State points out gaps in Health audit report

The government yesterday defended itself in the multi-billion shilling HealthGate affair, rejected the Health ministry's interim audit and said everything tendered and paid for has been delivered.

It said the Sh5.2 billion figure widely reported as suspect spending was greatly exaggerated and emphasised there was no inappropriate spending or procurement.

The affair, also known as Mafya House, has been a public relations nightmare for President Uhuru Kenyatta and his reelection strategists.

However, last night, Health CS Cleopa Mailu said, "The overview of our reply to the audit queries is that there was gross exaggeration of the figures involved; as well as application of inappropriate methodology. There is no figure of Sh5 billion that correlates with the audit queries raised by the Internal Auditor," he said in a statement to newsrooms.

The CS questioned the process and quality of the audit and said the internal auditor had not identified any fraud or misappropriation of funds. He said if the auditor had shared the report with ministry's management, as is standard practice, the ministry would have been able to comprehensively address the issues.

"We also note with concern that the Interim Financial Audit Report was not put through the standard internal processes that any interim audit report must go through. The same was made public even before the specific audit queries had been discussed and responses and reconciliations provided," Mailu said.

The CS said his ministry had combed through the document and concluded the noise the report has elicited was unjustified and not based on facts.

Mailu and PS Nicholas Muraguri were to appear before the Senate Health Committee today to explain the queries in the audit report, but information received last night indicated that this would be postponed.

The two were to appear Wednesday following reports of massive questionable spending amounting to Sh5.2 billion. They did not show up, citing short notice. They had asked to appear today.

"We have confirmation they will come tomorrow and we have asked them to come with answers and documents showing where that money is or [that] it was properly spent. Then they should as well show us," Senate Health Committee chair Wilfred Machage yesterday told the Star.

One of the contracts, for Sh1 billion with Estama Investment Limited to supply portable clinics was signed in July last year, although payments were made this year. Mailu said in a press conference on Sunday that Estama had already been paid Sh800 million, and there is a balance of Sh200 million.

The auditor had questioned why electronic tax register (ETR) receipts were not attached by Estama. Mailu said this was not necessary.

"In accordance with the tender requirements, tax compliance certificates and PIN numbers were provided by the supplier with the tender documents. Attachment of ETR receipts for the purposes of awarding a government tender is not a requirement," he said.

Mailu explained that four firms were contracted to supply food supplements required to augment others being funded by the Global Fund.
"The supplements were delivered and received by Kemsa (Kenya Medical Supplies Authority) for distribution to health facilities for ease of access by the HIV-Aids patients and other vulnerable populations," he said.
He added that payments to the suppliers were made on production of signed delivery notes by Kemsa on behalf of the ministry.
The government said a survey on nutrition status undertaken by the ministry indicated high cases of malnutrition in arid and semi-arid areas and other risky counties. As a result, it was agreed that the ministry urgently procure nutritional commodities to cater for at risk populations in dry areas and vulnerable populations living with HIV.
On the free maternity fund, Mailu said Sh586 million, not Sh889 million, had been budgeted. The difference of Sh302 million was made up of Sh118 million from the Global Fund, Sh66 million was for Kenya Medical Training College and Sh 117 million was for the Health Sector Support Project. It said these were wrongly lumped together as they are supposed to be accounted for under separate accounts.
"The payments of Sh586 million were made after settling all free maternity programme reimbursement claims amounting to Sh3.8 million from the counties for the 2015-16 financial year," Mailu said.

Nominated Senator and health committee member Zipporah Kittony confirmed the panel was preparing to invite more “persons of interest”.

“First we want to hear from Dr Cleopa Mailu and (Dr Nicholas) Muraguri. We invited them last week but they asked for more time,” she said.

The scandal has emanated from a leaked interim audit report for 2015-2016 by the ministry's head of Internal Audit Bernard Muchere.
He raised queries on expenditure running into billions, which the ministry was expected to explain before the report could be made public.
“The ongoing audit review on end-of-year procurements and payments has revealed pertinent issues which raise red flags on [a] possible fraud scheme that require your attention,” Muchere wrote to Dr Mailu on August 29 this year.
He also said unsupported pending bills amounting to Sh2.5 billion from the 2014-2015 financial year could be questionable.
“The pending bills should form the first charge in the subsequent financial year in line with Treasury circulars. Hence, the ministry should not have 2014-2015 bills,” he said.
The affair has also been linked to President Uhuru Kenyatta’s relatives after it emerged his sister Nyokabi Kenyatta Muthama and cousin Kathleen Kihanya are directors of a company that pocketed Sh41 million in questionable payouts.


Their firm, Sundales International Ltd, is listed on the Public Procurement Oversight Authority’s 2014 roll of “Disadvantaged Groups” that should receive preferential treatment when they bid for tenders.

On Saturday, the Star exclusively reported that Sundales, registered on September 12, 2013 — five months after Uhuru’s election — has been awarded government contracts running into hundreds of millions of shillings.

Between September 2014 and February this year, for instance, Sundales won at least five separate tenders from the Kenya Medical Supplies Authority — worth Sh270 million.