Sh9.7billion collected by Jane Karuku chaired Covid-19 Fund unaccounted, board converted into a private entity, PAC told

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, Public Accounts Committee of the National Assembly heard today.

In what points to possible daring pilferage of public coffers, the board was transformed into a private limited liability company by guarantee and the collected funds were not remitted to the National Treasury, Principal Secretary Dr. Julius Muia revealed.

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.

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However, it is not clear when this was revoked to the point Treasury had no representation in the board even before the board transitioned into a private firm.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.

Today, while appearing before the Ugunja legislator 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.