Special Audit Report of the Auditor-General on Utilization of COVID-19 Funds by National Government Entities
Summary
The Special Audit Report of the Auditor-General of Kenya on the utilization of COVID-19 funds by national government entities for the period 13 March to 31 July 2020, dated April 2021. The report covers the institutional framework, the National Treasury and Planning, the Ministry of Health and its headquarters spending, the referral hospitals and the COVID-19 Emergency Response Fund. In the Emergency Response Fund's cash transfer program, 97,515 persons benefited, 95,727 of them registered Mpesa users, with payments from Kshs 1,000 to Kshs 24,000; the audit found 38 payments to the same Mpesa number under different names (Kshs 72,000) and 7,850 beneficiaries sharing names on different lines, and without ID numbers could not confirm that the cash transfer funds reached bona fide beneficiaries.
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“Special Audit Report of the Auditor-General on Utilization of COVID-19 Funds by National Government Entities.”
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SPECIAL AUDIT REPORT
OF THE
AUDITOR-GENERAL
ON
UTILIZATION OF COVID-19 FUNDS BY NATIONAL GOVERNMENT ENTITIES
FOR THE PERIOD 13 MARCH -31 JULY 2020
APRIL 2021
1
2
TABLE OF CONTENTS
LIST OF TABLES ............................................................................................ 4
1. EXECUTIVE SUMMARY ................................................................................ 8
1.1 Introduction ........................................................................................ 8
1.2 Objectives ........................................................................................ 8
1.3 Terms of Reference ............................................................................ 8
1.4 Scope of Work and Limitations ............................................................... 9
1.5 Structure of the Report ....................................................................... 9
1.6 Key Findings ..................................................................................... 9
1.7 Managerial Responsibility .................................................................... 44
1.8 Conclusion and Recommendations ......................................................... 47
2. INTRODUCTION, METHODOLOGY AND SCOPE .................................................. 49
2.1 Introduction..................................................................................... 49
2.2 Objectives ....................................................................................... 49
2.3 Terms of Reference ........................................................................... 49
2.4 Scope of Work and Limitations .............................................................. 50
2.5 Structure of the Report ...................................................................... 50
2.6 Audit approach and methodology .......................................................... 50
3. DETAILED FINDINGS ................................................................................. 52
3.1 The Institutional Framework for the Management of the COVID-19 Funds ........... 52
3.2 Utilization of the COVID-19 Funds by the National Treasury and Planning ........... 53
3.3 Utilization of COVID-19 Funds and Donations by the MOH ............................... 62
3.4 Utilization of COVID-19 Funds by the Referral Hospitals ................................. 82
3.5 Utilization of the COVID-19 Funds by the COVID-19 Emergency Response Fund ...122
3
LIST OF TABLES
Table 1: Institutions involved in the COVID-19 prevention, mitigation, and response .......... 52
Table 2:GOK Supplementary Budgets for the COVID-19 activities ................................. 53
Table 3: Funds received from Development Partners for COVID-19 mitigation .................. 55
Table 4: Un-utilized Cash Balances as at 31 July, 2020 .............................................. 56
Table 5: Other Bank Accouts Opened to raise funds for the COVID-19 Pandemic ............... 57
Table 6: Bank Accounts with balances amounting to Kshs.9,862,941,166 ........................ 58
Table 7: Amount disbursed by the National Treasury to various MDAs ............................ 60
Table 8: Funds received at the Ministry of Health for COVID and Non-COVID Activities ........ 62
Table 9 : Funds allocated to the Ministry of Health ................................................ 63
Table 10: Summary of Expenditures incurred by the Ministry of Health .......................... 64
Table 11: Expenditures at the Ministry of Health Headquarters ................................... 65
Table 12: Budget for the Contingency Emergency Response Component (CERC) .............. 67
Table 13: Inadequate controls in Fuel Management.................................................. 69
Table 14: Financing Agreement between the Republic of Kenya and IDAs ....................... 71
Table 15: Un-surrendered imprest ...................................................................... 73
Table 16: SRC Approved rates for the Frontline Health Care Allowances ......................... 75
Table 17: Disbursement of funds to KEMSA ............................................................ 75
Table 18 : Delivery of Ventilators to Counties ........................................................ 78
Table 19 : Distribution list for last batch of Ventilators ............................................. 80
Table 20: Disbursement of Funds to Referral Hospitals .............................................. 81
Table 21: Receipt of the COVID-19 Funds by the Coast General Hospital ......................... 83
Table 22: Utilization of the COVID-19 Funds by the Coast General Hospital ..................... 84
Table 23: COVID-19 Funds received by the Jaramogi Oginga Odinga Referral Hospital ........ 85
Table 24: Utilization of Funds by the Jaramogi Oginga Odinga Referral Hospital ............... 86
Table 25: Disbursement of funds from Kitui County to Kitui Referral Hospital .................. 89
Table 26: Expenditure of the COVID-19 Funds by the Kitui Referral Hospital .................... 90
Table 27: Amount of COVID-19 Funds received by the Kenyatta National Hospital.............. 93
Table 28: Allocations by KNH for recruitment and compensation of health workers ............ 94
Table 29: Addittional Health Workers recruited on temporary basis .............................. 95
Table 30: KNH Othaya Teaching Referral Supplementary Budget II recurrent expenditure .... 96
Table 31: Delayed delivery of Medical Equipment at KNH .......................................... 98
Table 32: Pending Bills for Kenyatta National Hospital .............................................. 98
Table 33: Commitment of funds for Othaya Referal Hospital ....................................... 99
Table 34: Project Completion status for Othaya Referral Hospital ...............................100
Table 35: Un-utilized Frontline Health Workers Allowances for KNH .............................101
Table 36: COVID-19 Emergency response - Kshs.350,000,000......................................102
Table 37: Status of Isolation Centres at the Kenyatta National Hospital .........................105
Table 38: Amount of funds received by the KUTRRH for Covid-19 related activities ..........106
Table 39: Expenditure by KUTRRH for Recruitment of Healthcare Workers ...................107
Table 40: Expenditure by KUTRRH before COVID-19 was declared a pandemic in Kenya......109
Table 41: Payments incurred by KUTRRH on non covid-19 activities .............................111
Table 42: Amount of funds received by MTRH .......................................................114
Table 43: GOK Conditional grants received by the MTRH ..........................................114
Table 44: Exependitures incurred on Conditional grants by the MTRH ...........................115
Table 45: Procurement and installation of ICU Medical Equipment by MTRH ...................115
4
Table 46: Procurement process for the pandemic infrastructure project at MTRH.............116
Table 47: Over payment of the Frontline Health Workers Allowances by MTRH ................117
Table 48: Payment of allowances by MTRH beyond the approved Budget .......................118
Table 49: Un-Accounted for Kshs.115,000,000 at MTRH ............................................119
Table 50 MOH Disbursements to Quarantine facilities ..............................................120
Table 51 MOH Disbursements to other MDAs .........................................................121
5
ABBREVIATIONS
Abbreviation Full Name
ADB Africa Development Bank
CERC Contigency Emergence Response Component
CERIP Contigency Emergency Response Implementation Plan
COVID-19 Corona Virus Disease-2019
CGTRH Coast General Teaching and Referral Hospital
COK Constitution of Kenya
CCV Comprehensive Care Ventilators
EU European Union
GOK Government of Kenya
IDA International Development Agency
IMF International Monetary Fund
ICU Intensive Care Unit
JOOTRH Jaramogi Oginga Odinga Teaching and Referral
Hospital
KNH Kenyatta National Hospital
KUTRRH Kenyatta University Teaching Research and Referral
Hospital
KCB Kenya Commercial Bank
MDAs Ministries, Departments and Agencies
MTRH Moi Teaching and Referral Hospital
MOH Ministry of Health
PMT Project Management Team
PFMA Public Finance Management Act
PS Principal Secretary
RFQ Request For Quotations
SRC Salaries and Remuneration Commission
THS-UCP Transforming Health Systems for the Universal Care
Project
USD United States Dollar
6
LIST OF APPENDICES
APPENDIX APPENDIX NAME
NUMBER
I Terms of References
II List of Officers Interviewed
III The COVID-19 Budgets
IV Receipts and disbursement of External Resources by the National Treasury
V The World Bank loan for the 2nd Inclusive Growth and Fiscal Management
Development Policy
VI IMF loan for COVID-19 Emergency Response Support Programme
VII AfDB Loan for Budget Support
VIII Grants from DANIDA to the County Goverments
IX COVID-19 Expenditure by the Ministry of Health
X COVID-19 Expenditure incurred at the Ministry of Health Headquarters
XI Approved Budgets for CERC Component of the THS-UCP
XII Disbursements from the Ministry of Health to the County Goverments
XIII List of COVID-19 donations received by KEMSA on behalf of the Ministry of Health
XIV Donations distribution schedule by KEMSA
XV Procurements done in Mandera Referral Hospital without evidence of
Professional Opinion
XVI Use of inappropriate procurement method in Mandera Referral Hospital
XVII Irregular procurements in Mandera Referral Hospital
XVIII Unsupported Expenditures in Mandera Referral Hospital
XIX Medical Equipment procured by KNH and invoiced to KEMSA
XX List of donations received by KNH
XXI List of donations not taken on charge by KNH
XXII Donations received by the KUTRRH
XXIII Irregular payment of allowances by the KUTRRH
XXIV Emergency Response Fund Private Sector Cash Inflows
XXV Emergency Response Fund Public Sector Cash Inflows
XXVI Donation in Kind – Medical Supplies (Ppe, Oxygen and Sanitiser)
XXVII Donation in Kind – Food Items
XXVIII Donation in Kind – Household Items
XXIX Disbursement of Funds for Covid 19 To MDAS
XXX Appointment of Covid 19 Emergency Response Fund Board
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1. EXECUTIVE SUMMARY
1.1 Introduction
1.1.1 Provision of healthcare is one of the economic and social rights outlined in Article
43 of the Constitution of Kenya 2010, which states that every person has the right
to the highest attainable standard of health. Article 201(a) of the Consitution of
Kenya requires openness and accountability including public participation in
financial management matters. Financial management matters in Government are
guided by the Constitution of Kenya 2010, the Public Finance Management Act, 2012
and the attendant regulations, the Public Procurement and Asset Disposal Act, 2015
and circulars released by the National Treasury from time to time.
1.1.2 Articles 229 of the Constitution of Kenya and the Public Audit Act, 2015 gives the
the Auditor-General the mandate to audit all public funds and report on whether the
funds have been used in an effective and lawful manner. Section 37 of the Public
Audit Act, 2015 provides that, the Auditor-General may, upon request by Parliament,
conduct forensic audits to establish fraud, corruption, or other financial
improprieties. In addition, Section 38 of the Public Audit Act, 2015 provides that
the Auditor-General may examine the Public Procurement and Asset Disposal process
of a state organ or a public entity with a view to confirming whether procurements
were done lawfully and in an effective way.
1.1.3 In this regard, the Office of the Auditor-General conducted a special audit on
utilization of the COVID-19 Funds by National Government Entities with a view to
confirm lawfulness and effectiveness of the expenditure incurred.
1.2 Objectives
1.2.1 The objective of the special audit was to confirm whether public funds utilized by
National Government Entities for procurement of the medical supplies for purposes
of combating the COVID-19 pandemic were used in a manner that is lawful and
effective.
1.3 Terms of Reference
1.3.1 The special audit was guided by the Terms of References summarized below and
detailed in APPENDIX I:
• Review the Institutional Framework for Management of the COVID-19 Funds.
8
• Review utilization of the COVID-19 Funds by the National Treasury and Planning
including disbursements to Ministries, Departments and Agencies.
