,500 to 3,000 tonnes a
day and each truck carried at least 17
tonnes a day. This implies that the company receives between 140 – 170 trucks a day. The Committee
observed that this information was similar to the information received from contractors at
the quarries of 150 trucks per day implying that in a month the company
should pay between
Ksh. 8,400,000 and Ksh. 10,200,000 per day and Ksh. 100,800,000 and Ksh.
122,400,000 per year.

 

(ii)        
That the company did not have documentation / evidence
of the payments it makes to the
County Government. The officer in-charge informed the committee that such documentations can only be obtained from the head office at Ruiru.

 

Site visit to
the Revenue Head Office at Machakos Sub-County
 

The
Committee made a visit to the Revenue Head office on 6^th April, 2023
to find out whether Simba cement
was paying revenue. The Committee found out the following;

 (i)           
That it was true that, the companies transporting
pozollana (raw material) to National Cement
Company Limited (Simba cement) and other manufacturing companies did not pay cess at the Lukenya pay point /
check point. This meant that the County was losing a substantial
amount of revenue.

 (ii)        
That Simba cement wrote to the County Treasury on 19^th
January, 2021 reminding it that there was an agreement entered
into between the County Government and National Cement
Company Limited (Simba cement) on 18^th May 2017 and which the County
Government seemed to be breaching
through frequent stoppage
of the company’s trucks by county officers
(see annex 3). In the letter, the company laments
that it had not been communicated to, if there were any changes or

cancellation of the agreement
and further commits that it will support
the County in investment and job creation.

 

(iii)       That the
company had been issued with an invoice of Kshs. 500,000 to pay quarry extraction fees on 4^th March,
2021. On the file copy obtained by the Committee, it was indicated that it was paid on 16^th March, 2021
but a receipt was not availed. In addition,
another invoice of Kshs. 264,000 for quarry extraction was issued to the company on 22^nd May, 2022 but
there was no evidence of payment (See
annex 4(a)&(b)). From the records
at the quarry site, over 400 trucks carried pozollanna daily and therefore, a payment of Kshs. 500,000 or Kshs. 264,000
per month was an under-estimation as this
was equivalent to daily
fees for the trucks.

 Responses from the
County Executive Committee Member – Finance

The
Committee requested information from the County Executive Committee Member for Finance,
Economic Planning, Revenue
Management and ICT vide letter ref: MKSCA/PSC/CMM/FRC/Vol.9/4 dated 10^th
July, 2023. The CECM was to provide the following information:

(i)           
That, while on a site visit to Lukenya
quarries and National
Cement Company (Simba
Cement) on 16^th February, 2023 and 27^th March, 2023 respectively, the Committee
learnt that, the company does not pay quarry cess fees like other companies
but pays quarry extraction fees as evidenced
by two invoices from revenue office dated 4^th March,
2021 and 17^th May, 2022. In addition, the Company complained to the County Treasury vide
letter dated 19^th January, 2021 that County Officers were stopping
company trucks frequently yet there was an agreement
entered between the company and the County on 20^th April,
2017 and the company was yet to
receive any formal communication reversing or on cancellation of the agreement. In addition, the Assembly has made various
recommendations on payment of revenue by National Cement
Company and that CECM should provide response on:

(a)              
What is the
status of the agreement entered into between the County and National
Cement Company ltd on 20^th April, 2017?

(b)              
A breakdown
of the fees that the company has paid for the FY 2022/23 with supporting documentary evidence.

The CECM, provided response
to the Committee vide letter ref: MCG/CECM/FIN/MKSCA/VOL.1/16 dated 17^th July, 2023 and stated as follows:

(i)           
There is no such agreement between the County
Government and the said company and
provided a report of the Finance and Revenue Collection Committee on Revenue Enhancement and Monitoring Exercise in
the County of the Second Assembly dated August, 2021.

(j)           
On the amount of
fees paid by the Company, the CECM informed
the Committee that the company
had been invoiced as per the report of the second Assembly.

