REPORT OF THE KENYA FILM COMMISSION BOARD AUDIT COMMITTEE TO THE FULL BOARD OF THE MEETING HELD ON 11TH

May and 14th May 2012

The Board Audit Committee met on 11th May and 14th May,2012 to consider the internal audit report as prepared by the Commissions Internal Auditor and also conduct interviews with the departmental heads who were provided insights on the over expenditures as observed in the first and second quarter of this financial year. The Committee in fulfillment of this task interviewed the head of finance, the marketing manager, the procurement officer and the head of human resource and administration in the search for the justifications and clarifications as to what lead to the over expenditure.

The following was the deliberations and decisions reached by the Audit committee of the Board 1.0 Sponsoring policy The Committee noted that the Commission does not have sponsoring policy. This policy is to define the process to be followed in order to identify the filmmakers for sponsorships to the various events both locally and internationally. The proposed policy should spell out the types of support available to a film maker as well as state the applicable rates. This was found lacking in the Commission and therefore there is need for it to be developed. This will eliminate the ambiguity in identification of the film makers and the applicable rates used as is currently seen in the Commission. The Committee therefore recommends development of sponsoring policy. 2.0 Contingency The committee noted that there was no policy on how much contingency should be given to the employees who are assigned duties outside their normal place of work. In the last one financial year the employees are given huge amount as contingency money/funds. This in effect puts the employee under pressure to use the funds thereby providing an opportunity to present the Commission with not accurate receipts. The committee proposes that the contingency funds that can be applied by an employee of the Commission should only be capped to only 10% of the total imprest taken. The table below shows the contingency amount drawn:Date Imprest Event attended warrant No. 15/05/2012 Timothy Cannes Impest Holder Amount ExchangeAmount Rate in Kshs (USD) used 5,000.00 87.40 437,000.00

Owase 31/10/2011 Alex 0366 Mulwa 9/5/2011 Timothy 0222 Owase 30/5/2011 Alex Mulwa 9/12/2010 Alex Mulwa 0235 0094

International festival 2012 American Film market Cannes International festival 2011 AFCI locations show 2011 Dubai international film festival- 2010

4,000.00 104.5 5,000.00 88.5

418,000.00 442,500.00

5,000.00 90.15 1,000.00 84

450,750.00 84,000.00

3.0 Code of regulation provision on international travel. The Committee noted that the Commission does not have a policy on foreign/international travel policy. In view of this noted absence then the Commission relies on the provision of the section j3 on subsistence allowance when travelling on duty outside Kenya in the Code of regulation revised 2006. Subsection J.3 (2) states The rates of subsistence allowance which are payable for each complete period of 24 hours commencing from the time of departure from Kenya are designed to meet the cost of accommodation at good, but not luxury class hotels, three meals a day including service charges, local travelling (such as taxi, bus or train fare), incidental expenses including any taxes and an element in respect of essential entertainment. In addition, travelling expenses incurred from the airport of disembarkation to a hotel or other residential place and vice versa, airport charges, fees for vaccination, visas and passport charges will be refunded. The committee noted with concern that the provisions above regulations were being flaunted. A notable case was where the marketing manager presented taxi receipts, fuelling receipts and drivers allowance as part of the surrender of imprest given to him. The committee noted that the contents of the above regulation need to be disseminated to the staff members as soon as possible. This was seen as key in raising awareness of what should be allowable and what is not as far as imprest usage is concerned. 4.0 Communication between departments The committee noted that of the vote book balances are not available to all the managers/ budget holders in the Commission. This was identified as cause of some manager not knowing the balances on their votes at the time the commitment. The Committee proposes that the vote book system software be made available to all the CEO and all the managers. Further, the committee noted that there was a tendency where the holder of the budget is not consulted before his funds were committed. The committee proposes that all the funds should be committed only if the budget holder agrees the vote to be committed.

