NHIF reverses Sh495m payment for IT system

NHIF acting CEO Nicodemus Odongo (centre) when he appeared before a House committee on October 23, 2019. PHOTO | JEFF ANGOTE | NATION MEDIA GROUP 

In Summary

• The audit report indicated that no evidence was provided to show that the requisite conditions set for using the method were met.
• The management was therefore in breach of the 2015 Public Procurement and Assets Disposal Act.

By SAMWEL OWINO
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The National Hospital Insurance Fund (NHIF) reversed a payment of Sh495 million it had made to an information technology firm for an Integrated Revenue Management System.

The money is part of the audit query that former Auditor-General Edward Ouko had raised in his report for the 2017/2018 financial year.

OVERSTATEMENT

NHIF, in documents now before the National Assembly’s Public Investments Committee, indicated that it had complied with the recommendations of the Auditor-General by reversing the payment of Sh495,205,588, which was part of the payment for the system from Web Tribe Ltd. The agreement to supply the system was reached on June 4, 2018.

Audit reports for 2017/2018 indicate that although the insurer had not acquired the system as of June 30, 2018, the total cost of the system was included as an addition to computers and related equipment, resulting in an overstatement of the equipment by Sh495 million.

“It is true that the total cost of the Integrated Revenue Management System was included in addition to computers and related equipment under property, plant and equipment even though the Fund had not acquired the system as at June 30, 2018. This was done on the basis that the procurement and contract for the provision of the services were entered into in the financial year 2017/2018 and therefore the Fund had an obligation to recognise the expenditure in the same period,” NHIF said in the documents signed by acting CEO Nicodemus Odongo.

PROPRIETARY

On the direct procurement of the system, which had also been queried by Mr Ouko, NHIF defended itself saying the IT firm had exclusive rights to the system.

Despite using the direct procurement method, the audit report indicated that no evidence was provided to show that the requisite conditions set for using the method were met. The management was therefore in breach of the 2015 Public Procurement and Assets Disposal Act.

“The Integrated Revenue Management System is highly customised and proprietary to the Fund with source code availability limited to the software provider,” said the Fund.

NHIF further pointed out that the task of the IT firm was a continuation of tasks it had previously performed because it did not want disruption of services and compatibility-related problems.