Edward Ouko uncovers Sh11 billion hole at Health ministry

Thursday March 08 2018

Former Health Cabinet Secretary Cleopa Mailu (right) with his former Principal Secretary Nicholas Muraguri. President Kenyatta has since given them new offices. PHOTO | FILE | NATION MEDIA GROUP


The Health ministry is unable to account for about Sh11 billion that it had been allocated, the Auditor-General says.

Corroborating an exposé by the Business Daily last year, the Auditor-General’s 2015/16 report shows that beyond the Sh5 billion that the ministry could not account for when the story broke, the expenditure of an extra six billion could not be explained.


The funds include Sh10 billion that was held separately by the ministries of medical services and that of public health prior to the merger of the two by President Uhuru Kenyatta after the 2013 General Election.

Also summed up in the figure is Sh1.3 billion which Mr Edward Ouko, the Auditor-General, says was misplaced.

The cash was paid out for goods and services that were not delivered such as container mobile clinics, medical supplies, equipment and expansion works of hospitals in contravention of the Public Finance Management Act, Mr Ouko says.


In the report for the 2015/16 financial year, the ministry also accrued bills worth Sh2.4 billion by June 30, 2016, which it failed to settle and instead carried over to the next year.

According to the report, the latest by the auditor, the Sh10 billion deposits that were held in former ministries were never transferred to the new ministry’s deposit account despite a circular issued by the National Treasury in September 2013 directing their transfers.


“The circular required deposits in former ministries to be analysed and transferred to a new account,” says Mr Ouko.

On the irregular payment on portable clinics, the report notes that while the ministry awarded a contract to supply 100 portable medical clinics at Sh10 million each, the total cost being Sh1 billion, the goods were never supplied as per the agreed timeline.

The tender committee, Mr Ouko says, further made payments of Sh800 million for the clinics before they were installed, commissioned and handed over, thus contravening the contractual agreement.

As a result, he says, it was not possible to determine whether the government got value for money for the expenditure of Sh800 million.

Stalled projects, including the proposed upgrading of Othaya District Hospital, also ate into the ministry’s budget, with most funds allocated for the project being unaccounted for.

In some cases, funds were paid for projects that had not been completed, or done in contravention of the agreed terms and conditions.

For instance, it was noted that while the government made overpayments for the upgrade of the Othaya hospital, works on floors, walls, windows, ceilings, doors, internal and external paintings and ramps were not completed.


Also left unfinished were the staircases, worktop and counters, road drainage as well as medical gas installation.

The contract awarded for the hospital was Sh501 million.

In the story exclusively broken by Business Daily on October 26, top Health ministry officials were said to have stolen more than Sh5 billion in an NYS-style corruption scandal involving diversion of funds, double payment for goods, and/or manipulation of the Integrated Financial Management System (IFMIS).

A leaked internal audit report showed the theft, which is five times the infamous Sh791 million National Youth Service scandal, also involved payments of millions of shillings to phony suppliers in the financial year 2015/2016.

At the time of writing, auditors had indicated that the amounts lost could have been higher because they were yet to complete work on the ministry’s transactions for the year.


“The small sample covered is an indicator that there could be a wider scheme wherein the ministry incurred huge losses to the detriment of service delivery to the public,” the audit report addressed to the then Health Cabinet Secretary Cleopa Mailu had said.

The release of the auditor-general’s report corroborates the details contained in the story that was dismissed and denied by ministry officials.

Top on the list of fraudulent transactions identified in the audit report was the diversion of Sh889 million set aside for county governments to support the free maternity care.

Estama Investment Limited, a company whose owners are not revealed in official records at the Registrar of Companies, was allocated Sh800 million to supply 100 portable medical clinics that are yet to be delivered 17 months after that financial year ended.

Estama was paid in three instalments, including Sh400 million on June 27, a transaction whose payment voucher could not be found during the audit.

The fact that Estama raised a separate purchase order for Sh200 million on June 30 and got paid the same day was another questionable aspect of the transaction.


Head of curative and rehabilitative services at the ministry Dr Izaq Odongo, on whose behalf payments for the clinics were signed, said the equipment arrived at the port of Mombasa but has not been distributed a year since being shipped in.

Two years down the line, the clinics have not been taken and installed in slums.

He could not explain the delay or even why the ministry made the full payment before the equipment was delivered.

The then Health Principal Secretary Nicholas Muraguri did not deny the existence of the audit report, but dismissed the author as “incapable of understanding how government works,” even as he threatened her with espionage and snooping on her private communication.

“I mean, you don’t know government. We can get what you write even before you publish it, including getting print-shots and screenshots of the story. Someone can be reading your messages while sitting here. If there is a need to hack Nation’s system we can. We can even confirm how much money is in your account now,” the PS said when asked to respond to the audit queries.

Mr Muraguri is now the PS in the Lands ministry after being transferred on March 31, 2017.

Dr Cleopa Mailu has since been nominated to be Kenya’s Permanent Representative to the United Nations in Geneva.

The Nation’s attempts to reach the two through their mobile lines were fruitless as our calls went unanswered.