Rift Valley Railways is Bankrupt, says Kenya’s Auditor General

THE Kenya Railways is bankrupt. And its survival depends on cash from government and its creditors.

In a report to Parliament this week, the Government of Kenya’s Auditor General Prisca Komora said KR owed workers and creditors Shl3 billion.

Even after handing over its cargo and passenger services to Rift Valley Railways, KR still made a Shl billion loss last year.

Komora said: "The Corporation is, therefore, technically insolvent and the financial statements have been prepared on a going concern basis on the assumption that the corporation will continue to receive financial support from the government and its creditors."

He said the firm spent Shl billion yet there were no receipts or documents to prove the expenditure.

The report comes at a time when workers have paralysed the corporation's operations over unpaid salaries with MPs demanding that government cancel the 25-year concession contract with RVR.

The report cover the financial year ended June 30, 2007, almost a year after RVR took over operations.

On Thursday, transport assistant minister Harun Mwau told Parliament that RVR was facing financial problems and had breached the concession agreement.

According to Alego-Usonga MP Edwin Yinda, RVR was indebted to the Kenya Railways to the tune of Sh600 million.

He revealed RVR had failed to invest in the modernization of the railway services and was only trading on money generated from the assets it inherited from Kenya Railways.

Yinda said KR retirees who were supposed to be paid from money raised from the concessionaire were yet to be paid and were languishing in poverty while others had died without receiving their pensions.

According to Budalang'i MP Ababu Namwamba, services offered by the RVR were worse than when it was under Kenya Railways.

He claimed that since RVR took over the railways, all its workers were still on probation contrary to the initial agreement that they would be on a six-month probation.

According to the auditor general, lack of "prudent financial management" was among the problems facing the corporation. In a number of financial trans- actions audited, the auditor general says there were no supporting documents on cash either paid to or spent RVR.

For instance, out of Sh203 million said to have been advanced to executive staff, only Shl million had supporting documents with the remaining Sh202 million unaccounted for.
Another case is where out of Sh8.8 million paid as "advance general" only Sh6.8 million had supporting document leaving Sh2 million unaccounted for. RVR CEO earns a whooping KShs 4 million a month.

"These differences have not been reconciled," says the auditor general.