Up to Sh1.4b was stolen in NYS scandal, new audit now reveals

NAIROBI: The National Youth Service (NYS) paid out millions to a company five months before it was registered.

This emerged alongside the revelation that the money lost in the scandal was more than Sh1.4 billion.

A special audit shows an additional Sh609 million was paid out over and above the initial Sh791million initially found to have been lost.
The Auditor General's report notes Sh791 million was fraudulently paid out to three suppliers whose site details were irregularly defined by a Mr Fredrick Munge Musembi on various dates.

The suppliers, Form Home Builders, Reinforced Concrete Technologies and Roof and All Trading, are all associated with businesswoman Josephine Kabura.

"Form Homes builders received all its irregular payments of Sh218 million at least five months before it was even registered by the Registrar of Companies," the report says.

Reinforced Concrete Technologies and Roof and All Trading also started receiving payments about two months after they were registered.
"This highlighted a case of fundamental disregard for internal controls and an indication that due diligence was not done before these suppliers were awarded any business by the NYS," it adds.

The registrar of companies confirmed the suppliers are only recognised as business names and not companies or entities, meaning they are not bound by the Companies Act or the Registrar of Companies.

Records at the Registrar identify the proprietor of the three business as Ms Josephine Kabura Irungu. She received all the money amounting to Sh791,385,000.

The millions were received on account of the three business names via their corporate accounts at Family Bank Kenya Ltd at KTDA plaza.
"The payment of Sh791,385,000 was meant for materials supplied by the aforementioned three business names for construction of a 3.5-kilometre road in Kibera under the slum upgrading programme," the report notes.

Also, it notes there were other fraudulent payments totalling Sh609 million. The auditor said there were significant changes in the reporting structures and responsibilities at the height of the said theft. For instance, on February 19, 2015, the then NYS Director General Nelson Githinji was replaced by Mr Adan Harakhe.

"Subsequently, the next day, instructions were issued to the director of IFMIS at the National Treasury to define Mr Adab G. Harakhe as the Authority to Incur Expenses (AIE) holder for the NYS. This was the period Sh460,860,000 out of the Sh791,385,000 was fraudulently paid out," the report notes.

The audit also noted timing concerns especially between November 17, 2014 and July 20, 2015 relating to transfers, deployments and events affecting Mr Harakhe before his appointment.

"There is a likelihood that the loss and attempted theft mentioned later in this report was planned internally and externally long before the attempted execution date with or without the knowledge of Mr Adan G. Harakhe," the report notes. According to the audit, the scheme targeted Sh3.5 billion which was issued as the supplementary budget.

In 2014, procurement of goods and services, other than perishable foods, was centralised at the NYS headquarters and then distributed to field units on the basis of needs.

The audit covered the 2012/13 to 2014/15 financial years. It reviewed changes including sectoral, structural and accountability reporting that have happened at the institution.

It also reviewed both the Appropriation In Aid, that includes donor funds, and supplementary budgets, which include the extra allocations over and above what was initially budgeted for, and issued to NYS. The auditor also reviewed the internal controls, processes and procedures.