Audit reveals how brazen forgery bled Sh1.8bn from NYS coffers

What you need to know:

  • Procurement documents were forged, zeroes added in others to increase ten-fold the amounts to be paid, deliveries signed for without inspection and the payment system accessed irregularly.
  • The report also says that despite the revocation of Dr Nelson Githinji’s status as an accounting officer, the former director-general was still able to access Ifmis up to five months later.
  • Of the Sh791.39 million, Sh460.86 million was paid out on February 20, 2015, the day Mr Harakhe replaced Dr Githinji  as the accounting officer.

A combination of the manipulation of the government’s financial management software, outright forgery and neglect of duty enabled the theft of Sh1.8 billion from the National Youth Service, the Auditor-General has revealed.

Procurement documents were forged, zeroes added in others to increase ten-fold the amounts to be paid, deliveries signed for without inspection and the payment system accessed irregularly, creating a perfect environment for the theft that pervaded the service designed to create employment for youth.

An analysis of the Integrated Financial Management Information System (Ifmis) showed that passwords to the software were shared and controls were so lax that people whose access rights had been withdrawn could still log on to it, Auditor-General Edward Ouko said in a report he tabled in Parliament on Tuesday.

Mr Fredrick Munge Musembi, an Ifmis department employee who was not a defined user under the planning department, was reported as having set up the details of companies through which Sh791.39 million was fraudulently paid. The firms were set to receive another Sh695.4 million but these payments were stopped.

The report also says that despite the revocation of Dr Nelson Githinji’s status as an accounting officer, the former director-general was still able to access Ifmis up to five months later.

He did so 15 times between April and May 2015, most times at a few minutes to 6pm, by which time Government offices are closed.

The National Youth Service headquarters had its own Ifmis system and it was naturally expected that approvals would be made at the headquarters on Thika Road. However, some of its workers would sometimes log in from the National Treasury.

The agency’s deputy director-general, Mr Adan Harakhe, principal supply chain management officer Hendrick Pilisi and Ms Regina Mungai, a supply chain management assistant, also had access to Ifmis on Saturdays, which are not working days for the Government. “There is a likelihood that the users may have carried out suspect activities and transactions and feared detection from the other users on a normal working day,” the report says.

Mr Harakhe and Ms Mungai also appeared to have shared passwords.

On May 27, 2015, the two logged on to the same computer at the youth service headquarters within two minutes and 19 seconds of each other.
Mr Harakhe also logged into the system at the Treasury and 30 minutes later at the youth service headquarters.

This was two minutes after Ms Mungai logged in from the same computer.

This was the same month that the attempt to steal Sh695.4 million was made, with Mr Harakhe alleging that his password had been stolen and used to commit the money in the system the moment the Sh3.5 billion Supplementary Budget was used.

“These vulnerabilities could have contributed to the loss or attempted loss,” the auditor-general concludes.
According to him, there was outright forgery in the case where Sh791.39 million was stolen from youth service.

The payments were made to Reinforced Concrete Technologies, Roof and All Trading and Homes and Builders, which were all owned by Ms Josephine Kabura Irungu, the largest beneficiary of the theft from NYS. The payments were made for the materials purportedly supplied for the construction of a 3.5-kilometre road in Kibera.

SUPPLIERS FORGED DOCUMENTS

“All payments were based on supporting documents that appeared doubtful, inconsistent and forged which included: a circular dated September 30, 2014, Local Purchase Orders and Inspection and Acceptance Certificates,” the audit report says.

The forged circular was the basis for the start of the procurement.

The suppliers forged all subsequent documents. They also added a zero at the end of each delivery note, counter receipt voucher and inspection and acceptance certificate.

“The effect of the alteration on all the documents increased the expenditure from Sh79.1 million to Sh791.39 million,” said the Auditor-General. Ms Mungai told the auditors that she prepared the Local Purchase Orders but denied any involvement in altering them.

Of the Sh791.39 million, Sh460.86 million was paid out on February 20, 2015, the day Mr Harakhe replaced Dr Githinji  as the accounting officer.

When the companies that were paid the Sh791.39 million delivered the materials to the Kibera road project, the auditor-general said, a four-member Inspection and Acceptance Committee failed to do its job.
Its members were Mr David Alunga, Mr Chemos Ndiema, Mr Titus Livondo and Ms Jane W. Gichuki.

“They actually signed to have received/accepted goods and/or services without any evidence of conducting physical inspection,” the audit report says.

Curiously, too, there were 9,170 cases in which some youth shared national identification card numbers. A total of Sh19.46 million was paid out to them.