• Review utilization of the COVID-19 Funds by the Ministry of Health and the
Referral Hospitals.
• Review utilization of the COVID-19 Funds by the COVID-19 Emergency Response
Fund.
1.4 Scope of Work and Limitations
1.4.1 The Special Audit Report covers; planning, budgeting, financing and utilization of
Covid-19 Funds and donations by the National Government Entities for the period 13
March, to 31 July, 2020.
1.4.2 The report establishes the total amount of funds appropriated and received by the
National Government towards the COVID-19 related activities. It also details how
much of the funds were disbursed to other Ministries, Departments and Agencies and
usage of the COVID-19 Funds by the Ministry of Health. In addition, the report
reviews receipt and utilization of the COVID-19 Funds and donations by the COVID-
19 Emergency Response Fund.
1.5 Structure of the Report
1.5.1 The special audit report has three sections: the executive summary, the detailed
approach, and the detailed findings. The report should be read in its entirety to
comprehend fully the approach and the findings. It reports on facts as understood,
with the aim of informing the Public Accounts Committee on their deliberations and
decision-making, taking cognizance of any limitations raised.
1.6 Key Findings
The Institutional Framework for the Management of the COVID-19 Funds
1.6.1 On 11 March, 2020, the World Health Organization pronounced a public health
emergency of international concern, declaring the Corona Virus Disease 2019
(COVID-19) as a pandemic. The first case of the COVID-19 pandemic in Kenya was
announced on 13 March, 2020. Since then, the Country has continued to record new
cases daily.
1.6.2 The National Government received significant assistance from the various
development partners that includes the World Bank, the International Monetary
Fund, the African Development Bank, and the European Union.
9
1.6.3 The Government also established the COVID-19 Emergency Response Fund under the
Public Finance Management (COVID-19 Emergency Response Fund) Regulations,
2020, to receive voluntary contributions from well-wishers towards covering
expenses associated with the COVID-19 pandemic.
1.6.4 The key institutions involved in the COVID-19 prevention, mitigation and response
are as follows:
Institution Remarks
1 The National Treasury and Planning Implemented the fiscal and
monetary policy decisions including
mobilization of resources to mitigate
the pandemic and cushion the
economy from effects of the
pandemic.
2 The Ministry of Health, the Referral Received and utilized funds from the
Hospitals and KEMSA National Treasury for prevention and
mitigation of the COVID-19
pandemic.
3 The COVID-19 Emergency Response Received monetary and non-
Fund monetary voluntary contributions
from well-wishers towards covering
expenses associated with the COVID-
19 pandemic
4 Other Ministries, Departments and Received funding from the National
Agencies (MDAs) Treasury for either the General
Budget Support or the COVID-19
mitigation.
5 County Goverments Received funds and donations from
the National Government and other
development partners for the fight
against the pandemic.
Utilization of the COVID-19 Funds by the National Treasury and Planning
including disbursements to Ministries, Departments and Agencies
1.6.5 After the first COVID -19 case was reported in Kenya on 13 March, 2020, the
Government of Kenya through The National Treasury and Planning negotiated with
various donors for financial support for both COVID-19 mitigation programs and
budgetary support referred to as the Economic Stimulus Programs.
10
1.6.6 Consequently, financing agreements were signed between the various Development
Partners and the Government of Kenya represented by the Cabinet Secretary in
charge of the National Treasury and Planning.
1.6.7 The Government of Kenya, through the National Treasury and Planning, mobilized a
total of Kshs.214,908,853,825 from the various Development Partners. The funds
were received in the Special Deposit Account held at the Central Bank of Kenya as
follows.
Date Donor Crrcy Forex Amount (Kshs) Purpose
Amount
14/Feb/20 World USD 10,000,000 1,063,000,000 Transforming
Bank- Health Systems
Loan for Universal
Care
3/Apr/20 Euro 45,500,000 5,287,100,000 Covid-19
Emergency
Response
Project
20/May/20 USD 750,000,000 80,250,000,000 2nd Inclusive
Growth and
Fiscal
Management
Development
Policy
20/May/20 USD 250,000,000 26,574,996,811
13/May/20 DANIDA- DKK 23,000,000 350,000,000 Universal Health
Grant Care Devolved
System - COVID
19
4/Jun/20 ADB-Loan Euro 188,000,000 22,412,835,480 Budget Support
11
Date Donor Crrcy Forex Amount (Kshs) Purpose
Amount
30/Jun/20 IMF-Loan SDR 542,800,000 78,332,610,616 Covid-19
Emergency
Response
Support
Program (ERSP)
28/April/20 EU-Loan Euro 5,019,825 638,310,917 Public
(Initially Accountability
agreed and Service
Euro Delivery –
7,000,000 PASEDE
Disbursed
less
amount
offset for
ineligible
expenses)
Total 214,908,853,825
1.6.8 Out of the above amount of Kshs.214,908,853,825, requests amounting to
Kshs.162,685,604,780 had been received by The National Treasury and Planning. The
requested amounts were then transferred to the various Ministries, Departments and
Agencies (MDAs) and the Counties as at 31 July, 2020.
1.6.9 The funds were transferred to various National Government Ministries, Departments
and Agencies for COVID – 19 mitigation, and as normal Exchequer releases for the
period from March 2020 to July 2020. The funds that have been covered by the
special audit are highlighted under the remarks column of Appendix XXIX.
1.6.10 A balance of Kshs.52,223,249,045 was held in various bank accounts as detailed
below and represents the funds for which no requests had been made by the
implementing entities as at 31st July, 2020.
Source Purpose Amount (Kshs) CBK Bank Account
World Bank Transforming Health 86,584,500 1000003987 and
Systems for Universal 1000308637
Care Project
World Bank COVID-19 Emergency 3,559,977,380 1000003987 and
response project 1000446366
12
Source Purpose Amount (Kshs) CBK Bank Account
World Bank 2nd Inclusive and 26,574,996,811 1000003987
fiscal Management
development policy
IMF Covid -19 Emergency 21,363,379,436 1000003987 and
Response Support 1000448571
Programme
European Public Accountability 638,310,918 1000449772
Union and Service Delivery
Total 52,223,249,045
1.6.11 The special audit established the following irregularities regarding the Management
of the COVID-19 Funds by The National Treasury and Planning:
1.6.12 The special audit established that, there is another Bank Account, the Kenya COVID
-19 Fund Account Number 2042554653, operated under ABSA Bank Kenya PLC which
was established under the Public Finance Management (COVID-19) Emergency
Response Fund Regulations, 2020.
1.6.13 Further, it was noted that the COVID-19 Fund Accounts were not centrally managed
contrary to the provision of the COVID-19 Emergency Response Fund Regulations,
2020 Part III. Some Accounts were being managed by The National Treasury while
the ABSA account was being managed by an appointed Board without an
Administrator.
1.6.14 The National Treasury and Planning Manages the COVID-19 Emergency Response Fund
Account Number 1000445057 and the COVID-19 Emergency Response Fund-
Investigative and Prosecution Agencies Account Number 1000446021, both at the
Central Bank of Kenya. It also manages the COVID-19 Emergency Response Fund
Account No. 101071225535900 at the National Bank of Kenya and the Voluntary Pay
Cut Account Number 10002011924. All these accounts had receipts of
Kshs.9,862,941,166 as at 31 July, 2020 and no disbursements had been made out of
these Bank Accounts at the time of audit.
13
Receipt and Utilization of the COVID-19 Funds and Donations by the Ministry of
Health and Referral Hospitals
Receipt of funds by the Ministry of Health
1.6.15 According to records at the Ministry of Health, an amount of Kshs.25,511,115,932
was received from the National Treasury for the period 01 March 2020 -31 July 2020
for both COVID-19 and Non-COVID-19 related activities as follows:
Source Amount (Kshs) Covid-19 Related (Kshs)
Government of Kenya 740,222,242 740,222,242
International Monetary Fund 20,965,895,569 13,816,590,000
African Development Bank 751,460,000 0
World Bank 2,703,538,120 2,703,538,120
DANIDA 350,000,000 350,000,000
TOTAL 25,511,115,932 17,610,350,362
1.6.16 Out of the COVID-19 related amount received, the Ministry of Health utilized a total
of Kshs. 15,773,644,422 as detailed in the table below:
Particulars World Bank DANIDA IMF GOK Total
(Kshs) (Kshs) (Kshs) (Kshs) (Kshs)
RECEIPTS 2,703,538,120 350,000,000 13,816,590,000 740,222,242 17,610,350,362
EXPENDITURE
Expenditure 484,898,662 0 0 0 484,898,662
at MOH
Disbursement 0 350,000,000 7,355,899,000 0 7,705,899,000
to Counties
Disbursement 381,934,518 0 1,800,000,000 0 2,181,934,518
to KEMSA
Disbursement 0 0 3,942,245,000 648,722,242 4,590,967,242
to Referral
Hospitals
Quarantine 0 0 700,000,000.00 0 700,000,000
facilities
14
Particulars World Bank DANIDA IMF GOK Total
(Kshs) (Kshs) (Kshs) (Kshs) (Kshs)
Other MDAs 0 0 18,445,000 91,500,000 109,945,000
Total 866,833,180 350,000,000 13,816,589,000 740,222,242 15,773,644,422
expenditures
1.6.17 Included in the World Bank funding of Kshs.2,703,538,120, was Kshs.170,320,000
disbursed by the World Bank to the Gradian Health Systems for procurement of
Ventilators.
Expenditures incurred at the Ministry of Health Headquarters
1.6.18 The expenditure of Kshs.484,898,662 spent at the Ministry of Health Headquarters
was under the Transform Health System-Universal Care Project (THS-UCP) and the
COVID-19 Health Emergency Response Project (CHERP) as summarized below
Particulars Amount (Kshs)
1 Transform Health System-Universal Care Project 326,350,273
(THS-UCP)
2 COVID-19 Health Emergency Response Project 158,548,389
(CHERP)
Total 484,898,662
Transforming Health Systems for Universal Care Project (THS-UCP)
Background information on the project
1.6.19 The Transforming Health Systems for the Universal Care Project (THS-UCP) Credit
Number 5836-KE is a World Bank Funded Project in the Ministry of Health (MoH)
which commenced in 04 July, 2016. The Government of Kenya (GoK) through the
National Treasury requested for a second amendment to the financing agreement on
02 October, 2019, to provide for a Contingency Emergency Response Component
(CERC). The amendment to the financing agreement for THS-UCP was done on 14
February, 2020 to a sum of USD 10 million (equivalent to Kshs.1 Billion).
1.6.20 The National Treasury and the Ministry of Health wrote to the World Bank on 18
February, 2020 and 11 March, 2020 respectively, (i) requesting that the Contingency
15
Emergency Response Component (CERC) be triggered for a sum of USD 10 million and
to release USD 50 million under the COVID-19 financing facility to enable immediate
and timely response to the crisis caused by the virus, and (ii) request for reallocation
of funds across the disbursements categories under THS-UCP from the Ministry of
Health vide letter Ref: No. MOH/ADM/1/1/171 Vol. 1(179) to the National Treasury.
1.6.21 On 13 March, 2020, the World Bank accepted the request to support COVID-19
response. On 18 March, 2020, the CERC was activated and disbursement requests
were accepted by the World Bank after withdrawal conditions were met by the
Government of Kenya.
1.6.22 According to the bank statements for the Project Account, the funds for the CERC were
remitted to the Ministry of Health Account No. 1000313878 at the Central Bank of
Kenya in three tranches as shown in the table below:
Date Transaction Number Amount in KShs.