A case in point is where the Committee noted the human resource department was not communicated to about the error in the budget which affected the salaries of temporary staffs. This fact was communicated to the department only when it had engaged the temporary staff for another three months. 5.0 Signatory to the accounts The committee noted that one of the senior managers in the Commission is a signatory of the Commissions bank accounts. The manager in question runs one of the core departments of the Commission which accounts for huge portion of the Commissions budget. The departmental head not only approves the requisitions of his department but also is a member of the tender committee. The committee noted that this is a weakness in the Commissions internal control system and could lead to cases of conflict of interest. They observed that this vulnerability on the side of Commissions controls once exploited then the Commission stands to lose a lot of funds. The committee noted there is need to identify another signatory to the account especially from the departments which are not big spender and is not in the tender committee. This will ensure that more control and scrutiny is enhanced before a cheque is signed. 6.0 Over expenditure in international travel and accommodation. The Committee noted with concern that the vote had been over expend by a total of Kshs 1,385,019.00. This translated to 186% over and above the allocated amounts. The marketing managers justification that the CEO travel expenditures was not meant to be charged to the international travel and accommodation vote but to the research and advocacy vote could not be substantiated as he did not produce any evidence such as a copy of extract of the board minutes authorizing the use of the research and advocacy funds. It was further noted that the explanation given by the Marketing manager that the CEOs travel was not planned for from the beginning could also not be substantiated. This was after an examination of memo Ref. No. KFC/5/MEMOS/11 dated 24th October, 2011 from his department had included the CEO among the delegation that was scheduled to travel. Therefore the assertions by the marketing manager that he came to know about the CEOs travel on the day he was due to board the plane to the USA for the event were not factual. The Committee noted that this was a case where the management overrode the Commissions internal controls. The committee proposes that the management should religiously stick to the funds allocated to avoid the cases of over expenditure as was the case above. 7.0 Unsupported expenditures- American Film Market The Committee discussed the internal auditors findings as well as sought the clarification from the imprest holder. The following were the findings of the Committee. a) Kenya film reception expenditure.

The Kenya film commission organized a reception dinner for the filmmakers in the Los Angeles for a total of USD 3,407.89. The committees examination of the surrender voucher No 0426 dated 18th January 2012 revealed that the only proof of the expenditure was a statement/guest folio showing that banquets, audio visual and VLT park all at total cost of USD 3,407.89. However, the expenditure was not supported by the receipts from the hotel or a contract signed prior to provision of services. It was unanimously agreed that since the expenditure was not supported by receipts as is required by the government procedures, then the whole amount of USD 3,407.89 should be recovered as its propriety could not be ascertained. b) Drivers allowance USD 1,020. The committee was informed that Mr. Sam Okolji of the Kenyan consulate received a total of USD 1,020 as drivers fee for six days at a rate of USD 170 per day. The committee took note that the only supporting document attached to the surrender voucher as evidence was a signed letter showing that he received the money from the imprest holder. The committee noted that this was not sufficient and could not account for the expenditure since no invoices or receipts were presented as evidence of the said expenditure especially where the Commission has received services from suppliers. The Committee sought to establish how the rate of USD 170 per day was arrived at as there was no letter headed letter from the Kenyan consulate or a government circular specifying the applicable rates at the time of the transaction. Further, they noted that there was no letter of engagement spelling the terms of contract between the consulates driver and the Commission. These two documents were not availed for verification. Further, the committee noted that the letter showing that the money was paid out didnt have either the pass port number or ID number or even the staffs personal number. The committee agreed that since the expenditure was not supported with the necessary documents such as receipts, engagement letter and the recipients identity could not be ascertained then the amount of money paid to the driver should be recovered in full. c) Support to the Kenya film maker amounting to USD 1,000. Among the support that was given to Ms Jane Munene was USD 1,000. This amount was to be refunded by the Ministry of Information and Communication. However, no such monies have been refunded to the Commission at the time of the meeting. The marketing manager said that there was no follow up which had been done by the Commission to have the Ministry give us the refund. The committee agreed that the imprest holder should be surcharged if no money refund is gotten from the Ministry as initially agreed. d) Air ticket refund of USD 2,000.00 to Ms Jane Munene.

