The National Treasury has defended payments amounting to nearly half a billion shillings to a company not part of the original e-Citizen consortium, saying the firm’s entry was formalised through a revised contract.

Appearing before the National Assembly’s Public Accounts Committee (PAC) on Thursday, Treasury Principal Secretary Chris Kiptoo said Electronic Citizen Services (ECS) was brought into the e-Citizen framework through a contract novation after the Directorate of E-Citizen Services assumed operations of the platform in July 2024.

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

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

However, a special audit flagged Sh492.1 million and USD414,299.60 paid to ECS, which was not named in the initial contract.

The Auditor-General warned that such payments could expose the government to legal disputes and questioned the accountability of the arrangement.

“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.

Kiptoo maintained that the ICT Authority still works with the original companies and insisted ECS’s inclusion was lawful. He also addressed audit concerns over Sh142.1 million and the full USD414,299.60 paid for a payment gateway, which the Auditor-General said should not have been charged since the government was using its own platform.

In response, Kiptoo explained that the payment gateway was privately owned and its costs were outlined in the agreement. “The terms agreed in the contract were fully honoured,” he said.

The audit also highlighted that revenue collected through e-Citizen was handled via an unlisted account under PesaFlow, not among the officially approved accounts for public funds.

Bank records from Equity Bank showed deposits totalling Sh68.7 million and USD48.1 million between 2020/2021 and 2023/2024.

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

“It was stated that the two accounts, one in Kenya shillings and the other in US dollars, were agency accounts opened by PesaFlow and Equity Bank specifically for revenue collection,” he said. He assured MPs that all revenue, including the amounts cited, had been remitted to the government’s official account.

The PS added that once Treasury was made aware of the issue, a letter was sent to Equity Bank seeking full details of the accounts, and instructions were issued to freeze them.

The session saw sharp exchanges between Treasury officials and representatives from the Auditor-General’s office over the audit, which examined financial years 2021/22 to 2023/24 and alleged that at least Sh10 billion may have been lost through the platform.

“To my knowledge, no money has been lost through e-Citizen. We are as interested as anyone else in establishing the truth, once and for all, so that Kenyans can have clarity,” said Kiptoo, who was accompanied by Principal Secretaries Bellio Kipsang (Immigration and e-Citizen Services) and John Tanui (ICT).

Kiptoo claimed Treasury had not been fully involved in preparing the audit and was not given the final report before it was tabled in Parliament, which he said limited their ability to respond

. But the Auditor-General’s office countered that Treasury had attended the exit meeting and was issued with a management letter.

“Before finalising the report we held an exit meeting, which PS Kiptoo attended. We have the management letter and official responses. I can go on record to say some of the responses tabled today were not submitted to us,” said a representative from the Auditor-General’s office. “In fact, some of the statements presented here contradict what was submitted earlier.”

PAC members said they needed more time to examine the PS’s submissions.

“To do justice to this report, we require thorough interrogation. There are many complex issues,” said Funyula MP Wilberforce Ojiambo. Gatundu South MP Gabriel Kagombe criticised some of the responses as incomplete, saying they did not address the audit’s concerns.

The audit had also flagged other issues, including lack of a legal framework to govern the platform, absence of Service Level Agreements, weak governance, irregular collection of convenience fees, and continued control of e-Citizen by Webmasters Kenya Ltd despite government claims of full acquisition.

It also noted delayed remittance of funds to government agencies and the Treasury’s irregular collection of Sh2.6 billion through a flat Sh50 convenience fee instead of the prorated rate set in a Gazette notice.

While PS Kiptoo insisted that the platform is now under full government ownership, citing a January 2023 handover agreement signed by three Principal Secretaries, the audit found that operational control remains with the vendor.

It also said no oversight body had been set up to coordinate the Interior Ministry’s Directorate of Citizen Services and the Treasury’s Government Digital Payments Unit as directed by Executive Order No. 2 of 2023.