02/04/2020 FT20093GP52K 500,000,000
29/05/2020 FT20150T66YW 31,550,000
02/07/2020 FT201844MWFH 444,865,500
Total 976,415,500
1.6.23 The total amount utilized under this project for the COVID-19 related activities was
Kshs.158,548,389. The special audit identified the following irregularities in relation
to the budget utilization of the Contingency Emergency Response Component (CERC)
project:
Inadequate controls in the Management of Fuel Amounting to Kshs.14,000,000
1.6.24 It was established that M/s. Ramji Haribhai Devani Limited was awarded the tender
for the Supply and Delivery of fuel for Kshs.14,000,000. The Ministry of Health made
an advance payment of the entire Kshs.14,000,000 to the supplier based on a profoma
invoice. However, the actual expenditure for the period May 2020 to July 2020 was
Kshs. 2,074,764. The special audit established weaknesses in usage of fuel cards since
the Ministry of Health did not designate fuel cards to each vehicle, hence not possible
to ascertain the amount of fuel consumed by each vehicle for the period under review.
16
1.6.25 A review of the fuel expenditure statements established that the fuel cards listed in
the table below were open for use by any vehicle in different months
MONTH CARD NUMBER VEHICLE REG. NO AMOUNT-(KSH)
May 1408032986 Any Vehicle 163,535
1408035675 Any Vehicle 88,487
Sub-Total 252,022
June 1408032986 Any Vehicle 45,210
1408035675 Any Vehicle 127,532
Sub-Total 172,742
July 1408032984 Any Vehicle 51,425
1408032985 Any Vehicle 86,940
1408032986 Any Vehicle 101,809
1408035675 Any Vehicle 155,815
1408035676 Any Vehicle 648,458
1408037142 Any Vehicle 58,451
1408037143 Any Vehicle 26,826
Sub-Total 1,129,724
GRAND TOTAL 1,554,488
1.6.26 It was not possible to trace the transaction amounts in the monthly fuel expenditure
statements to respective work tickets hence the audit team could not confirm whether
fuel expenses incurred by fuel cards marked for use by ‘Any Vehicle’ were for official
assignments. There is a possibility of misuse of the fuel cards especially fuel cards
marked, for use by ‘Any Vehicle’, as such transactions cannot be traced to the drivers’
work tickets.
1.6.27 This was contrary to Section 139 (1) of the Public Finance Management Regulations,
National Government Regulations, 2015 which provides that the Accounting Officer of
a National Government entity should take full responsibility and ensure that proper
control systems exist for assets and that; (a) preventative mechanisms are in place to
eliminate theft, security threats, losses, wastage and misuse; (b) movement and
conditions of assets can be tracked; and (c) stock levels are at an optimum and
economical level.
17
Un-Explained Variance in the Payment of Import Duty
1.6.28 A review of Payment Voucher Number 002347 established that the budget for handling
and delivery fees of goods procured under the Transform Health System-Universal Care
Project (THS-UCP) for COVID-19 response commodities through UNICEF, and any other
contingency was Kshs.6,403,947. However, a total of Kshs.6,678,166 was paid on 01
July, 2020 to KUEHNE+NAGEL for handling and delivery fees for goods procured under
the Transform Health System-Universal Care Project (THS-UCP) for COVID-19 response
commodities through UNICEF. In addition, a review of the Single Administrative
Document (IM4) showed that import duty was Kshs.5,937,927, yet the Ministry of
Health paid an amount of Kshs.6,678,166 resulting in an un-explained overpayment of
Kshs.740,239.
Issuance of LSO after provision of Services
1.6.29 A review of Payment Voucher Number 002394 established that, M/s. EAT and Tell Café
Limited was engaged by the Ministry of Health for provision of catering services to
officers involved in COVID-19 prevention and mitigation at a cost of Kshs.1,536,000.
The Payment Voucher indicate that the services were provided between 27 April 2020
and 03 May, 2020 both days inclusive.
1.6.30 Further, the review established that the Local Service Order (LSO) Number 9110 was
issued to M/s. EAT and Tell Café Limited on 04 June, 2020, which was over one month
after the service had already been offered. It was also not possible to ascertain how
the suppliers were evaluated for the service since procurement documents relating to
the evaluation were not provided and no explanation was given.
Un-supported expenditures for Airtime
1.6.31 It was established that Safaricom Limited was contracted through direct procurement
to supply airtime for officers manning the Quarantine Sites, Surveillance Teams, the
Emergency Operation Centre (EOC) and the Contact Tracing Teams for Kshs.3,000,000.
A review of the store’s ledger and Stock Control Card No. 524481 of mobile airtime
revealed that, 2,400 airtime scratch cards worth Kshs.2,400,000 were issued without
any counter requisition and issue voucher.
1.6.32 The special audit could not confirm whether the issuance of mobile airtime was dully
sanctioned and approved. The special audit also established that as at the date of the
18
audit, all airtime worth Kshs.3,000,000 had been fully issued. However, a review of
the availed list of beneficiaries of airtime revealed that, only airtime worth
Kshs.869,000 were dully signed for by the recipients. The audit could not confirm how
the balance of airtime worth Kshs.2,131,000 was issued since there was no evidence
that the recepients had signed acknowledging receipt of the airtime.
Conflicting documentation on notification of tender award and letters of
acceptance
1.6.33 It was also established that, Hadassah Hotel was awarded a tender for the Provision of
full board accommodation services for the Ministry of Health officials undertaking rapid
response for the month of April and May 2020 for Kshs.5,273,670 commencing from 07
April, 2020. However, the special audit established that, the letter of acceptance
dated 04 April, 2020 was issued by the supplier three days before notification of the
tender award dated 07 April, 2020.
1.6.34 The Management of the Ministry of Health explained that, the service provider had
erroneously written the wrong date on the letter of acceptance and that the Ministry
of Health noted the error in the date and notified the service provider. However, the
afforemtioned conflicting documents had been received by the Ministry of Health and
used as a basis of processing payments to the supplier.
The Covid-19 Emergency Response Project (CHERP)
Background information on the project
1.6.35 The COVID-19 Emergency Response Project (CHERP) IDA Credit 65980 is based on the
Kenya COVID-19 Emergency Response Project Appraisal document dated 25 March,
2020. The project objective is to prevent, detect and respond to the COVID -19
outbreak and strengthen national systems for public health emergency preparedness
in the Republic of Kenya.
1.6.36 In this regard, the Ministry of Health, through the Supplementary III Development
Budget for the financial year 2019/2020 allocated an amount of Kshs.5.35 Billion for
the CHERP Project under Vote Head 1081118200.
1.6.37 According to an extract of an email from the World Bank, to the Project Manager at
the Ministry of Health, a No Objection was issued to the Project Work and Procurement
Plan on 30 April, 2020. The procurement plan indicated activities for the first 3 months
19
(31 July, 2020) of the Project costing Kshs.2,484,518,772. However, a total of
Kshs.1,556,802,620 was received by the National Treasury and disbursed on 27 May,
2020 to the Ministry of Health Account Number 1000446684 at the Central Bank of
Kenya.
1.6.38 As at the time of completion of the audit, an amount of Kshs.326,350,273 had been
incurred. A review of the project expenditures established the following irregularities:
Un- Surrendered Imprest
1.6.39 The special audit established that, there was un-surrendered Imprest of Kshs.7,981,975
as at 30 September, 2020. This was contrary to Section 104 of the Public Finance
Management (National Government) Regulations, 2015 which provides that all receipts
and payment vouchers of public moneys should be properly supported by pre-numbered
receipt and payment vouchers and shall be supported by the appropriate authority and
documentation.
1.6.40 Further Sections 93, 14 and 15 of the Public Finance Management (National
Government ) Regulations, 2015 provides that when the imprest holder needs to have
his/ her funds replenished, he or she should send an abstract and analysis of the
memorandum cashbook, plus originals of the supporting payments vouchers to the
accounts department for examination that the expenditure has actually been incurred
and there are no irregularities.
Disbursements of funds from the Ministry of Health to the County Governments
1.6.41 The Ministry of Health disbursed COVID-19 conditional grants of Kshs.4,999,999,000
and allowances for the Frontline Health Workers of Kshs.2,355,900,000 to the forty-
seven (47) Counties.
1.6.42 The Disbursement of COVID-19 Conditional Grants was based on the Commission of
Revenue Allocation letter referenced CRA/CSO/COG/13/VOL.II(1) dated 29 April,
2020.
1.6.43 A separate special audit report of the Audior-General on utilization of the COVID-19
funds by the County Governments has been concluded and issued to Parliament.
20
Disbursement of funds to KEMSA
1.6.44 The Ministry of Health disbursed a total of Kshs.2,181,934,518 to KEMSA on 30 June,
2020 as detailed in the table below:
Source of Sub Head Allocation to Amount Recipient Bank
Funds KEMSA (Kshs.) Received Account
(Kshs.)
1 World Bank CERC- 758,690,583 304,160,118 EQUITY BANK
Transforming KEMSA Trade
Health Account number
Systems 01400261398514
Project (THS)
2 World Bank Kenya COVID- 454,840,000 77,774,400 EQUITY BANK
19 Emergency KEMSA Trade
Response Account number
Project 01400261398514
(CHERP)
3 Government Procurement 1,500,000,000 1,500,000,000 EQUITY BANK
of Kenya of Test kits Warehouse
and reagents Construction
Account number
1400264426362
4 Government Supply of 300,000,000 300,000,000 NATIONAL BANK
of Kenya Facemasks to OF KENYA
vulnerable KEMSA
groups Operations
Account number
100300912500
3,013,530,583 2,181,934,518
1.6.45 A separate special audit report of the Auditor-General on the utilization of the COVID-
19 funds by KEMSA has been issued to parliament.
Procurement of Comprehensive Care Ventilators
1.6.46 A memo referenced MOH/PROC/GEN/MF/ADSCMS/Vol.1.1 dated 21 May, 2020 from the
Principal Secretary, Ministry of Health to the Project Manager CHERP shows that the
procurement for the Supply of Comprehensive Care Ventilators & Related Services was
done using World Bank Facilitated Procurement Method as approved by the World Bank.
A Step Approval No. KE-MOH-00001-GO-DIR/Procure 250 Gradian Comprehensive Care
Ventilators extract specified that, Direct Selection Method was adopted and indicated
that the Contract was to supply 250 units at USD16,000 per unit at a total cost of USD
4,000,000 (KShs. 424 Million at an exchange rate of 1USD=Kshs106).
21
1.6.47 The Contract for the Supply of 250 Gradian Comprehensive Care Ventilators (CCV) and
related services between the Ministry of Health and M/s. Gradian Health Systems, New
York USA was signed on 30 March, 2020. According to Appendix C of the Contract
Agreement, price schedule 3, the contract sum was Kshs.424 Million (USD 4,000,000).
1.6.48 According to a memo referenced MOH/PROC/GEN/MF/ADSMS/Vol.1 from the Project
Manager C-HERP to the Principal Secretary, Ministry of Health dated 21 May, 2020 the
payment was to be processed through the National Treasury and the World Bank would
pay the supplier directly. On 22 May, 2020, the Principal Secretary, Ministry of Health
approved processing of the payment. A Payment Voucher Number 282 for
Kshs.170,320,000 was prepared at the Ministry of Health dated 3 June, 2020 being
payment of 40% advance payment. The payment voucher was forwarded on the same
day to the Director - Resource Mobilization Department through a letter ref
MOH/COVID 19/ACC/VOL. (003) to the Principal Secretary, National Treasury
requesting them to charge IDA credit 5836-KE, the total amount of USD 1,600,000
(Kshs.170,320,000). On 22 June 2020, a direct payment of USD 1,600,000 was made
from IDA account number 1000446366 at the Central bank of Kenya.