The Committee noted that the Commission decided to sponsor Ms Jane Munene travel to the USA at a cost of USD 2,000.00. This was meant to be in the form purchase of the air tickets to the filmmaker. The commission instead of purchasing the air tickets for the filmmaker resulted to giving her the money in form of cash. This is evidenced by the letter of acceptance by the film maker as the only attachment as the supporting document in the surrender voucher. The Committee wondered how a procurement process could have turned to be refund process to a filmmaker. It was not clear how the Commission can relinquish its role to procure and had it over to a third party who has not been authorized by the Commission. Further, the committee was not provided with the boarding passes and the photocopy of the film makers passport and therefore could not ascertain if the said film maker actually attended the function in the American film maker. The committee resolved that in absence of the boarding passes and the photocopy of the passport as the supporting documents then the amount shall be recoverable from the imprest holder. The Committee advised that in future the Commission should not let third parties procure on behalf of the Commission. e) Per Diem on the day of arrival.

The Committee noted that the officer who had travelled to the USA was scheduled to arrive back into the country in 12th November 2011. The per diem given to the officer as per the warrant No 136 catered even for the day he landed back into the country. The Committee found it irregular for an officer to access full per diem even when he landed into the country before midnight. It was observed that the officer should have been allowed to access only quarter per diem on the day of the arrival and not the full per diem as was the case. The committee took cognizance of the fact that the officer did not spend in a hotel on the arrival date and therefore there was no need for the officer to be given full per diem on the arrival day. The Committee recommended that the three quarters of the per diem which amounts to USD 315 should be recovered from the officer involved. NB: This report was deferred till the end of the current boards term which expires this August. It is understood that this was done under the persuasion of the acting board chair with a few board members insisting that it be known that they were not for the idea (as per the minutes)

OPEN LETTER TO MR. PETER MUTIE ON KENYA FILM COMMISSION MISMANAGEMENT

DR.BITANGE NDEMO P.S MINISTRY OF COMMUNICATIONS TELEPOSTA TOWERS NAIROBI, KENYA 18th June 2012 RE: OPEN LETTER TO MR. PETER MUTIE, CEO- KENYA FILM COMMISSION It is with a heavy heart that I pen this letter. Six years after a viable institution was set up, one cannot sit back and idly watch. For evil to take root, it only takes good people in society sitting back and watching events unfold. I hope this letter puts a stop to the evil that is happening at the Kenya Film Commission. It is common knowledge that Mr. Mutie was not the top candidate for this job and was placed there as a stooge to fundraise for the powers that be. Mr. Mutie, the following are concerns raised as far as managing the Commission goes; for ease of reading, I will place them in bullet form:

PER DIEM: You receive full per diem during the several foreign trips you make and YET you still take huge amounts in contingencies for refreshments and alcoholic beverages. Doesnt government have any guidelines on this? Can you give a full account of how you spent this so called contingency budget. You actually know that this is not allowed or is highly discouraged by government. In fact these days you dont even bother with approvals which clearly specify the maximum allowable amount for any trips. It is clear that this is how you are embezzling funds. It would be interesting to find out how much you and the Marketing Manager, Mr. Alex Mulwa have withdrawn in contingency amounts in the last 2 years, in addition to full per diem. AFCI: During the last AFCI Event held in Santa Monica, USA, you requisitioned payments to be done for a booth, construction of the booth and hire of the standall of which are ONE and the SAME thing! Yet we know for a fact that KFC did NOT have a stand at AFCI! Is this not defrauding the Commission and the government? You and your manager even presented photocopies of receipts from the U.S trip for reimbursement of USD 4,000. Has this amount been paid to you and can you account for this amount?

