2.5 Summary of inherited buildings, Kenya counties total, March 27, 2013

TABLE 2.5 Summary of inherited buildings, Kenya counties total, March 27, 2013

BUILDING CATEGORIES

Identified

Without identification

Additional by CALC Disputed Buildings verified

Source: IGRTC 2018. Note: CALC = County Asset and Liability Committee. NUMBER % OF TOTAL

4,938 58.4

3,526 41.7

25 0.3

160 1.9

8,461 100.0

verified 8,461 buildings, of which nearly 60 percent had clear identification with a registration number, parcel number, and allotment letter number (table 2.5). Less than 2 percent of buildings were found as disputed because of illegally or irregularly allocated ownership or location of a building in illegally or irregularly allocated public land. Some disputes are between national government entities and counties.

Main observations regarding building properties. The following observations were gathered from IGRTC (2018) and interviews:

• Missing technical details and size of buildings. One major shortcoming on building inventories is that CALC teams have registered building complexes with multiple units as single units without indicating technical details, such as number of rooms in office buildings, number of dwellings in a building or in a compound, and, more important, the size of each unit and the total floor area of a building in square meters is either missing or inaccurate. • Value of the buildings not established or registered. Neither the historic book value nor present value net of amortization was established, while market value valuation was intentionally postponed for later stages due to the shortage of time. • Buildings listed without identification. These were inventoried without corresponding to a land registry, land identification, and adjacent land size. • Lack of ownership proofs. Some DLAs had constructed buildings on private land before completing the acquisition and left no proof of ownership. • Swap buildings for debt resolution. Mombasa County aimed to work out inherited liabilities and handed over housing complexes to statutory bodies such as the National Social Security Fund, the National Health Insurance Fund, or the

Local Authorities Pension Trust of the National Social Security Fund to eliminate debt. These were mainly housing estates (300 one-bedroom units, 144 one-bedroom units, and 144 two-bedroom units (IGRTC 2018, 27). These buildings are not included in the CALC lists (a sort of inconsistency, since the lists state that assets are verified as of March 27, 2013, while transfers or swaps have happened in subsequent years). • Valuable buildings are missing from lists. IGRTC experts suspect that a considerable number of valuable buildings, such as leisure centers, mountain lodges, and so forth, are missing from these verified lists, whether intentionally or by human error. • Missing inventory of buildings from the projects or works in progress inventory.

Buildings that were planned with approved funding and/or were under construction at the time of transition (March 2013) are either not recorded in the

building inventory or are simply accounted as verified buildings or extensions without reference to projects inventory. • Missing inventory of posttransition buildings. These would have been built after March 2013 and funded from development budgets of the new county governments, and they are not listed separately and some may be incorporated in the list of inherited buildings, especially when projects aimed to build extensions to existing schools, health centers, hospital wards, and so forth. • Missing inventory of divested buildings. These include buildings the incoming county governments had inherited but divested, transferred, or allocated other ways between March 2013 and August 2018.

Options for corrective measures include the following:

• Revise building registers to include all due technical and financial details as regulated in PFM law. • Segregate main groups of the building list: buildings, plants, network, and other infra- and superstructures. • Obtain identification and registration numbers for all buildings. • Conduct a forensic investigation of lodges in game reserves, natural parks, and mountain resort areas to find irregular allocation or illegal use or possession or appropriation of buildings. • Do valuation of buildings starting with those rented, leased, or being managed as revenue-generating commercial assets with present market value established for such commercial properties. Buildings used for core urban services and assumed to be undivestible (schools, health centers, and so forth) can be evaluated in simplified methodology and at a later stage. (Detter and

Fölster [2018] also suggest such a pragmatic approach.) • Commence investigating existence and present status of buildings that are supposed to have been completed after March 2013 from the list of projects or works in progress. • Develop a reliable inventory of buildings constructed from development funds of incoming county governments and cross-reference it with the building inventory of inherited assets (over K Sh 200 billion total value—see part II). • Investigate to identify buildings and develop an inventory of buildings the incoming county governments have divested, transferred, or allotted after

March 2013.

Projects: Works in progress At the time of dissolution, DLAs were managing 4,308 projects in different phases of development. By the time of CALC verification, 55 percent were completed, 27 percent were in progress, and 745 (or 17 percent) had not yet started as of March 27, 2013 (and possibly not after). The estimated fair value of completed and ongoing projects as of March 2013 was about K Sh 16 billion, a substantial amount of development funding.

CALC teams approached verification of projects with nonchalance. As a result, the IGRTC report has several shortcomings. First, it does not provide a list of completed projects that should have been incorporated and cross-referenced in the respective fixed-asset reports (buildings, structures, infrastructure, or equipment). Second, it does not provide progress details and a breakdown as of August 2018 (completed, ongoing, stalled, canceled) on projects that were works in progress in 2013. Instead, the summary just states that “some projects were completed, others stalled or still to be completed” (five years after transition?).

Third, teams failed to trace the fate of projects that had not started by transition date, simply concluded that most of these never commenced, but more interestingly, no explanation is provided about the funds that were set aside to finance them. Possibly, the incoming county governments simply used the funds for other projects such as urgent repair of offices, schools, or health facilities.

Main observations regarding projects or works in progress. The following observations were gathered from IGRTC (2018):

• The list includes the “fair value” of projects as of March 2013 without reflecting the actual, final value at the date of completion. • CALC teams found very unreliable data on projects, with lots of missing information. • Verification of status in 2018 and segregation of buildings, structures, and equipment from respective inherited asset files did not happen. • Completed projects represent over half of the projects or works in progress but were left in the project list because completion documents were missing, and some contractors did not hand over structures due to lack of payment or missing final administration. • CALC teams found little evidence about funds allotted for projects that had not started by March 2013 but may or may not have started later under incoming county governments. • Some of the projects could generate revenue from investments, but no segregated list has been generated, despite a risk of losing public revenues.

Options for corrective measures include the following:

• Commence investigation to clarify the status of each project and segregate results within regular inherited asset inventories. • Estimate the final actual value of projects and the present value of the built assets. • Commence forensic investigation to clarify the status of projects that did not start by transition and determine the disposition of allocated funds. • Install project management information and communication technology modules for easy and consistent recording of all details of construction projects currently and in the future (Makueni County offers a good example for such a module in part II). • Commence forensic investigation of projects that were aimed at revenue generation to clarify their status and reverse irregular transactions as necessary.

Motor vehicles Motor vehicles are defined as self-propelled road or off-road vehicles, commonly wheeled and used for transportation: ambulances, cars, combine harvesters, ferries, fire trucks, lorries, motorbikes, motorboats, pickups, tractors, and vans.

CALC teams verified 2,617 motor vehicles (table 2.6) without book values. Two-thirds of vehicles were found in serviceable conditions, a quarter had no engine or chassis or registration number, and 60 were sold or stolen.

Incoming county governments took over motor vehicles since they desperately needed transportation or movement. Not quite understandably, some counties left old and used vehicles unattended (“due to lack of transfer”), most in open air, and many were dilapidated by the time of CALC verification. Numerous logbooks were lost during transition; verification teams found several logbooks but failed to verify corresponding vehicles. Thus, it is wise now to look to the