1.6.49 The following irregularity was observed on Procurement of Comprehensive Care
Ventilators & Related Services from M/s. Gradian Health Systems by the Ministry of
Health.
Delivery of the Ventilators to Counties that did not have capacity
1.6.50 According to Appendix A of the contract on shipping and completion schedule, there
were 8 phases of air shipping schedule between 30 April, 2020 and 31 December, 2020.
However, on 13 April 2020, the Chief Executive Officer of M/s. Gradian Health Systems
wrote to the Principal Secretary, Ministry of Health informing her of the delay in
delivery due to limited supply in a critical component used in the manufacturing of the
Gradian Comprehensive Care Ventilators. They also proposed a reassessment period
after delivery of 100 units for the Ministry of Health to assess whether they would
continue to purchase the remaining quantity.
1.6.51 On 2 June 2020, the Principal Secretary, Ministry of Health through a letter reference
MOH/ADM/1/1/159 wrote to M/s. Gradian Health Systems informing them that the
Ministry of Health had considered the proposal and decided that it would only procure
100 ventilators.
22
1.6.52 On 3 June, 2020 the the Principal Secretary, Ministry of Health wrote to M/s. Gradian
Health Systems via letter ref MOH/DC/9/1/instructing them on the distribution of 30
ventilators to Counties. Further, distribution was as per the letter on distribution
referenced MOH/PROC/6/3/1 done by the Principal Secretary, Ministry of Health on
19 August, 2020 instructing on the distribution of 45 ventilators. The special audit team
visited the health facilities listed and noted the following observations:
County Health Facility Dispatched Remarks
1 Kiambu Tigoni Level 4 5 Received and in use
Hospital
2 Kitui Kauwi Level 4 5 Received but not in use since
Hospital there was no Intensive Care Unit
(ICU). Items were in store as at
the time of audit.
3 Nakuru Langa Langa level 3 5 Received on 11 June, 2020. On
Hospital 6 October, 2020, 2 units were
issued to Annex Provincial
General Hospital (PGH), on 7
October, 2020, 3 more units
were Issued to PGH Nakuru
4 Nyeri Othaya level 5 5 Received and transferred to
Hospital KNH for use.
5 Taita taveta Mwatate level 3 5 Received and in use
Hospital
6 Laikipia Nyahururu level 4 5 Received at the Nanyuki
Hospital Teaching and Referral Hospital
Critical Care Unit on 11 June
2020. This was because there
was no ICU at Nyahururu level
4.
7 Nairobi Mama Lucy Kibaki 18 Received but not in use since
Hospital there was no Intensive Care Unit
(ICU). Items were in store as at
the time of audit
8 National Kenyatta University 15 Received and in use
Government Teaching and
Referral Hospital
9 Kiambu Ruiru Sub-County 5 Received but not installed since
Hospital the facility was not ready for
installation.
10 Kajiado Ngong level 4 5 The 5 ventilators were still in
Hospital their original packaging.
11 Mandera Kamor Infectious 2 Received and in use
Disease Hospital
23
County Health Facility Dispatched Remarks
Total 75
1.6.53 As detailed above the ventilators were dispatched to some hospitals that were not
ready, hence they were not installed and were still in their original packaging.
1.6.54 According to a memo dated 8 October, 2020 from the Project Manager to the Principal
Secretary, Ministry of Health, the last batch of 25 ventilators had been received and
was ready for distribution. On 16 October, 2020, the Principal Secretary, Ministry of
Health wrote to M/s. Gradian Health Systems through a letter ref
MOH/ADM/1/3/1/VOL 1/(18) instructing on the distribution of the last batch of
ventilators. The special audit team did not conduct a physical verification on these
last batch due to time limitation.
Receipt and Distribution of Donations by the Ministry of Health
1.6.55 The Principal Secretary, Ministry of Health established a COVID-19 Pandemic Response
Commodities Clearance Committee through an internal memo Ref MOH/DC/9/1/33
dated 29 April, 2020. The Committee was a dedicated Multi-Agency Team from the
Ministry of Health, the National Treasury, the State Department of Foreign Affairs and
the State Department of Industrialisation.
1.6.56 The special audit established that the Government of Kenya received donations from
philanthropists, development partners and other donors. The Donations were received
at the KEMSA WareHouses on behalf of the Ministry of Health and later distributed to
Counties and other institutions based on instructions issued by the Ministry of Health.
1.6.57 APPENDIX XIV details the quantities of donations received, issued and the stock
balances as at the time of audit on 14 September, 2020.
Disbursement of funds by the MOH to Referral Hospitals
1.6.58 The Ministry of Health disbursed a total of Kshs.4,590,967,242 to seven referral
hospitals for various purposes as detailed below.
24
Hospital COVID19 HR Allowances others Total (Kshs)
Emergency Recruitmen for the
Response t Frontline
Healthcare
Workers
1 Coast 500,000,000 0 0 0 500,000,000
General
Hospital
2 Jaramogi 400,000,000 0 0 0 400,000,000
Oginga
Odinga
Referral
Hospital
3 Kitui 300,000,000 0 0 0 300,000,000
Referral
Hospital
4 Mandera 300,000,000 0 0 0 300,000,000
Referral
Hospital
5 Kenyatta 600,000,000 0 156,795,000 500,701,392 1,257,496,392
National
Hospital
6 Kenyatta 500,000,000 0 12,270,000 771,696,150 1,283,966,150
University
Research
&
Referral
Hospital
7 Moi 400,000,000 42,824,700 106,680,000 0 549,504,700
Teaching
&
Referral
Hospital
Total 3,000,000,000 42,824,700 275,745,000 1,027,201,392 4,590,967,242
1.6.59 The special audit established the following irregularities in utilization of COVID-19
funds by the Referral Hospitals:
25
COAST GENERAL HOSPITAL
Failure to inspect purchased goods
1.6.60 It was noted that the procurement file did not have evidence to show that the medical
equipment supplied and delivered by M/s. Surgipham Ltd at a cost of Kshs.11,600,000
were duly inspected. Therefore, the special audit could not confirm whether the right
quality and quantity of supplies were delivered. This was contrary to Section 48 (1) of
the Public Procurement and Asset Disposal Act, 2015, that requires an Accounting
Officer of a procuring entity to establish an adhoc committee known as the Inspection
and Acceptance Committee to test the quality and quantity of goods delivered to
confirm compliance with specifications.
KITUI REFERRAL HOSPITAL
Irregular transfer of funds from the Kitui Hospital Account Number
01141303838201 to the Kitui County COVID -19 Account number 1000455543
1.6.61 The Principal Secretary to the Ministry of Health in a letter reference number
MOH/FIN/1/A/VOL III (70) dated 19 June, 2020 informed the Chief Executive Officer
of Kitui Referral Hospital of the disbursement of Kenya COVID-19 Emergency Response
Funds. It was reported that the Supplementary budget II had been approved and A.I.E
Number A685792 dated 16 June, 2020 for Kshs.50,000,000 was enclosed specifically
for the COVID-19 pandemic interventions. According to the letter, the guidelines for
the conditional grant were to apply. In addition, the hospital was to provide to the
Ministry of Health expenditure items for the budgeted amount and implementation of
the same. On 30 June, 2020, A.I.E number A685773 for Kshs. 250,000,000 was received
by the Kitui Referral Hospital.
1.6.62 On 7 July 2020, a total of Kshs. 300,000,000 was credited to the Kitui Refeeral Hospital
Account Number 01141303838201 in two tranches of Kshs.50,000,000 and
Kshs.250,000,000. The Kitui County Executive Committee Member (CECM) for Finance,
in a letter reference number CGKTI/CT/ADM/33/24 dated 23 July, 2020 to the Kitui
County Chief Officer Health and Sanitation, instructed the transfer of Kshs.300,000,000
from the Kitui General Hospital Account to the Kitui County Government Special
Purpose Account (SPA) for the COVID-19 interventions. The letter stated that, the
funds had been budgeted for under the County Supplementary II budget. According to
26
the budget, the funds were earmarked for spending in 4 departments, namely Health,
Trade, Agriculture and Education, ICT and Youth Development.
1.6.63 On 27 July 2020, the Heath Administrative Officer at Kitui Referral Hospital and the
Accountant vide a letter reference number CGKTI/KCRH/FIN/1 (48) to the Manager
Cooperative Bank-Kitui Branch instructed the transfer of Kshs.298,966,655 from the
Kitui Hospital Account number 01141303838201 to the Kitui County COVID -19 Account
Number 1000455543 at the Central Bank of Kenya.
1.6.64 On 3 August, 2020, Kshs.298,966,655 was debited from the Kitui County Hospital
Account to the Kitui County COVID 19 Account Number 1000455543 at the Central Bank
of Kenya. The transfer of Kshs.298,966,655 from the Kitui County Hospital Operations
Account to the Kitui County COVID-19 Account was irregular and contrary to the
Supplementary Appropriation Act, 2020 which indicated that the funds were ring-
fenced for COVID-19 pandemic activities at the Kitui County Referral Hospital.
1.6.65 Further, it was established that the total funds disbursed by the Kitui County to the
Kitui Referral Hospital was only Kshs.36,105,454 as detailed below:
Amount received from
County Government
Date (Kshs)
17 June, 2020 26,466,745
17 June, 2020 5,254,060
25 June, 2020 4,384,649
Total 36,105,454
1.6.66 A comparison between what the National Government and what the County
Government had allocated and disbursed to the Kitui Referral Hospital reflects an
under funding of Kshs.263,894,546.
27
MANDERA REFERRAL HOSPITAL
Procurements done without evidence of professional opinions
1.6.67 The special audit established that the Mandera County Referral Hospital received in its
Kenya Commercial Bank Account No.1149105127 Kshs.300,000,000 on 02 July, 2020
from the Ministry of Health. The amount had been appropriated by Parliament and
budgeted for in the Ministry of Health Recurrent Supplementary II budget for the
COVID-19 Response. However, it was established that, procurements amounting to
Kshs.228,910,610 did not have professional opinions contrary to the provisions of the
Act.
1.6.68 Section 84 (1) of the Public Procurement and Asset Disposal Act, 2015 requires that,
the Head of the Procurement function of a procuring entity should, alongside the
report to the Evaluation Committee as secretariat comments, review the Tender
Evaluation Report and provide a signed professional opinion to the Accounting Officer
on the Procurement or Asset Disposal proceedings.
Inappropriate use of procurement method
1.6.69 The special audit established that procurements amounting to Kshs. 272,531,900 were
undertaken through Requests for Quotations (RFQs) and did not meet the threshold set
under the regulations. These procurements process should have been done through
open tender since the amounts involved were above the RFQ threshold.
1.6.70 This was contrary to Section 59(1) of the repealed Public Procurement and Disposal
Regulations, 2006 which require that, a procuring entity, that conducts procurement
using the Request for Quotations (RFQ) method should be subject to the procurement
thresholds set out in the First Schedule.
Absence of documents to support opening and evaluation of bids
1.6.71 It was also established that expenditures amounting to Kshs.39,857,500 was incurred.
However, the procurement procedures had the evaluations done before opening of
quotations.There were missing documents like tender opening and evaluation meeting
minutes and missing letters of appointments for the Tender Opening and Evaluation
Committees.
28
KENYATTA NATIONAL HOSPITAL
Absence of work plans on utilization of COVID-19 Funds
1.6.72 The Management of Kenyatta National Hospital (KNH) had a plan of requirements for
the operationalization of a 20-bed capacity at the Kenyatta National Hospital Infectious
Unit at Mbagathi Hospital dated 26 February, 2020 costing Kshs. 150.49 Million. The plan
envisaged to enhance the existing 6-bed capacity at the KNH Infectious Disease Unit
ward to a 20-bed capacity. The plan, however, did not provide timelines on
implementation of the various renovation activities.
