NHIF scandal: Bosses feasted as patients suffered - Daily Nation

Documents expose tender games at NHIF

Friday December 7 2018

NHIF

National Hospital Insurance Fund CEO Geoffrey Mwangi (left) and Finance Director Wilbert Kurgat arraigned in Nairobi on November 28, 2018, over withholding of documents related to a Sh1 billion transaction. PHOTO | FILE | NATION MEDIA GROUP  

By BRIAN WASUNA
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When the National Hospital Insurance Fund (NHIF) floated a tender for a revenue management system, many hoped that the leakages that had plagued the insurer’s ability to deliver seamless services to members would be sealed.

Internal documents however show that that was the beginning of what appears to have been a scheme to siphon off more than Sh1 billion from the health insurer, as the system that was advertised for was not delivered despite seven bidders being led on to the end of a dud procurement process by the NHIF management.

The management, led by then Chief Executive Officer Simeon Kirgotty, wanted to bring on Web Tribe Limited, which trades as JamboPay, to offer payment services to NHIF without going through a competitive process.

So after Web Tribe Limited was eventually picked to instal an internally managed system, which would have cost between Sh400 million and Sh600 million, the contract it signed was for offering a payment solution to NHIF at a fee of between four and 4.5 percent of collections.

FRAUD

Between then and August this year, when NHIF eventually bought its own stand-alone system to which JamboPay would offer only technical support as expected of any vendor, up to Sh1 billion had been lost.

That money would have supported maternal healthcare across the country and taken thousands of children suffering from terminal illnesses like cancer overseas for specialised treatment.

A report submitted to the NHIF Board last week showed an elaborate bait-and-switch scheme through which JamboPay received the money at the expense of more than six million contributors.

The documents indicate that JamboPay has received Sh864 million as commissions for payments made through banks alone.

The Directorate of Public Prosecutions is convinced NHIF opted for the more expensive leasing arrangement to perpetrate and camouflage fraud.

The current CEO Geoffrey Mwangi and his Finance Director Wilbert Kurgat have since been taken to court over the withholding of documents related to the transaction and are out on bond. They have also been suspended from their positions.

PAYMENT

NHIF’s ICT department wrote to then CEO Simeon ole Kirgotty on January 31, 2014 asking for the acquisition of a system that could allow the insurer to manage contributions from its members through various platforms.

Two weeks later, the Fund advertised a tender for the provision of an integrated revenue collection system.

While 20 firms bought tender documents, only seven had applied by the February 21, 2014 deadline. Web Tribe, through its JamboPay platform, emerged the best bidder.

The contract that NHIF offered JamboPay, however, was not a purchase agreement as expected.

Instead, the firm was offered a contract for the provision of integrated revenue collection services. As per the 2014 contract, JamboPay first received a Sh49.5 million one-off payment from NHIF.

The IT firm was also to receive four percent of all bank, mobile money and agency contributions collected through its integrated system.

It was also to get a 4.5 percent commission on electronic card payments over a three-year period.

COMMISSIONS

Interestingly, the report presented to the NHIF Board last week also refers to the contract JamboPay signed in 2014 as one for “provision of integrated revenue collection system”.

When NHIF contributions shot up to an average of Sh2.3 billion from Sh800 million, the insurer renegotiated its three-year contract with Web Tribe.

Commissions for bank collections changed to 1.5 percent, mobile money collections to 3.5 percent, electronic card collections to three percent, and agency collections to two percent.

In November, 2015 NHIF tried to negotiate commissions to JamboPay for bank collections from 1.5 percent to a flat rate of Sh24.8 million a month.

The request was out of fear that commissions could rise higher with the growth of NHIF’s contributions. JamboPay refused to sign the agreement.

“The Finance and Investment directorate again requested a review of the bank charges from 1.5 percent to a fixed rate of Sh24,864,293. However, the service provider (JamboPay) declined to sign the reviewed contract and the 1.5 percent rate continued,” the report to the NHIF Board reads.

PROCUREMENT

It was only in February last year that then acting Finance and Investment director Joseph Mbuvi wrote to Mr Mwangi, who replaced Mr Kirgotty in 2016, suggesting the purchase of a system.

“The buying option will cost much less considered against the recurrent transactional model in the long run,” Mr Mbuvi said in an internal memo.

After consultations with the Public Procurement Regulatory Authority, NHIF single-sourced the purchase of JamboPay’s system for Sh495 million in June this year.

JamboPay had initially quoted Sh598 million for the system but agreed to give a discount of Sh103.5 million after being told that NHIF’s budget capped the purchase at Sh500 million.

This time, the contract signed for the purchase reads exactly the same as what was advertised in 2014 — provision of integrated revenue management system.

Under the new deal, JamboPay is to handle technical support for two years before a full handover to NHIF in June 2020.

The technical support will cost Sh26.3 million per year, but is part of the Sh495 million purchase price.

CHARGES

The JamboPay dealings are now at the centre of investigations the Directorate of Criminal Investigations (DCI) is doing in regard to NHIF.

Last week, Director of Public Prosecutions Noordin Haji instituted charges of conspiracy to defeat justice and disobedience of court orders against Mr Mwangi and Mr Kurgat.

During bail proceedings, Mr Haji instructed his prosecutors to inform Magistrate Francis Andayi that the NHIF investigations involving JamboPay dealings could unravel the loss of Sh2 billion.

Last evening, JamboPay CEO Danson Muchemi said they were “competitively contracted” by NHIF in 2014, and that they offer critical service to the Fund.

“The entire outpatient scheme relies on the service we provide,” he said, adding that there has “been no loss of funds through the electronic transactions switch services we provide to NHIF”.

He said that the switch sits between NHIF partner banks and the fund’s servers at Upper Hill, “enabling real-time transmission of payments”.