 Report of Finance and Revenue Collection Committee
of second Assembly

 

The Finance
and Revenue Collection Committee of the Second Assembly carried out an inquiry
on revenue collection in the County and tabled a report titled Revenue Enhancement and Monitoring Exercise in the
County in August 2021. The Committee in observation number
4 stated that:

Exemption of cess for National
(Simba) cement was against the
provisions of Article 210 (1) of the
Constitution of Kenya which provides that no tax or
licensing fee may be imposed, waived
or varied except as provided by legislation. Article 185(1) of the Constitution of Kenya provides that the
legislative authority of a County is vested in, and exercised by, its County Assembly. The Department of Finance and Revenue Collection should commence collecting revenue from the company with immediate effect.

The Committee under recommendation 4 stated that:

 

Within thirty (30) days of approval
of this report, the Department of Finance and
Revenue Collection should
invoice National Cement
Company (Simba Cement)
and start collecting revenue and forward a report to
the Assembly.

The
Committee noted that the Department was required by the recommendations of the report to collect
revenue from the National Cement
Company and this was evidenced by the invoices provided to the Committee.

Committee Observations

 

Based on
the findings of the Committee during site visits and responses of the officers,
the Committee makes the following
observations that lead to decline and loss of revenue collection in the County:

(i)           
Collection
of revenue in Cash: Revenue officers are still collecting of revenue in cash and later deposing it in the MPESA paybill.
This can be collaborated by what
 the
Committee observed at Mutituni slaughter house and at Lukenya quarries pay point where
a Committee member posed as an
inspectorate officer and was given cash
by the drivers.

(ii)         
Collusion
and pocketing of revenue: Revenue officers, inspectorate officers, the Department and business people have been
colluding to evade payment of revenue. This was noted:

(a)          
At the quarries where a Committee member pretended to
be an inspectorate officer and the
truck drivers gave the member cash which was half of what was expected
to be paid as cess.

(b)         
Where National Cement Company is issued with invoices
that are under- stated by the Department of Finance, Economic
Planning and Revenue
Management.

(c)          
Where revenue officers fail to keep records of trucks
that National Cement Company uses to
transport quarry materials for ease of identification and the number
of trips the trucks make in a given
day.

(d)         
Where the Department fails to provide an accurate
system to quantify how much revenue the National
Cement Company should pay to the
County.

(iii)      
Inadequate
services provided at County facilities: The County has not provides good services before collecting revenue
thus leading to resistance in payment. This has been observed as follows:

(a)          
Business people
have come together to provide gun powder, water and undertake repairs of the facilities at slaughter houses.

(b)         
Roads to quarries are in poor state and the truck
transporters also resist payment of cess as they question
what service does the County
offer to

them.

 

(iv)       
Inadequate
guidelines of operations: In adequate guidelines have been observed in the following:

(a)              
Slaughter houses operate
from 7.00 a.m. to 9.00 p.m. leading
to overworking of the officers
whereas there is very little activity between

11.00 a.m. – 6.00 p.m. Stakeholders proposed operation hours to be from

7.00 a.m. to 11.00 a.m. and 6.00 p.m. – 9.00 p.m. but no one has taken up their proposal.

(b)              
Quarry trucks undertake transportation beyond 6.00
p.m. when revenue officers have gone
home as there are no guidelines of when should happen after 6.00 p.m. or when should transportation of quarry
materials take place.

(c)              
Failure to implement human resource guidelines for
overtime for officers working long
hours. Officers at the slaughter houses
work from 6.00 a.m to 9.00 pm without
overtime. Officers at the quarries
close down at 6.00

p.m. and leave their stations
unmanned while transporters continue to transport quarry materials.

(v)         
Inadequate
monitoring and keeping of records: There is inadequate monitoring of revenue collection at revenue
collection points. This was observed through:

(a)          
Failure to deploy an officer to verify whether all animals being slaughtered have been
paid for.

(b)         
Lack of gadgets to verify whether business
people have paid for the services needed
at slaughter houses and quarry pay points.

(c)          
Failure to keep records of trucking passing
through their pay points thus
relying on the information
provided by traders.

(vi)       
Laxity in revenue collection: The Department has relaxed in the collection of revenue
collection at Lukenya quarries the County lost revenue of approximately between
Ksh 100,800,000 to Ksh. 200,000,000 per year from National Cement
Company alone.”