1.6.73 On the contrary, there was no evidence that Kenyatta National Hospital had work plans
to guide in the utilization of the following funds:
• Kshs.350,000,000 for COVID-19 Emergency Response
• Kshs.250,000,000 for COVID-19 Emergency Response
• KShs.140,000,000 for 'Conversion Day Care Center to Ward for COVID-19
Health Care Workers
1.6.74 Absence of work plans on utilization of COVID-19 funds implies inadequate programme
planning that may have resulted in inefficient and ineffective utilization of funds
resulting in value-for-money risks.
Over expenditure on recruitment of additional health workers
1.6.75 As at the end of September, 2020 the total number of temporary staff recruited through
the needs of user departments were 498. KNH was allocated Kshs.244,655,850 for
compensation of temporary employees engaged on COVID-19 prevention and mitigation
activities. According to the payment vouchers for utilization of COVID-19 Funds availed
to the special audit team by the Finance Department, as at the end of September 2020,
KNH had spent Kshs.263,674,211.90. This resulted in an over expenditure of
Kshs.19,018,361.90 above the approved budget.
Delay in delivery of equipment thereby negating the justification for Direct
Procurement
1.6.76 KNH used the Direct Procurement method to purchase medical equipment to set up the
Infectious Disease Unit (IDU) at Mbagathi Hospital. The reason for use of the Direct
29
Procurement method was because they were dealing with an emergency and the Centre
needed to be established within 7 days.
1.6.77 One of the conditions of the tender was that the suppliers had to deliver the equipment
within 24 Hours after award of the contract which was done on 4 March, 2020. It was
however noted that there were firms that delivered the equipment later than the 4
March, 2020 contrary to the conditions of the tender as detailed below;
Supplier Item Date Amount (Kshs)
delivered
Medifest Africa Ltd- Infrared thermometers 23/4/2020 3,100,000
and infusion pumps
Harleys Ltd Examination lights 21/4/2020 856,000
Medionics Oximeter/baby 2/4/2020 374,000
Healthcare mechanical scale
Total 4,330,000
KENYATTA UNIVERSITY TEACHING RESEARCH AND REFERRAL HOSPITAL (KUTRRH)
Payment for expenditures incurred before COVID-19 was declared in Kenya
1.6.78 The special audit established that KUTRRH had utilized Ksh.177,029,923.20 out of the
Kshs.526,500,000 received as GoK COVID-19 Grant for Development. They also had
commitments of Kshs.99,920,436.69. A review of the related payment vouchers
revealed that, the institution had reallocated Kshs.12,388,797 to previous commitments
made before COVID-19 pandemic was declared in Kenya. The authority to reallocate
from the COVID-19 funds for these payments was not availed to the special audit.
1.6.79 Section 43 (1) of the Public Finance Management Act, 2012 requires that an Accounting
Officer may reallocate funds from authorized use but may not reallocate funds where-
(a) the funds are appropriated for transfer to another government entity or person; (b)
the funds are appropriated for capital expenditure except to defray other capital
expenditure; (c) the reallocation of funds is from wages to nonwages expenditure; or
(d) the transfer of funds may result in contravention of fiscal responsibility principles.
1.6.80 Section (2) of the Public Finance Management Act, 2012 further requires that, an
Accounting Officer for a National Government entity, other than a State Corporation,
30
may reallocate funds between programs, or between Sub-Votes, in the budget for a
financial year if— (a) there are provisions in the budget of a program or Sub-Vote which
are unlikely to be utilised; (b) a request for the reallocation has been made to The
National Treasury explaining the reasons for the reallocation and The National Treasury
has approved the request; and (c) the total sum of all reallocations made to or from a
program or Sub-Vote does not exceed ten percent of the total expenditure approved for
that program or Sub-Vote for that financial year.
1.6.81 The table below gives details of the payments and expenditure whose procurement had
commenced and, in some cases, goods delivered before the COVID-19 period of March
2020, but payments were made using the conditional Covid Grants.
Purpose of payment L.P.O Amount Remarks
No. (Kshs)
Supply & installation of AC 1757585 3,323,897 User request on 15 February, 2020
system at the main vide Internal memo REF:
pharmacy store KUTRRH/PRS/F1/366
Supply @ delivery of fridge 3478305 1,870,000 User request on 4 March, 2020 vide
& freezer for food storage Internal memo REF:
KUTRRH/CD/F1/74
Purchase of desktop 3478080 431,500 User request on 23 January, 2020
computers for CEO & Board vide Internal memo REF:
Chair KURRH/ICT/REQ/109. RFQ done on 7
February,2020
Installation of AC at clinical 3473688 408,900 Certificate of completion states work
Lab completed on 31 January, 2020 REF:
KUTRRH/IPRJ/F1/263
Supply of Ipad Pro 11 3478075 594,000 RFQ done on 5 February, 2020. REF
keyboard leather cases KUTRRH/PD/SOP/F.01
Supply and delivery of 3473983 1,856,000 RFQ done on 24 October, 2019 &
pharmacy store racks professional opinion on 6 November
2019 REF KUTRRH/PD/PO/VOL1(1520
Supply and fixing of non-slip 3,904,500 The approved requisition of Kshs.
matt 3,664,625 budgeted amount for the
service was dated 14th October,
2019.The bid opening and the
professional opinion were done on 22
January,2020. Quotation
NO.309/2019-2020/KUTRRH/PUR
TOTAL 12,388,797
31
Delivery notes dated before tender opening and award
1.6.82 A review of Payment Voucher Number 1073 to M/s. Windson Services Ltd, Quotation
Number 584/2019-2020/KUTRRH/PUR for the purchase of materials for creation of
washrooms and Board Members lounge at the Centre for specialized clinics, established
that delivery notes attached to the Payment Voucher were dated between 10 -13 April,
2020, which was before the bid opening and professional opinion that took place on 14
April, 2020. The reason for the service delivery before the tender opening was not given
by the entity.
Services offered before awarding of tender
1.6.83 The special audit noted that services rendered by M/s. Ragely Investment Ltd, Quotation
No. 422/2019-2020/KUTRRH/PUR/provision of fumigation services were offered before
the professional opinion was given. The company provided a medical fumigation of ICU
using magnesium phosphate chemical at a cost of Kshs.1,350,000. The Professional
Opinion highlighted that the entity used the request for quotation in awarding the
tender. The Public Procurement and Asset Disposal Act, 2015, Section 84(3) requires
that, the Accounting Officer takes into account the views of the Head of Procurement
in the signed professional opinion in making decision to award a tender in request for
quotation method.
1.6.84 However, M/s. Ragely Investment Ltd offered the fumigation service between 24 – 26
February, 2020 which was before the tender opening and professional opinion that took
place on 28 February, 2020 and 3 March, 2020 respectively. The reason for awarding the
tender to M/s. Ragely Investment Ltd before the bids were opened or even before a
professional opinion was given was not provided by the entity.
Failure to include estimate of non-cash donations in the budget
1.6.85 The special audit team examined the approved budgets and the succeeding
supplementary budgets I and II in the financial year 2019/2020. It was established that
the Kenyatta University Teaching Referral and Research Hospital did not estimate the
value of donations received from KEMSA, Ministry of Health and other donors and
consequently their values are not reflected in the Donations Schedule provided. In that
32
respect, Section 74 (4) of the Public Finance Management Act (National Government)
Regulations, 2015 was contravened.
1.6.86 Section 74 (4) of the Public Finance Management Act (National Government)
Regulations, 2015 requires that where grants and donations are receivable in kind, the
value of such donations should be determined and included in the estimate and reflected
as expenditure in the financial year.
MOI TEACHING AND REFERRAL HOSPITAL
Absence of approved work plans, budgets, procurement plans and training plans
specific to COVID-19 resulting in failure to utilize Government grants
1.6.87 The special audit established that the hospital had only the Annual Work Plan,
procurement plan, training plan and budget for its normal hospital operations. On the
contrary, there was no evidence of existence of approved budget, procurement plan
and training plan specific to COVID-19 funds utilization for any of their sources of the
COVID-19 Funds.
Irregular payment of Health Workers Allowances to Non-eligible staff
1.6.88 The Moi Teaching and Referral Hospital (MTRH) received an amount of Kshs.106,680,000
from the Ministry of Health for the Frontline Health Workers Allowances and another
Kshs.42,824,700 for the recruitment of health workers on a 3-months contract.
1.6.89 It was also established that an amount of Kshs.2,695,000 was paid as Allowances to non-
eligible staff who were not Frontline Health Workers contrary to the SRC circular Ref.
No. SRC/TS/COG/3/61/48 of 28 April, 2020 which had clearly indicated that only the
Frontline Health Workers should be paid.
Un-Accounted for Funds
1.6.90 The special audit established that, the Moi Teaching and Referal Hospital (MTRH) had
funds set for emergency and for COVID-19 intervention as follows:
33
Funds 2019/2020 2020/2021 (Ksh) Total (Kshs)
(Ksh)
Emergency Funds 30,000,000 30,000,000 60,000,000
Covid-19 Funds 55,000,000 100,000,000 155,000,000
Total 85,000,000 130,000,000 215,000,000
1.6.91 The Management of the Moi Teaching and Referral Hospital did not avail documents to
support expenditures of Kshs.85,000,000 incurred in the financial year 2019/2020 and
Kshs. 30,000,000 incuured in the financial year 2020/2021. Under the circumstances,
the special audit could not confirm the lawfulness and effectiveness of an amount of
Kshs.115,000,000 incurred by the Moi Teaching and Referral Hospital from Own Source
funds.
1.6.92 Section 53 (1) of the Public Finance Management (National Government) Regulations,
2015 provides that except as provided for in the Act and these Regulations, an
Accounting Officer of an entity may not authorize payment to be made out of funds
earmarked for specific activities for purposes other than those activities. Section 53 (2)
further provides that a public officer who makes a payment contrary to paragraph (1)
commits an offence under the Act.
Utilization of the COVID-19 Funds by the COVID-19 Emergency Response Fund
GOVERNANCE AND OVERSIGHT FRAMEWORK
1.6.93 The Legal Notice No.38 of 27 March 2020, the Public Finance Management (COVID-19
Emergency Response Fund) Regulations, 2020 established the COVID-19 Emergency
Response Fund Board with the principal object of mobilizing resources towards
containing the spread, effects and impact of the pandemic. Section 4(2) of the
Regulations outlines the purpose of the fund.
1.6.94 Section 7(1) of the COVID-19 Emergency Response Fund Regulation, 2020 established a
Board responsible for the management of the fund. The Fund Board comprised of the
following members appointed by the President through a press release by the State
House Spokesperson on 30 March,2020:
34
Board Member Capacity
1 Ms. Jane Karuku Chairperson
CS, Ministry of Interior and Coordination of National
2 Dr. Fred Matiang’i Government
3 Hon. Wycliffe Oparanya Chairperson, Council of Governors
4 Mr. Michael Joseph Member
5 Mr. James Mwangi Member
6 Dr. Narenda Raval Member
7 Mr. Joshua Oigara Member
8 Mr. Jeremy Awori Member
9 Mr. Wachira Waruru Member
10 Mr. Mohammed Hersi Member
11 Ms. Phyllis Wakiaga Member
12 Mr. Kennedy Kihara Secretary
1.6.95 It was established that on 12 June 2020, the Fund Board registered the Kenya Covid-19
Emergency Fund Limited under the Companies Act, 2015 as a Company limited by
guarantee. The audit noted that the Fund Board approved the establishment of the Fund
as a corporate entity for procurement and logistics purposes in a Board meeting held on
14 April, 2020.
1.6.96 The certificate of incorporation indicates the Company Registration Number as CLG-
PPFDDA and the registered office of the company as ALN House, Eldama Ravine Close
Off Eldama Ravine Road, P.O. Box 200-00606 – Sarit Centre.
