The Health ministry is unable to account for the Sh5.2 billion suspected to have been stolen a week before the release of a final audit report, an auditor told the Senate Health Committee on Tuesday.
The ministry’s internal audit head, Bernard Muchere, accused the accounting and procurement departments of denying his office documents on three major payments, saying he had been forced to rely on data in the Integrated Financial Management Information System (Ifmis) to generate an interim audit.
Mr Muchere said ministry officials had engaged in financial malpractices, including diverting billions of shillings meant for the HIV/Aids programme, free maternity and other projects. He also spoke of double payments to suppliers where billions could have been misappropriated.
“Prudent financial management requires that government entities procure only when they are sure funds are available, which was not the case when Sh200 million meant for free maternity services [was] paid to Estama Ltd that supplied the mobile clinics.
"A Sh350 million supplementary budget was also released so close to the end of the financial year, creating opportunities for fraud,” he said.
The auditor, who described himself as a “small man” and who has nevertheless been thrust to the centre of the suspected mega scam at the Health ministry, said he forwarded the audit to Health Cabinet Secretary Cleopa Mailu, who had requested it.
According to the auditor, who appeared before the Senate Health Committee chaired by Migori Senator Wilfred Machage, he was supposed to forward the complete report to Principal Secretary Nicholas Muraguri, but he instead gave it to Dr Mailu, who had requested to know about suspected fraud at the ministry.
He told nominated Senator Godliver Omondi that he was not driven by malice in handing over the report to Dr Mailu.
He said there were four suspicious payments in the interim audit, which included Sh515 million for the purchase of “food and rations” for the National Aids Control Programme, Sh265 million of which was irregularly paid to Co-operative Bank and Sh249 million to five firms although a similar programme was being funded by donors, leading to the risk of double payments.
On the Letter of Credit (LC) that the ministry opened at Co-operative Bank by depositing Sh265 million, Mr Muchere explained that a 1997 Treasury circular made it clear that LCs could only be opened for overseas suppliers.
“A Letter of Credit cannot be executed for local suppliers,” he told the committee when asked whether the ministry had put money in the bank for the benefit of the supplier, adding that the same loophole had been used in the National Cereals and Produce Board scandal that was associated with wheeler-dealer Jacob Juma, who has since died.
FINANCIAL PERIOD LAPSED
Mr Muchere told the committee that answers to his questions about the supplementary budget and the Letter of Credit came later.
He said it was irregular for the ministry to pay the money in the Co-operative Bank account because the law was clear that ministries had to bank with the Central Bank of Kenya.
Mr Muchere also told the committee that the Sh350 million supplementary budget was released to the ministry four days to the close of the financial year, when government procurement, which closes a month to the end of the financial period had lapsed.
“The Sh350 million appeared to have been spent although no payment vouchers were available,” he said and blamed the ministry for reallocating Sh530 million from the Sh800 million set aside for the “mobile clinics” to which Sh350 million was again added, before Sh647 million was paid to suppliers, leading to an over-expenditure of Sh418 million.
The Kenya Medical Training Centre is also reported to have misappropriated over Sh452 million after reporting Sh184 million in pending bills and a Sh268 million over-expenditure from its Sh2.2 billion budget.
The auditor also raised questions on whether Estama Ltd, which supplied the 100 portable clinics at Sh10 million each, was qualified to win government tenders, saying it did not supply Kenya Revenue Authority personal identification numbers (PIN) and Value Added Tax receipts, among other documents, suggesting it did not pay taxes.
Pushed by Dr Machage to explain whether the firm was qualified to undertake government tenders, Mr Muchere said he was shown PIN and VAT documents by Ethics and Anti-Corruption Commission officials, indicating the firm paid taxes, but was not given copies of the records.