Sh2.3b lost in Kemsa Covid-19 procurement scandal-Auditor General

Auditor General Nancy Gathungu. [Elvis Ogina/Standard]

A report by Auditor General Nancy Gathungu on the procurement scandal at the Kenya Medical Supplies Authority (KEMSA) has revealed that Sh2.3 billion was lost in procuring Covid-19 medical supplies.

Gathungu, who tabled the report before Senate on Wednesday, revealed how billions of shillings were unaccounted for and how there was no evidence of budgetary approval by relevant authorities.

The auditor-general concluded that Kemsa irregularly utilized the Universal Health Coverage and budget to procure Covid-19 related items worth Sh7,632,068,588.

"The procurement process was not initiated based on need assessment and planning resulting in over-procurement of Covid-19 related stock worth Sh6.3b that is still being held at KEMSA warehouses. 97 per cent of the stock has been in the Kemsa warehouses for more than three months implying inadequate market forecasting and planning practices."

"The items were procured at a higher price as compared to the current market pricing implying that KEMSA may realize a loss of Sh.2,338,261,175 if the products are to be sold at the current market price," she reported.

The report also showed KEMSA's 2019/2020 budget did not have any allocation for Covid-19 related procurements, contrary to a letter addressed to Health Cabinet Secretary Mutahi Kagwe dated August 15, 2020, that said, KEMSA had utilized the Universal Health Coverage Budget (UHC) to fund the Covid -19 procurements.

The Auditor-General established that the Ministry of Health allocated Sh13 billion to the medical agency to finance UHC. Out of this, only Sh8.5b was disbursed to Kemsa.

"This is a clear indication of comingling of UHC and KEMSA capital funds both of which were irregularly used to fund Covid-19 related expenditures," she noted.

The audit also established that the management of Kemsa had violated provisions of the Public Procurement and Asset Disposal Act, 2015 and the Public Finance Management Act, 2012.

"Value for money given the inefficiency in the procurement process and the fact that 97 per cent of supplies procured were still lying in Kemsa warehouses as at the time of the audit, there was no value for money realised," it stated.

In her recommendations, Gathungu wants both the Directorate of Criminal Investigations (DCI) and the Ethics and Anti-Corruptions Commission (EACC) to conduct investigations to establish criminality on the procurement process and possible collusion between the management and companies that supplied the items.

The report also recommends that that KEMSA should withhold any further processing of Covid-19 related claims until an independent audit is done and appropriate action taken on those found culpable.

The Director Public Prosecutions (DPP) Noordin Haji had earlier appointed a six-member special team to conduct an independent review into claims of impropriety in the acquisition of Sh7.8 billion Covid-19 equipment.

His statement came just a day after the expiry of the 21-day report submission deadline by President Uhuru Kenyatta to agencies investigating the matter.

“I have appointed a team of senior experienced prosecutors to undertake an independent and comprehensive review of the inquiry file and submit their findings to me after which I will make a decision and inform the public of the progress within the next 14 days,” Haji said.