AUDITS: You get clean audit reports- do these auditors really check what is going on or have you compromised them? Do they check what activities your marketing team actually carries out and how you spend the international travel monies you have acquired over the years? There is a recent board audit committee on contingency spent by your marketing manager, Mr. Alex Mulwa. Why did your board defer this report until the board members terms expire? Why are you covering up for the manager? He presented fake receipts to the accounts department whereby he claimed he was paying a driver in the U.S 170 dollars a day and yet such a driver does not exist in the O.P office records- full board audit reports which will be circulated later will prove this fact. You are already a beneficiary of supplementary development funds from treasury for the last two years; can you account for these funds other than the foreign travel you are constantly engaging in? You have been advised by Treasury that this money is specifically for projects. But apparently you use ALL of it on travel. Where is the EMU in all of this??? MR. MAGERIA: Kindly explain who DISCOP is, how they were procured and and how many times KFC has paid money to them. Are they procured using government guidelines. What is MWANIKI MAGERIAs role in DISCOP? Is he a stakeholder? Apparently he is part of the entourage that will travel to attend this forum. He is constantly pushing for payments at the Commission and putting the Management under pressure to honor certain obligations. Is this not conflict of interest as a board member? For the record, he is the same person who pushed for the Balozi cheque of Kshs 300,000 three years ago. This issue was picked up by the external auditors because of lack of documentation and even resulted in questioning the character of the previous CEO, Mr. Maingi. Still on Mr. Mageria, there was a series of Kalasha audit reports compiled, what was the KFCs board recommendation? There is an issue of supplier interference surrounding Kalasha Awards. You arm twist suppliers before signing off their payments. Information reaching us shows that you interfered with the Kalasha procurement process, instead of a mere Kshs 8 million budget that was initially drawn up, it shot up to Kshs15 m budget . Almost DOUBLE the figures! Surely..sheer theft! Mrs. IVY MATIBA-CHEGE<CANNES TRIP: You were in Cannes, France for 15 days with your Acting Board Chair, Mrs. Ivy Matiba- Chege what was her role in Cannes and did you have to be there for 15 days? The KFC staff speaks of a deep intimate relationship between the two of you which leaves them totally at yours and her mercy. Did you secure anything for the film industry as a result of your prolonged stay there? During your interview for the CEO position, Mrs Ivy Matiba- Chege walked out stating conflict of interest and she was unable to interview you and now that she

Acting Board Chair is there still conflict of interest? Mrs. Chege is not a member of MOA and still sits on the board, who is she representing?

You claim that a co- production partnership with CNC was signed whilst you were in Cannes. This is as a result of processes that had been initiated by your predecessors and completed before you joined the Commission. So you cannot claim any credit for the CNC partnership. You also took credit for the ISO certification where you pulled down quality mission statements (that had already been signed by the Acting CEO prior to your appointment) from the walls in order to append your signature. Why does Mrs. Chege (Acting Chair) also head the HR and Finance Committee- isnt this a conflict of interest? This is obviously not good corporate governance and you are known to be in cahoots with her when it comes to administering the Commission. You always brief her a day before the scheduled board meeting. Are you possibly altering board minutes? Perhaps the former legal services manager can shed light on this. Issues that may endanger you are killed off by the Board Chair Mrs. Ivy Matiba Chege. MR. MULWA: Your Marketing Manager, Mr. Mulwa, who is known as your blue-eyed boy and partner in crime actually approves requisitions, sits on the tender committee and is a bank signatory!! He is known to put the finance department under alot of pressure to process supplier payments. He is so empowered, he gives the HR instructions on who to hire- you recently employed a driver from KTB who was not even the top candidateyou rejected the best two candidates for the position of driver. Obviously Mr. Mulwa knew this driver from his time at KTB. Also he recently recruited his wifes relative who is the new HR temporary assistant, Ms. Wanjiru Maina. You recently rushed for the creation of directorship positions in the name of restructuring the schemes of service/ career progression and even had it embedded in the proposed organogram. Was this to uplift the Marketing manager, MR. Alex Mulwa who even though is not a H.O.D, he is currently the Deputy CEO? You commissioned the internal audit manager to do background checks on suppliers are these the existing rules on procurement. After you and your Mr. Mulwa have identified suppliers, do you shove it down the throats of your other managers e.g why do you always place your radio ads on Radio Africa (Kiss FM). Kalasha ads are also in the Star newspaper and not mainstream newspapers like the Nation or Standard. Why???? Are these decisions forcibly implemented? Frequest expense claims are made by you from Cedars Restaurant where you are known to entertain Mrs. Chege, Mr. Mageria and anyone else who is greasing your palms. Clearly an intention to defraud the commission because you get paid an entertainment allowance- this is a double allowance. The entire film marketing vote is your personal per diem for you and your marketing manager Mr. Mulwa to eat from KFC. In every budget line, there is an element for the

two of you to benefit from. Infact the entire management is aware that budget approvals have to satisfy yours and Mulwas whims otherwise it will never be approved.

