Revealed: Taxpayers lose Sh5bn in NYS-style Afya House theft

Principal Secretary in the Ministry of Health Dr Nicholas Muraguri (left) and former Ethics and Anti-Corruption Commission chairman Philip Kinisu. PHOTO | FILE 

By STELLAR MURUMBA, smurumba@ke.nationmedia.com

In Summary

• A leaked internal audit report says the theft, which is five times the infamous Sh791 million NYS scandal, also involved payments of millions of shillings to phony suppliers in the financial year (2015/2016).
• Top on the list of fraudulent transactions identified in the audit report was the diversion of Sh889 million meant to be disbursed to county governments to support the free maternity care programme.
• The Principal Secretary in the Ministry of Health, Nicholas Muraguri, did not deny the existence of the audit report, but dismissed the author as “incapable of understanding how government works.”

Estama was among private companies, civil servants and government departments that benefited from Sh889 million that was diverted from the free maternity programme at the expense of county governments.

Another entity that received the cash is Esaki Ltd, a company associated with former Ethics and Anti-Corruption Commission (EACC) chairman Philip Kinisu, which was paid Sh150.1 million of the diverted funds.

The ministry’s Global TB Fund Round 5 (Sh118.1 million), Vivo Ltd (Sh18.7 million), “Director KMTC” (Sh66.5 million) and “Director KEMSA” (Sh25 million) were the other beneficiaries of the diverted funds.

Dr Mailu had not responded to our queries on the mega scam by the time of going to press.

The audit says a whopping Sh515.7 million was lost through outright theft and double payments made under the National Aids Control Programme.

The amount was ostensibly used to buy food and rations, whose storage or use the audit could not confirm. Some Sh265.7 million of the total amount was paid to Co-op Bank — an action that the audit found to be expressly fraudulent.

“Co-op Bank cannot be a supplier of food and rations and yet the real payees were not disclosed,” the auditors say, adding that the department could not produce payment vouchers to help establish who the bank was instructed to pay.

The remaining Sh249.9 million was paid to four suppliers, including Life Care Medics (Sh201 million), for items that had been procured and paid for through Kenya Medical Supplies Authority (Kemsa).

The auditors have particularly flagged irregularities surrounding the procurement, noting, for instance, that while goods were purportedly purchased and paid for at the ministry headquarters, the same were received and stored in Kemsa warehouses, where a parallel procurement for similar goods had been made, “making it difficult to probe the two and raising the prospects of possible double payments for the same supply.”

The ministry also closed the financial year 2015/16 with Sh2.4 billion pending bills, which the auditors found to have mainly arisen from illegal overspending made in contravention of the Constitution and the Public Finance Management Act.

The auditors say the mountain of pending bills is particularly questionable because the government runs a cash-based accounting system — meaning that accruals or prepayments are not allowed.

“Based on the foregoing, the financial statements presented to the Auditor-General contain material mis-statement of approximately Sh2.4 billion in form of pending bills,” the auditors wrote to Dr Mailu in a separate memo dated October 10, 2016.

The Sh2.4 billion overspending is captured in a series of transactions running into hundreds of millions of shillings.

The ministry, for instance, spent in excess of Sh413.6 million to construct buildings, partly aided by illegal expansion of authorised allocations by a massive Sh350 million.

The audit says ministry officials manipulated IFMIS to effect the fraudulent transactions where two counties and 10 firms were paid money that the report says was not intended for the allocation.

Estama was among private companies, civil servants and government departments that benefited from Sh889 million that was diverted from the free maternity programme at the expense of county governments.

Another entity that received the cash is Esaki Ltd, a company associated with former Ethics and Anti-Corruption Commission (EACC) chairman Philip Kinisu, which was paid Sh150.1 million of the diverted funds.

The ministry’s Global TB Fund Round 5 (Sh118.1 million), Vivo Ltd (Sh18.7 million), “Director KMTC” (Sh66.5 million) and “Director KEMSA” (Sh25 million) were the other beneficiaries of the diverted funds.

Dr Mailu had not responded to our queries on the mega scam by the time of going to press.

The audit says a whopping Sh515.7 million was lost through outright theft and double payments made under the National Aids Control Programme.

The amount was ostensibly used to buy food and rations, whose storage or use the audit could not confirm. Some Sh265.7 million of the total amount was paid to Co-op Bank — an action that the audit found to be expressly fraudulent.

“Co-op Bank cannot be a supplier of food and rations and yet the real payees were not disclosed,” the auditors say, adding that the department could not produce payment vouchers to help establish who the bank was instructed to pay.

The remaining Sh249.9 million was paid to four suppliers, including Life Care Medics (Sh201 million), for items that had been procured and paid for through Kenya Medical Supplies Authority (Kemsa).

The auditors have particularly flagged irregularities surrounding the procurement, noting, for instance, that while goods were purportedly purchased and paid for at the ministry headquarters, the same were received and stored in Kemsa warehouses, where a parallel procurement for similar goods had been made, “making it difficult to probe the two and raising the prospects of possible double payments for the same supply.”

The ministry also closed the financial year 2015/16 with Sh2.4 billion pending bills, which the auditors found to have mainly arisen from illegal overspending made in contravention of the Constitution and the Public Finance Management Act.

The auditors say the mountain of pending bills is particularly questionable because the government runs a cash-based accounting system — meaning that accruals or prepayments are not allowed.

“Based on the foregoing, the financial statements presented to the Auditor-General contain material mis-statement of approximately Sh2.4 billion in form of pending bills,” the auditors wrote to Dr Mailu in a separate memo dated October 10, 2016.

The Sh2.4 billion overspending is captured in a series of transactions running into hundreds of millions of shillings.

The ministry, for instance, spent in excess of Sh413.6 million to construct buildings, partly aided by illegal expansion of authorised allocations by a massive Sh350 million.

The audit says ministry officials manipulated IFMIS to effect the fraudulent transactions where two counties and 10 firms were paid money that the report says was not intended for the allocation.