1.6.97 It was not clear why an entity established under the Public Finance Management (COVID-
19 Emergency Response Fund) Regulations, 2020 as the COVID-19 Emergency Response
Fund Board with clear governance, management structures, systems and procedures
outlined in the Public Finance Management Act, 2012 and the attendant Regulations was
again registered as a Company Limited by Guarantee under the Companies Act, 2015
indicating it was a private company receiving donations from well-wishers.
1.6.98 Further, the special audit sought advisories from the Office of the Attorney General &
Department of Justice and the National Treasury on the status of the COVID-19
Emergency Response Fund. The advisories provided conflicting conclusions.
35
1.6.99 (i) The National Treasury advisory dated 8 February,2021 maintained that the Covid-19
Emergency Response Fund was established pursuant to Section 24 (4) of the Public
Finance Management Act,2012.The Fund was therefore required to facilitate the Office
of the Auditor-General to audit its expenditures in line with Article 229 of the
Constitution, Public Finance Management Act,2012 and Public Finance Management
(Covid-19 Emergency Response Fund) Regulations,2020 Legal Notice No.38 of 26
March,2020.
1.6.100 (ii) The Solicitor General in an advisory dated 30 April,2021 was of the opinion
that the money raised through the framework of the COVID-19 Emergency Response
Fund could not be deemed to have been collected under statutory authority since the
antecedent statutory requirements for the establishment of such authority were not
carried out in respect of the Fund. Consequently, the money under the fund would not
fit within the definition of public money as articulated in Section 2 of the, Public Finance
Management Act and would be outside the remit of the Auditor-General. However, the
Solicitor General recommended that the Auditor-General undertake an audit of the Fund
operations due to the public interest nature of the Fund and the nexus between the
Fund and the Government for the purpose of securing effective COVID-19 mitigation
outcomes.
1.6.101 Although the Solicitor-General seems to have concluded that the funds raised by
the COVID-19 Emergency Response Fund were not public funds, the Auditor-General
audited the funds based on the Regulations. The Fund Board has since submitted
documents for audit to the Auditor-General.
FUND ADMINSTRATION AND ACCOUNTABILITY
Irregular Administration of the Fund
1.6.102 Section 9(1) of the PFM (COVID-19 Emergency Response Fund) Regulations, 2020
provides that the Principal Secretary to the National Treasury should be the
Administrator of the Fund. The roles of the Administrator as provided in Section 9 (2)
include to; supervision and control of the administration of the fund, establishing proper
systems of control and oversight, cause proper books of account to be kept and other
records relating to the fund, prepare financial statements for the fund and transmit to
the Auditor-General for audit. Section 9(4) of the PFM (COVID-19 Emergency Response
36
Fund) Regulations, 2020 provides that the Administrator of the Fund should designate
officers under the National Treasury as the Secretariat to the Fund.
1.6.103 A review of the inauguration Board meeting minutes (MIN 5/1/4/20 held on 1
April 2020) notes that the Members were briefed about the Fund Regulations issued by
the National Treasury but unanimously resolved to adopt a private sector steered
approach for purposes of instilling and assuring public confidence in the process. The
Board decided to develop its own procedures and workplan in the performance of its
mandate.
1.6.104 There was no evidence that the Principal Secretary of the National Treasury
exercised his duty as the Fund Administrator as provided by the Regulations establishing
the Fund. Instead, the Fund Board engaged Ernst and Young, PwC, Deloitte and KPMG
on pro-bono basis. A review of minutes of the Fund Board meeting held on 20 April 2020
established that the professional firms were incorporated to develop the requisite
governance audit systems to ensure transparency in the Board operations. The
professional firms were to provide support to the Fund Board operations and activities
on roles that ought to have been the responsibility of the Administrator of the Fund.
This significantly affected the application of the Government’s Financial and
Procurement Laws and Regulations in management of public funds.
1.6.105 The following are the roles of the professional firms engaged by the Fund Board:
i) Ernst and Young (EY), is the Program Management Office, responsible for implementing
the approved program design from end-to-end and managing overall real-time program
reporting including donor specific reporting.
ii) PwC serves as the Fund Accountant with the responsibility of maintaining complete and
accurate books of accounts managed by an ERP system that is reviewed and approved
by the Board.
iii) KPMG provides assurance services by documenting key controls across the projects and
committees and continuously ensures that they meet the defined key performance
indicators and service level agreements and comply with approved procedures.
iv) Deloitte provides external audit services.
Absence of evidence of Revenue and Expenditure Estimates and Work Plan
1.6.106 Section 9 (2) (b) of the PFM (COVID-19 Emergency Response Fund) Regulations,
2020 requires the Fund Administrator to prepare estimates of the annual revenue and
37
expenditure of the Fund relating to its obligations and operational expenses and submit
it to the Board for adoption. Section 8(a) provides that upon adoption, the Board should
recommend Estimates of the Annual Revenue and Expenditure from the Fund to the
Cabinet Secretary of The National Treasury for approval.
1.6.107 No evidence was provided to the Auditor-General that revenues and expenditures
to and from the Fund Account were prepared and communicated to the Cabinet
Secretary of The National Treasury for inclusion in the 2019/2020 or 2020/2021 Budgets
contrary to section 9(2)(b) of the PFM (COVID-19 Emergency Response Fund)
Regulations, 2020.
1.6.108 In addition, there was no evidence that the Fund Board had developed a work
plan to guide its operations and to ensure proper linkage between budgeting and
planning for efficient and effective utilization of resources. Consequently, the special
audit could not give assurance on the lawfulness and effectiveness of the Fund’s
expenditures and operations for the period under review. The Management explained
that approved work plans and budgets were not applicable since the Fund was set up to
address urgent procurement interventions based on dynamic conditions considering
donations were received either in cash or in kind.
Approvals for opening the Bank Account
1.6.109 Section 10 (1) of the PFM (COVID-19 Emergency Response Fund) Regulations,
2020 requires the Fund Administrator to open Bank Accounts with the approval of the
Board as may be approved by The National Treasury. The audit established that, the
Fund opened a Bank Account with Absa Bank Kenya PLC, the account name being Kenya
COVID-19 Fund, Account Number 2042554653 at Absa Towers Branch. Though the
decision to open the Bank Account was approved by the Fund Board, there was no
evidence of approval by the Cabinet Secretary to The National Treasury for opening the
Bank Account. The Fund also operated an MPESA pay-bill number 999000.
Amount of funds received by the Covid-19 Emergency Response Fund Board
1.6.110 An analysis of the bank statements provided reflects total cash inflows of
Kshs.1,355,468,968 as at 31 December, 2020 which included contributions from private
entities and individuals of Kshs.1,016,981,315 and contributions from Government
Entities of Kshs. 338,487,653 as follows:
38
Source Amount (Kshs)
1 Private Entities and Individuals 1,016,981,315
2 Government Entities 338,487,653
Total 1,355,468,968
1.6.111 As at 31 December, 2020, the Kenya Covid 19 Fund Account held at Absa Bank
had a balance of Ksh.855,468,918.
Donations in Kind- Kshs.409,602,009
1.6.112 The Kenya Covid-19 Emergency Response Fund Board had received donations in
kind amounting to Kshs. 409,602,009 as at 31 December, 2020 as detailed below:
Category Value (Kshs)
1 Health - Medical Supplies (PPE, Oxygen 286,702,300
and Sanitizers)
2 Livelihood - Food items 113,375,328
3 Livelihood – Household items 9,524,381
Total 409,602,009
1.6.113 The Kenya Covid-19 Emergency Response Fund Board provided a schedule
indicating the donors, dates of distribution, items, quantities, and the costed value with
an explanation that the donors did direct delivery to the beneficiaries. As a result, the
audit was not able to verify the donations in kind amounting to Ksh.409,602,009.
PPEs distribution by the Kenya COVID-19 Fund and Equity Group Foundation
Procurement of 1st Tranche PPEs – Kshs.259,373,300
1.6.114 In a Board meeting held on 19th May 2020, the Fund Board resolved (MIN
4/19/5/20) to have the Equity Group Foundation as the contracting entity for purposes
of the initial purchases by the Board. This was an interim measure to allow the
Secretariat to finalize the incorporation of a legal entity.
39
1.6.115 The Equity Group Foundation procured and paid for the 1st Tranche of PPE at
Kshs. 259,373,300. This amount has been recorded in the Fund’s Books as a donation in
kind from the Equity Group Foundation.
Procurement of 2nd Tranche PPEs – Kshs.150,486,050
1.6.116 The Covid 19 Fund Board procured for the 2nd Tranche of PPEs at Ksh.150,486,050
from various suppliers. Out of this Ksh.100,000,050 had been paid for by 31 December,
2020 as detailed below;
Date Payee Details Amount (Kshs)
13/10/2020 Texplast Rfb/Inv Nos 68050 20,000,050
Industries 69258/56
Limited 68985
18/09/2020 Alpha Knits Rfb/Invs 14235/182/179 14,000,000
Limited
18/09/2020 Texplast Rfb/Supply of Reusable 14,000,000
Industries Cloth
Limited Face Masks
Cs 390542
30/09/2020 Alpha Knits Rfb/Invs 14343 14295 14,000,000
Limited 14273 2nd
Tranche Procurement
Award
30/09/2020 Texplast Rfb/Inv 68583 And 14,000,000
Industries 68838 2nd Tranche
Limited
15/09/2020 Manchester Rfb/ Inv 5631 12,000,000
Outfitters Ltd
30/09/2020 Manchester Rfb/Inv 5724 2nd 12,000,000
Outfitters Ltd Tranche
Procurement Award
Total 100,000,050
Commitments
1.6.117 The fund had outstanding commitments of Ksh.50,486,000 as at 31 December
,2020 which were subsequently settled on 7 January, 2021.
40
Supplier Items 31 December, 2020
Kshs
Superior Products Africa Limited Goggles 3,400,000
Omega Apparels Limited Gowns 5,511,000
Texplast Industries Limited Surgical Masks 6,250,000
Scrubs 12,000,000
Coveralls 16,250,000
Bakpharm Limited Face shield 2,475,000
Nairobi Enterprises Limited Hair covers, Aprons, KN95 4,600,000
Total 50,486,000
1.6.118 The fund did not subject the procurement of the PPEs to the Public Procurement
and Asset Disposal Act,2015 and the attendant Regulations. The Fund had resolved
through (MIN 5/1/4/20) to adopt a private sector steered approach.
1.6.119 The Fund Board resolved (MIN 5/28/4/20) to use the TenderSure procurement
system that would be supported by QED Solutions Limited on pro-bono basis. The
following procurement process was applied;
1.6.120 The Fund relied on specifications provided by the Ministry of Health which were
vetted/validated by the Fund’s Technical Committee on Health. It was noted that
Request for Quotation was sent to 72 bidders comprising of local manufactures and
direct importers using TenderSure System on 29 July, 2020 and closed on 5 August, 2020.
Out of the 72 bidders, 41 bidders responded, they were automatically evaluated by the
system and 28 passed the Quality Assurance.
1.6.121 The 28 bidders were then subjected to Technical Evaluation which was
conducted in two parts; physical sample review and documentation due diligence and
24 suppliers with samples were approved. The bidders who passed both sample review
and the quality assurance were considered for financial evaluation where suppliers were
selected on lowest price per item.