You temporarily employed a HR Assistant who is paid the same basic salary as the HR Officer (her supervisor, Ms Joyce Maingi). Infact this same lady earns more than permanent employees who have been working at KFC for 6 years. This favourable salary was as a result of instruction from the marketing manager, Mr Mulwa. Your Head of HR was also not the best candidate and it is known that you worked together previously. You obviously influenced her appointment. Is she there to intimidate people? She apparently hides documents for those employees who are not aligned to you so that they miss out on trainings and workshops. Are these your instructions? Still on HR issues, the procurement assistant, Mr John Kamanda still gets the salary of an office assistant despite having an appointment letter for procurement assistant; this is despite several appeals to you to rectify this anomaly. Recently you attempted to hound out Mr. Nathan Asiago from the office he occupies because you suspect him to be leaking information to the Stakeholders. You grabbed that office and allocated it to Mr. Mulwa who is a grade below the head of programmes, Mr Asiago. Inorder to save face, Asiago moved to the resource centre whereby you still hounded him there and have ordered him to vacate and move to the open plan office, failure to which he will bend sacked. We know that Asiago refused to vacate and you have threatened to sack him. Will he ever be able to achieve his targets given that he was on a prolonged probation period? In the approved government structure, Mr. Alex Mulwa is a scale below the Asiago. You really know how to intimidate junior officers- you directed the internal audit manager to investigate a receipt of Kshs 6000 for a carwash service carried out in Mombasa incurred by your own driver, Lennox Owino. The manager actually flew to Mombasa to investigate this receipt. Worse still, you are harassing the accounts dept about a receipt of Kshs 600 for water purchased for staff members during the Animation Expo, yet you systematically cover up for the Marketing Manager, Alex Mulwa even when the issues are brought to your attention at the board level. The person who fixes your personal car, the white Prado KAX also offers services to the Commission. He is a supplier and it appears that you are taking advantage of this service. Why do you use the official car to travel upcountry to your home in Masinga? Is this not illegal? This is probably why you are intimidating your driver, Mr Owino. Why have many people resigned enmasse from the Commission LIZZIE NJERI, RUTH KIHURIA, JENNIFER KAREITHI, CAROLE OMONDI, GORDON OYUGI, HILARY OTATI, COLLINS ODHIAMBO? It is said that all these individuals are hounded out by you and every single persons exit has a direct connection to you. Was Carol Omondi fired because she had sensitive and personal information about you especially on her neighbor whom you have vested interests in? And why did you involve the police in harassing Ms Omondi?

Do you into intimidate your managers by forcing their juniors to write reports about them with the hope of using the same reports against them You make very many foreign remittances to various organizations as identified by Mr Mulwa. Give us a list and the purpose of those funds and how you procure those organizations. You dumped the entire strategy plan for the Commission on your Head of Finance, Mr. Dennis Ratemo. Why havent the stakeholders validated this Plan? Mr. Ratemo is independent minded and because of that, you can never approve his participation or travel to any workshop since you joined the commission two years ago. You are frustrating him in order for him to resign. Any concept drawn up by him never credited to him, instead yothe present it to the board as yours and Mr. Mulwas e.g the Rotary concept paper, the PRSP model, CMS and others. You solicit funds from several suppliers and the proof is available. You employed a temporary company called Muinde and Co, what were they doing for KFC? Is this the reason why you keep revising budgets and having the board rubber stamps them? Is the PS aware of this? You spend before approval and have the board rubber stamp your budget changes. Which means the budget is forever being amended to suit your whims. You use KFC funds to attend PR related functions and you force staff members to attend workshops organized by your PR counterparts. Training kitty- only staff aligned to you have been trained and the proof is available. Relevant workshops are discarded and people are forced to attend irrelevant workshops/ trainings. You refused to pay an artist named Roy Kohadha and shifted goal posts on payment because of his recent FB postings accusing you of misdeeds. You killed the Kenya International Film Festival (KIFF) because of personal differences between you and its president, Charles Asiba.

Such impunity has to and MUST be addressed. The future of the film industry depends on this level of rot being weeded out! Regards, CONCERNED STAKEHOLDERS (Signatures Below) CC

Ethics and Anti-Corruption Commission The Prime Ministers Office The Permanent Secretary, Ministry of Finance The Permanent Secretary, Ministry of Information and Communication Controller and Auditor General The Chairman, Commission on Administrative Justice (Office of the Ombudsman) Parliamentary Committee on Energy and Communication

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