The National Youth Service scandal was worse — a lot worse — than initially thought, the auditor-general has found out.
The conspiracy to defraud the Government, and the taxpayer, was much broader and targeted the theft of Sh3.5 billion released in a supplementary Budget.
And the woman most closely identified with the scandal, Ms Josephine Kabura Irungu, was paid Sh1.29 billion and not Sh791 million as initially thought. In all, a total of Sh1.86 billion was lost, according to the findings of the Auditor-General, Mr Edward Ouko.
Ms Kabura operated 11 companies which received the money in fraudulent circumstances. She was set to receive another Sh695.4 million from the NYS but the payment was stopped, the Auditor-General says in a report tabled in Parliament on Tuesday.
In most of the cases, the companies were barely two months old, had no prior dealings with NYS, were not pre-qualified, were dealing in goods and services for which they were not officially registered and were all owned by Ms Kabura.
Ms Kabura has in court papers claimed that she operated the companies in partnership with then Devolution minister Anne Waiguru. Ms Waiguru has denied knowing Ms Kabura.
Mr Ouko details the manner in which officers at the NYS conspired internally and with outsiders to fraudulently pay out Sh3.5 billion allocated to the service in the Supplementary Budget for the 2014/2015 financial year.
For instance, on February 20, 2015 — the day Mr Adan Harakhe replaced Dr Nelson Githinji as the accounting officer — Sh460.86 million of Sh791.38 million that would eventually be stolen was fraudulently paid out.
Mr Ouko said the special audit had noted concerns in the timing of transfers, deployments and events affecting Mr Harakhe before his appointment as an accounting officer, and noted that they seemed sequential and could be related to the fraud.
“There is likelihood that the loss and the attempted loss... was planned internally and externally long before the attempted execution date, with or without the knowledge of Mr Adan G Harakhe, with the likely target being the Sh3.5 billion issued as supplementary budget to the NYS,” Mr Ouko said.
So poor were the controls that even after he was replaced as accounting officer, Dr Githinji was able to access the Integrated Financial Management Information System (Ifmis) up to four months later.
The Auditor-General recommended that criminal investigations be conducted against all officers involved in the fraudulent payments and action taken against them according to the law.
However, unlike previous audits in which he named the officers individually culpable, Mr Ouko did not do so in the report tabled on Tuesday.
Nonetheless, the revelations are likely to shine the spotlight on those, like Ms Kabura, who have been charged in court.
Ms Kabura caused a stir earlier in the year when she swore an affidavit implicating Ms Waiguru in the NYS scandal. However, Ms Waiguru has in the past said that she was a whistleblower who stopped the loss of millions from the NYS. In one case, one of Ms Kabura’s companies, Form Homes Builders, received all its irregular payments, amounting to Sh218.9 million, five months before it was even registered by the Registrar of Companies.
Other companies, like Reinforced Concrete Technologies and Roof and All Trading, started receiving their payments about two months after registration.
Mr Ouko said that “this highlighted a case of fundamental disregard to internal controls and an indication that proper due diligence was not done for these suppliers before being awarded business by the NYS”.
HIRE OF EQUIPMENT
The Registrar of Companies told the auditors that the suppliers were just recognised as business names and not companies, meaning it is likely that they were not bound by the Companies Act.
Through Form Home Builders, Reinforced Concrete Technologies and Roof and All Trading, Ms Kabura was paid Sh791.385 million. The money was meant for materials supplied by the companies for the construction of a 3.5-kilometre road in Kibera under the Slum Upgrading Programme.
Other companies associated with Ms Kabura that were paid a total Sh609.3 million were Brain Craft Trading, Big Kent Company, Classroom Technology, Essential Prodigy Trading, Gilnak Gen Suppliers, Smartboard Learning Equipment, Startling Trading, Tucking Stitch Emporium, and Brand Associates.
Their services were mainly hire of equipment, plant and machinery, and infrastructure and civil works. Big Kent Company and Essential Prodigy Trading were registered as trading in garments but were paid for civil works. Gilnak Suppliers were grain dealers but were paid for civil works, while Smartboard Learning Equipment were suppliers of learning equipment but were paid for hire of equipment and machinery.
Mr Ouko said the management of NYS was so bad that some Sh3 billion meant to pay the youth they recruited for projects, known as cohorts, was exposed to misappropriation.
More than half a billion of the money (Sh551.7) meant to be held in trust for the cohorts in savings and credit cooperatives (Saccos) was thus used to fund NYS operations and reimbursed in January this year.
The report will be scrutinised by the Public Accounts Committee before it is returned to the House for debate and possible adoption.