1.6.122 From the evaluation, the most competitive suppliers were selected and
recommended for award. The Fund Board approved the tender awards vide (MIN
2/27/5/20).
41
Procurement contract with Bedi Industries - Kshs. 48,165,000.
1.6.123 It was noted in a report dated 22 October, 2020 on supply and delivery of
Personal Protective Equipment for COVID-19 Emergency Medical Care Health Workers
(Batch 2) for Equity Group Foundation and COVID-19 Emergency Response Fund that,
Bedi Industries had been engaged on 20 July, 2020 to supply 100,000 coveralls at a price
of Kshs. 95,000,000. From the report, the first order for 50,700 coveralls of Kshs.
48,165,000 was placed immediately, with the balance of the 49,300 coveralls (Kshs.
46,835,000) to be ordered upon approval of the second PPE procurement cycle.
1.6.124 Although, the Contract and procurement documents for this engagement were
not availed for audit review, the audit team noted that the report indicated the Contract
was for 3 months and had lapsed on 20 October, 2020 before the second order was
placed. The report stated that the second order was not placed because there was
negative feedback from various institutions on the quality of the coveralls supplied and
the second order was subject to approval of the procurement of second batch of PPE.
1.6.125 From the information above, the audit team could not ascertain whether the
Equity Group Foundation or the Fund had appointed an Inspection and Acceptance
Committee responsible for inspecting the goods delivered to confirm conformity with
the required specification prior to receiving them.This control embedded in Section 48
of the Public Procurement and Asset Disposal Act, 2015 is a safeguard to ensure Public
Entities procure goods that meet the technical specifications in the contract and achieve
value for money. The special audit could not also establish whether the contract was
between the Equity Group Foundation and Bedi Industries as donations in kind or direct
procurement from the Fund.In this regard, there is a risk that the Fund may not have
realized value for money in the procurement of the 50,700 coveralls at Kshs. 48,165,000.
1.6.126 There was no evidence that the procurements were paid for by the Fund Board
and the amounts had not been recorded in the Fund’s Financial Statements as
contribution in kind from the Equity Group Foundation.
Utilization of the Cash Transfer Program Funds – Kshs. 400,000,000
1.6.127 It was noted that there was a Cash Transfer Program of Kshs.400, 000,000 aimed
at benefitting 100,000 Kenyans weekly in urban informal settlements for a period of one
42
month. The mapping of the vulnerable categories of persons to benefit from the cash
transfer programme would be guided by considerations such as persons who were on
employment but rendered jobless due to COVID-19, persons within a family set up and
those who had not been beneficiaries of funds from any Government related
intervention. The Board approved the cash transfer programme on 2 June,2020 and Kshs.
400,000,000 was transferred to MPESA Holding Company Limited to be disbursed to the
identified beneficiaries.
Date Details Amount (Kshs)
22/06/2020 MPESA HOLDING CO. LIMITED 100,000,000
17/07/2020 MPESA HOLDING CO. LIMITED 100,000,000
03/08/2020 MPESA HOLDING CO. LIMITED 100,000,000
11/08/2020 MPESA HOLDING CO. LIMITED 100,000,000
Total
400,000,000
1.6.128 The disbursements were done in 4 phases. Detailed Mpesa blasting reports
showing the recipient’s phone number, names, receipt number, dates and amounts
disbursed were provided for audit from Safaricom through the Fund Accountants
(PricewaterhouseCoopers). Location of the recipients was, however, not indicated, and
as a result, the special audit could not therefore confirm if the beneficiaries were from
urban informal settlements. The audit revealed that a total of 97,515 persons benefited
from the cash transfer program. Out of these, 95,727 were registered Mpesa users while
1,788 were not registered. The highest amount disbursed to a beneficiary was Kshs
24,000 while the least amount disbursed was Kshs 1,000.
1.6.129 Analysis of the data provided revealed that, there were 38 payments done to the
same Mpesa telephone number but with different names amounting to Kshs 72,000.
Similarly, there were 7,850 beneficiaries who shared names but had different Mpesa
telephone lines who were paid a total of Kshs.32,626,000. The identity card (ID) numbers
of the recipients were not provided for audit and analysis. In absence of the identity
card numbers and in view of the time constraint, the special audit was not able to
independently verify that the recipients of the cash transfers were the bona fide
beneficiaries or that the cash was received. Consequently, the lawfulness and
effectiveness of utilization of the Kshs.400,000,000 could not be confirmed.
43
Irregularities, Weaknesses and Managerial Responsibility
1.7 Managerial Responsibility
1.7.1 The special audit identified the following irregularities and managerial responsibilities in the Utilization of COVID – 19
Funds by the National Government Entities.
Irregularity Law violated /Risks Amount at Risk (Kshs) Responsibility
1 Inadequate controls in management of Loss of public funds 14,000,000 Management of the
Fuel Ministry of Health
2 Un-explained variance in payment of Value for Money Risks 740,239 Management of the
Import Duty Ministry of Health
3 Issuance of LSO after provision of Violation of the PPADA, 1,536,000 Management of the
catering services for surveillance team 2015 Ministry of Health
4 Un-supported expenditures for airtime Loss of public funds 2,131,000 Management of the
Ministry of Health
5 Conflicting documentation on Value for Money Risks 5,273,670 Management of the
notification of tender award and Ministry of Health
letters of acceptance
6 Un-surrendered imprest Violation of the PFMA, 7,981,975 Management of the
2012 Ministry of Health
7 Delivery of Ventilators to Counties Value for Money Risks N/A Management of the
that did not have capacity to use the Ministry of Health
Ventilators
8 Failure to inspect purchased good Value for Money Risks 11,600,000 Management of Coast
General Hospital
9 Irregular transfer of Kshs.298,966,655 Irregular use of public 298,966,655 Management of Kitui
from the Kitui Hospital Account funds Referral Hospital and
Number 01141303838201 to the Kitui Kitui County Government
County COVID -19 Account number
1000455543
44
Irregularity Law violated /Risks Amount at Risk (Kshs) Responsibility
10 Procurements done without evidence Violation of the PPADA, 228,910,610 Management of Mandera
of professional opinions 2015 Referral Hospital
11 Inappropriate use of procurement Violation of the PPADA, 272,531,900 Management of Mandera
method 2015 Referral Hospital
12 Absence of documents to support Violation of the PPADA, 39,857,500 Management of Mandera
opening and evaluation of bids. 2015 Referral Hospital
13 Absence of work plans on utilization of Value for money Risks 740,000,000 Management of Kenyatta
COVID-19 Funds National Hospital
14 Over expenditure on recruitment of Violation of the PFMA, 19,018,361 Management of Kenyatta
additional health workers 2012 National Hospital
15 Delay in delivery of equipment Value for money Risks 4,330,000 Management of Kenyatta
thereby negating the justification for National Hospital
Direct Procurement
16 Payment for expenditures incurred Value for money Risks 12,388,797 Management of Kenyatta
before COVID-19 was declared in University Teaching
Kenya Research and Referral
Hospital
17 Delivery notes dated before tender Violation of the PPADA, 849,620 Management of Kenyatta
opening and award 2015 University Teaching
Research and Referral
Hospital
18 Services offered before Awarding of Violation of the PP&ADA, 1,350, 000 Management of Kenyatta
tender 2015 University Teaching
Research and Referral
Hospital
45
Irregularity Law violated /Risks Amount at Risk (Kshs) Responsibility
19 Failure to include estimate of non- Violation of the PFMA, N/A Management of Kenyatta
cash donations in the budget 2012 University Teaching
Research and Referral
Hospital
20 Absence of approved work plans, Value for money Risks N/A Management of Moi
budgets, procurement plans and Teaching and Referral
training plans specific to COVID-19 Hospital
resulting in failure to utilize
Government grants
21 Irregular payment of Health Workers Value for money Risks 2,695,000 Management of Moi
Allowances to Non-eligible staff Teaching and Referral
Hospital
22 Un-Accounted for Kshs.115,000,000 Loss of public funds 115,000,000 Management of Moi
Teaching and Referral
Hospital
23 Irregular Administration of the COVID- Section 9(1) of the PFM N/A Management of the
19 Emergency Response Fund (COVID-19 Emergency COVID-19 Emergency
Response Fund) Response Fund
Regulations, 2020
24 Absence of evidence of Revenue and Section 9(2)(b) of the N/A Management of the
Expenditure Estimates and Work Plan PFM (COVID-19 COVID-19 Emergency
Emergency Response Response Fund
Fund) Regulations, 2020
46
1.8 Conclusion and Recommendations
1.8.1 The National Government received significant assistance from various Development
Partners that includes the World Bank, the International Monetary Fund, the African
Development Bank and the European Union among others. The National Treasury
disbursed funds to the Ministry of Health and other MDAs for COVID-19 prevention and
mitigation. The Government also established, the COVID-19 Emergency Response Fund
under the Public Finance Management (COVID-19 Emergency Response Fund)
Regulations, 2020, to receive voluntary contributions from well-wishers towards
covering expenses associated with the COVID-19 pandemic.
1.8.2 A review of expenditures incurred established violations of the Public Procurement and
Asset Disposal Act, 2015 by the Ministry of Health and the Referral Hospitals. There were
failures by the entities to take on charge donations and inventories procured,
inconsistencies in procurement records raising red flags on authenticity of the
transactions, and unsupported payments. Some entities also lacked approved work
plans to guide in efficient and effective utilization of funds. All these infractions are
itemized under Section 1.7 of this special audit report.
1.8.3 It is therefore, recommended that, overally.
• The Executive should undertake across board independent assessment of the
procurement systems with a view of ensuring procuring entities introduce price
models such as price caps on key items and services related to emergencies that
respond to market conditions and prevent overspending. Importantly, the Executive
should consider other contractual designs such as implementing framework
agreements for emergency purchases, setting out contractual terms and price caps
before commencement of procurement; and
• The Executive should ensure that procurement information is made public and that
data is published frequently to create mechanisms by which irregularities in
procurement and corrective interventions can be reported in a timely manner. This
will ensure that independent audits and investigations including social audits
undertaken by key stakeholders are able to corroborate the information.
47
1.8.4 It is further recommended that, specifically.
• The Ministry of Health and the Semi-Autonomous Agencies within the Ministry should
review the systems in place with a view to identifying areas of weaknesses so that
appropriate control measures can be put in place to mitigate procurement fraud
risks especially during times of emergencies;
• The Management of the Ministry of Health and the Management of the Referral
Hospitals should automate their procurement and asset disposal processes with
appropriate audit controls embedded in the system to proactively identify and
mitigate procurement related risks; and
• The Ethics and Anti-Corruption Commission and the Directorate of Criminal
Investigations should conduct further investigations to establish acts of criminality
in all irregularities identified by this special audit.
CPA Nancy Gathungu, CBS
AUDITOR-GENERAL
25 May, 2021
48
2. INTRODUCTION, METHODOLOGY AND SCOPE
2.1 Introduction
2.1.1 Provision of healthcare is one of the economic and social rights outlined in Article
43 of the Constitution of Kenya 2010, which states that every person has the right
to the highest attainable standard of health. Article 201(a) of the Consitution of
Kenya requires openness and accountability including public participation in
financial management matters. Financial management matters in Government are
guided by the Constitution of Kenya 2010 , the Public Finance Management Act, 2012
(PFMA) and the attendant regulations, the Public Procurement and Asset Disposal
Act, 2015 and other circulars released by the National Treasury from time to time.
