Treasury defends payments to firm outside original e-Citizen deal, cites contract revision

The National Treasury has defended nearly half a billion shillings in payments made to a firm not part of the original e-Citizen consortium, saying the firm’s inclusion followed a formal contract revision.

Appearing before the National Assembly on Thursday, Treasury Principal Secretary Chris Kiptoo explained that the payments, amounting to Sh492.1 million and USD414,299.60, were made to Electronic Citizen Services (ECS) following a contract novation that brought the firm into the e-Citizen framework.

He said the Directorate of e-Citizen Services took over platform operations in July 2024, and that a new agreement was initiated to formalise ECS’s role.

“The contract novation outlines the responsibilities of all the service providers under the governance of ECS,” Kiptoo told the committee.

The original contract, signed between the ICT Authority and three companies, Webmasters Kenya Ltd, PesaFlow Ltd and Olive Tree Media Ltd, covered system maintenance, support, and payment gateway services for the national digital services portal.

But the Auditor General raised concerns after discovering that hundreds of millions were paid to Electronic Citizen Solutions Ltd, a company not named in the initial agreement.

The audit warned that the move could create legal challenges and raise questions over the government’s accountability.

“This arrangement exposes the government to potential legal disputes that might arise from payments to parties not part of the contract,” the audit report stated.

PS Kiptoo, however, said the ICT Authority had not stopped working with the original companies and insisted that the entry of ECS was backed by law.

“The Directorate of E-Citizen Services took over the e-Citizen platform operations in July 2024, after which a contract novation was initiated to introduce Electronic Citizen Services (ECS) and its role within the consortium,” he said.

The Treasury PS also addressed another query in the audit report, which flagged Sh142.1 million and the full USD414,299.60 paid for the use of a payment gateway, fees the Auditor General found questionable, arguing the government should not be charged to use its own platform.

In response, Kiptoo clarified that the government does not own the payment gateway and that the contract had clearly outlined the cost of using it as a service.

He added that the terms agreed in the contract were fully honoured.

The audit further raised eyebrows over e-Citizen collections handled through an unlisted account under the name PesaFlow, which was not among the approved accounts for collecting public revenue.

Bank statements from Equity Bank showed that PesaFlow received deposits totalling Sh68.7 million and USD48.1 million across four financial years, from 2020/2021 to 2023/2024.

Kiptoo explained that these were agency accounts jointly opened by PesaFlow and Equity Bank for the sole purpose of collecting revenue on behalf of the government.

“It was stated that the two accounts, one in Kenyan shillings and the other in US dollars, were agency accounts opened by PesaFlow and Equity Bank specifically for revenue collection,” he said.

He assured the committee that PesaFlow had continued to remit all revenue collected to the official government account at Equity Bank, including the Sh68.7 million and USD48.1 million cited in the audit.

Kiptoo said that once the issue was brought to the Treasury’s attention, a letter was sent to Equity Bank requesting full details of the agency accounts and instructions were given to freeze the said account.

However, PS Kiptoo admitted that the relevant authorities failed to implement the prorated service charge as required, and instead used a flat Sh50 convenience fee, which resulted in the overcollection of Sh1.8 billion from taxpayers.