The ghost of Covid-19 scam at the tainted Kenya Medical Supplies Agency (Kemsa) continue to haunt the Kenyan government and risk having financial support from international global lenders frozen due to inaction against local firms implicated in the grand theft two years on now.
Now, the International Monetary Fund (IMF) has demanded fresh audit be conducted involving unaccounted Covid-19 related stocks Sh17billion out of the Sh173billion IMF gave to Kenya.
Although the Kenyan government committed to publicly publish names of directors and shareholders of companies doing business with government as a precondition to the Sh263billion loan, no action has been taken against those implicated.
Also, last year, it emerged the country could have lost tens of billions of shillings collected as contributions from persons of goodwill, corporates and public entities by the Covid-19 Emergency Response Fund (ERF) Board chaired by Jane Karuku.
Through shocking submissions made before the Public Accounts Committee (PAC) of the National Assembly, National Treasury, Principal Secretary Dr. Julius Muia revealed that the board was transformed into a private limited liability company by guarantee and the collected funds were not remitted to the National Treasury.
This points to possible daring pilferage of public coffers.
Effectively, the funds collected under the Public Finance Management Act were diverted to a private entity, Kenya Covid-19 Emergency Fund registered under the Companies Act contrary to the terms of engagement since a private company cannot be a custodian of public funds.
The Ethics and Anti-Corruption Commission (Eacc) seized the matter and forwarded the investigation files to the Director of Public Prosecutions (ODPP) involving Sh7.8billion procurement scandal two years ago.
However, no one has ever been taken to court since DPP Noordin Haji sent back the inquiry files to Eacc in what is largely interpreted as deliberate technical delays to frustrate the investigations within the criminal justice system.
It was expected that those mentioned adversely in the allegations of irregular payments relating to the purchase and supply of Covid-19 emergency equipment at Kemsa would be charged speedily.
However, some gaps identified by Haji in the inquiry submitted to him on September 18, 2020 prompted his decision not to move to court yet.
This EACC had recommended the prosecution of six senior officials of Kemsa.
Should Kemsa sell the PPEs at the current market price, taxpayers will still lose a whooping Sh2.3 billion, a fact confirmed by the Auditor General Nancy Gathungu, when she presented a special audit report on the utilisation of the Covid-19 funds by Kemsa to the Senate on September 30.
Besides inflating the commodities’ prices, Gathungu faulted Kemsa for failing to conduct a comprehensive needs assessment of the Covid-19 purchases, leaving it stuck with stocks worth about Sh6.34 billion in its warehouses.
The Auditor General said 97 per cent of the Covid-19-related stocks have been lying in the Kemsa warehouses for more than three months, suggesting inadequate market forecasting and planning by the managers of the state agency.
“By irregularly procuring items valued at Sh7,632,068,588 under Universal Health Care (UHC) and capital budgets without requisite approvals, the accounting officer and the management of Kemsa violated Section 68 (1) of the Public Financial Management Act,” Gathungu said.
On the Karuku chaired board, vide the Legal Notice of March 27, 2020, PS Treasury was to be the Funds Administrator but this was reversed.
However, it is not clear when this was revoked to the point Treasury had no representation in the board even before the board transitioned into a private firm.
Interestingly, vide the Legal Notice of 27/03/2020 which provided PS National Treasury was to be the Funds Administrator was controversially reversed.
It also remains unclear when the decision to fully disengage the PS was made to a point that there was no Treasury’s representative in the board even before it transitioned.
While appearing before the Opiyo Wadanyi chaired committee, Muia laid it bare that the emergency cash collected by the task force is not reflected in the Treasury’s books of accounts.
“Treasury was kept off and we cannot authoritatively give the exact amount of the money raised by the board.” Muia said.
The Karuku chaired board was established by President Uhuru Kenyatta under the Public Finance Management (COVID-19 Emergency Response Fund) Regulations, 2020.
The board was mandated to manage funds collected locally towards the pandemic.
Muia told a parliamentary committee that his office was kept in the dark and came to know of the operations of the fund through the Auditor General Nancy Gathungu’s report into the expenditure of Covid-19 funds.
“Is it a fund under the PFM Act or another mongrel? There can never be two ways to it. We are still at a loss as to what this animal really was.” Wadanyi observed.
The PS also told PAC Treasury received Sh224 billion from various sources between the period to manage the pandemic.
From that amount, the country received Sh113 billion from the World bank, Sh78.3 billion from IMF, Danida gave Sh350 million while AfDB bank gave Sh22.4 billion. All were concessional loans.
Muia’s explanation was rebuffed by the committee members and the Parliamentary Budget Office (PBO) on account that the creation of the private limited company means the existence of two funds.
“The legal fund created under the PFM Act was abandoned in favour of a private entity whose creation is irregular,” PBO says in its presentation to the watchdog committee defining what a public fund is and how it should be managed.
“When the President set up the board, he relied on the technocrats in government including you the PS to have the job done legally. But you chose to sit back and watch irregularities committed,” said Wadanyi.
The is concerned that in contravention of the Public Finance Management Act, and the Legal Notice issued upon the formation of the fund, the board was transformed into a private limited company, despite being in charge of public funds.
Among others, the twelve board members were Karuku who also doubles as the Kenya Breweries Ltd Managing Director, Michael Joseph (Safaricom), James Mwangi (Equity Bank), Narenda Raval (founder, Devki Group of Companies), Joshua Oigara (KCB Bank), Jeremy Awori (ABSA bank) and Wachira Waruru (Royal Media Services).
Others were Mohammed Hersi (Pollmans Tours and Safaris), Phyllis Wakiaga (Kenya Association of Manufacturers) and Kennedy Kihara (Principal Administrative Secretary at the Office of the President).
Interior Cabinet Secretary Fred Matiang’i and Kakamega Governor Wycliffe Oparanya were designated as joint representatives of the government to the Fund.
The law required that the Treasury PS be the fund’s administrator but this was ignored and the office was never involved.
Muia could not explain why Principal Secretary in the Office of the President Kennedy Kihara was appointed the secretary to the board.
Wandayi, has indicated that the committee will hold a meeting with the Attorney General Kiahara Kariuki the Karuku and board secretary Kennedy Kihara to answer the legal questions arising from this matter.
By December 31, 2020 the board had collected Sh1.2billion.
The family of Mwangi has contributed Sh300 million to the Covid-19 fund.
His millions were part of Sh1.1 billion shot in the arm from Equity Group Foundation, with support from Equity Bank and Mastercard Foundation, which gave Sh300 million and Sh500 million, respectively.
The glaring revelations comes even before the infamous Covid-19 billionaires suspects involved in controversial dealings with the embattled Kenya Medical Supplies Agency (Kemsa) in which the government lost billions of shillings through controversial procurement of Covid-19 commodities are yet to face formal charges in connection with the saga.