2.1.2 Articles 229 of the Constitution of Kenya and the Public Audit Act, 2015 gives the
Auditor-General the mandate to audit all public funds and report on whether the
funds have been used in an effective and lawful manner. Section 37 of the Public
Audit Act 2015 provides that, the Auditor-General may, upon request by Parliament,
conduct forensic audits to establish fraud, corruption or other financial
improprieties. In addition, Section 38 of the Public Audit Act, 2015 provides that
the Auditor-General may examine the Public Procurement and Asset Disposal process
of a state organ or a public entity with a view to confirming whether procurements
were done lawfully and in an effective way.
2.1.3 In this regard, the Office of the Auditor-General conducted a special audit on
utilization of the COVID-19 Funds by the National Government Entities with a view
to confirm lawfulness and effectiveness of the expenditure incurred.
2.2 Objectives
2.2.1 The objective of the special audit is to confirm whether public funds utilized by the
National Government Entities for procurement of the medical supplies for purposes
of combating the COVID-19 pandemic were used in a manner that is lawful and
effective.
2.3 Terms of Reference
2.3.1 The special audit was guided by the Terms of References summarized below and
detailed in APPENDIX I:
• Review the Institutional Framework for Management of the COVID-19 Funds
49
• Review utilization of the COVID-19 Funds by the National Treasury and Planning
including disbursements to Ministries, Departments and Agencies
• Review utilization of the COVID-19 Funds by the Ministry of Health and Referral
Hospitals
• Review utilization of the Funds by the COVID-19 Emergency Response Fund
2.4 Scope of Work and Limitations
2.4.1 The Special Audit Report covers, planning, budgeting, financing and utilization of
Covid-19 funds and donations by the National Government for the period 13 March
2020 to 31 July, 2020.
2.4.2 The report establishes, the total amount of funds appropriated and received by the
National Government towards the COVID-19 related activities. It also details, how
much of the funds were disbursed to other Ministerial Development Agencies and
usage of the COVID-19 funds by the Ministry of Health. Further, the report reviews
receipt and utilization of the COVID-19 Funds and donations by the COVID-19
Emergency Response Fund . Separate reports have been issued on Utilization of the
COVID-19 funds by the 47 County Goverments and the Kenya Medical Supplies
Authority (KEMSA).
2.5 Structure of the Report
2.5.1 The special audit report has three sections; the executive summary, the detailed
approach and the detailed findings. The report should be read in its entirety in order
to fully comprehend the approach and the findings. It reports on facts as understood,
with the aim of informing the Public Accounts Committee on their deliberations and
decision making taking cognizance of any limitations raised.
2.6 Audit approach and methodology
2.6.1 The special audit adopted the following methodology in evidence gathering,
analysis and reporting:
Document Examination
2.6.2 The special audit reviewed and examined documents which include the Public
Finance Management Act 2012, the Public Procurement and Disposal Act 2015, the
procurement records and budgets among others. This was done to ensure objectivity
50
of the assignment and to provide practical recommendations towards the special
audit.
Analytical Review
2.6.3 Information from procurement records for the period under review was analyzed and
the results used to arrive at the conclusions.
Interviews
2.6.4 The audit team interviewed Officers detailed in APPENDIX II involved in various
operational processes within the Entitities and their response have been
incorporated in this report.
51
3. DETAILED FINDINGS
3.1 The Institutional Framework for the Management of the COVID-19 Funds
3.1.1 On 11 March, 2020, the World Health Organization pronounced a public health
emergency of international concern, declaring the Corona Virus Disease 2019
(COVID-19) as a pandemic. The first case of the COVID-19 pandemic in Kenya, was
announced on Friday, 13 March, 2020. Since then, the Country has continued to
record new cases daily.
3.1.2 The National Government received significant assistance from various development
partners that includes: the World Bank, the International Monetary Fund, the African
Development Bank and the European Union.
3.1.3 The Government also established, the COVID-19 Emergency Response Fund under
the Public Finance Management (COVID-19 Emergency Response Fund) Regulations,
2020, to receive voluntary contributions from well-wishers towards covering
expenses associated with the COVID-19 pandemic.
3.1.4 The key institutions involved in the COVID-19 prevention, mitigation and response
are as follows:
Table 1: Institutions involved in the COVID-19 prevention, mitigation, and response
Institution Remarks
1 The National Treasury and Implemented the fiscal and monetary policy
Planning decisions including mobilization of resources
to mitigate the pandemic and cushion the
Economy from effects of the pandemic
2 The Ministry of Health, the Received and utilized funds from the National
Refferal Hospitals and KEMSA Treasury for prevention and mitigation of the
COVID-19 Pandemic
3 The COVID-19 Emergency Received monetary and non-monetary
Response Fund voluntary contributions from well-wishers
towards covering expenses associated with
the COVID-19 pandemic
52
Institution Remarks
4 Other Ministries, Departments Received funding from the National Treasury
and Agencies (MDAs) for either the General Budget Support or the
COVID-19 Mitigation.
5 County Goverments Received funds and donations from the
National Government for the fight against the
pandemic. A separate report has been issued
on utilization of the COVID-19 Funds by the
County Goverments.
3.2 Utilization of the COVID-19 Funds by the National Treasury and Planning
Budgeting and financing for the COVID-19 activities
Supplementary Budgets for the COVID-19 related activities
3.2.1 When the COVID -19 pandemic was declared by the Government, the budget for the
financial year 2019/2020 was in operation. The Covid 19 intervention measures that
were prepared called for budget reallocations leading to supplementary budgets II
and III which were passed by the National Assembly on 30 April, 2020 and 30 June,
2020 respectively, amounting to Kshs.58,158,600,000 to cater for the Emergency
Response Funds. Records at the National Treasury indicated that the reallocations
for the COVID -19 emergency related expenditures and budgetary support were as
summarized below and detailed in APPENDIX III.
Table 2:GOK Supplementary Budgets for the COVID-19 activities
MDA Purpose Amount (Kshs)
1 The Ministry of Health COVID-19 22,432,000,000.00
Interventions
2 The State Department for COVID-19 6,200,800,000.00
Correction Services Interventions-
Pending Bills
3 The State Department for Security 500,000,000.00
Interior Enforcement
4 The National Intelligence Contact Tracing 1,500,000,000.00
Service
5 The National Treasury and Kenya Revenue 10,000,000,000.00
Planning Authority- VAT
refunds
6 The State Department for Youth Provision for 6,165,800,000.00
pending bills
53
MDA Purpose Amount (Kshs)
7 The State Department for Provision for relief 400,000,000.00
Devolution food
8 The State Department for Provision for Kazi 416,000,000.00
Housing Mtaani project
9 The State Department for Social Provision for 10,000,000,000.00
Protection vulnerable groups
10 The National Land Commission Provision for 544,000,000.00
pending bills
Total 58,158,600,000.00
Loans and Grants received by the Government of Kenya for COVID-19
3.2.2 After the first COVID -19 case was reported in Kenya, on 13 March, 2020, the
Government of Kenya, through the National Treasury and Planning, negotiated with
various donors for financial support for both COVID-19 mitigation programs and
Budgetary support (Economic Stimulus Programs).
3.2.3 Section 52(1) of the Public Finance Management Act, 2012, provides that, the Cabinet
Secretary of the National Treasury or any person designated by the Cabinet Secretary
in writing is authorized to execute loan documents for borrowing by the National
Government. Section 50 (7) of the Public Finance Management Act, 2012, further
provides that, the Cabinet Secretary shall ensure that the proceeds of any loan
raised under this Act are paid into the Consolidated Fund or into any other public
fund established by the National Government or any of its entities as Cabinet
Secretary may determine in accordance with the Regulations approved by
Parliament.
3.2.4 Consequently, financing agreements were signed between the various Development
Partners and the Government of Kenya represented by the Cabinet Secretary of the
National Treasury and Planning.
3.2.5 The Government of Kenya, through the National Treasury and Planning, mobilized a
total of Kshs.214,908,853,825 from various Development Partners . The funds were
received in the Special Deposits Accounts held at the Central Bank of Kenya as
summarized below and detailed in APPENDIX IV:
54
Table 3: Funds received from Development Partners for COVID-19 mitigation
Date Donor/GOK Currency Forex Amount Amount (Kshs) Purpose
14/Feb/20 World Bank- USD 10,000,000 1,063,000,000 Transformi
Loan ng Health
Systems for
Universal
Care
3/Apr/20 Euro 45,500,000 5,287,100,000 Covid -19
Emergency
Response
Project
20/May/20 USD 750,000,000 80,250,000,000 2nd
Inclusive
Growth and
Fiscal
Managemen
t
20/May/20 USD 250,000,000 26,574,996,811 Developme
nt Policy
13/May/20 DANIDA-Grant DKK 23,000,000 350,000,000 Universal
Health
Care
Devolved
System -
COVID 19
4/Jun/20 ADB-Loan Euro 188,000,000 22,412,835,480
30/Jun/20 IMF-Loan SDR 542,800,000 78,332,610,616 Covid -19
Emergency
Response
Support
Program(ER
SP)
55
Date Donor/GOK Currency Forex Amount Amount (Kshs) Purpose
28/April/20 EU-Loan Euro 5,019,825 638,310,917 Public
(Initially Accountabil
agreed Euro ity and
7,000,000. Service
Disbursed less Delivery –
amount offset PASEDE
for ineligible
expenses)
Total 214,908,853,825
3.2.6 Out of the above amount of Kshs.214,908,853,825, requests amounting to
Kshs.162,685,604,780 had been received as at 31 July, 2020 and transferred to the
various Ministries, Departments, Agencies (MDAs) and the Counties. The funds were
transferred to various National Government Ministries, Departments and Agencies
for COVID – 19 mitigation, and as normal Exchequer releases for the period from
March 2020 to July 2020. The funds that have been covered by the special audit are
highlighted under the remark’s column of APPENDIX XXIX.
3.2.7 A balance of Kshs.52,223,249,045 was held in various bank accounts including the
Exchequer Account and represents funds for which no requests had been made by
the implementing entities. APPENDIX IV details receipts, disbursements and
balances held in the various special accounts as at 31 July, 2020.
3.2.8 The un-utilized balance of Kshs.52,223,249,045, was held in the following Central
Bank Accounts as at 31 July, 2020.
Table 4: Un-utilized Cash Balances as at 31 July, 2020
Source Purpose Amount (Kshs) CBK Bank Account
World Bank Transforming Health 86,584,500 1000003987 and
Systems for Universal 1000308637
Care Project
World Bank COVID-19 Emergency 3,559,977,380 1000003987 and
response project 1000446366
World Bank 2nd Inclusive and Fiscal 26,574,996,811 1000003987
Management
Development Policy
56
Source Purpose Amount (Kshs) CBK Bank Account
IMF Covid -19 Emergency 21,363,379,436 1000003987 and
Response Support 1000448571
Programme
European Union Public Accountability 638,310,918 1000449772
and Service Delivery
Total 52,223,249,045
Other Bank Accounts opened to raise funds for the COVID-19 Pandemic
3.2.9 It was also established that various bank accounts were opened or had been in
operation in relation to raising funds for the COVID-19 pandemic mitigation as
follows:
Table 5: Other Bank Accouts Opened to raise funds for the COVID-19 Pandemic
Particulars COVID-19 Covid-19 Covid-19 Voluntary pay
Emergency Investigative and Emergency cut CBK A/C.
Response Fund Prosecution response Fund 1000201924
CBK. A/C No. Agencies CBK. A/C NBK A/C
1000445057 1000446021 1071225535900
Bank Signatories PS-National PS-National PS-National PS-National
Treasury Treasury Treasury Treasury
Receipts (Kshs) 288,754,937.30 9,387,674,000.00 6,308,010.30 179,207,769.45
Disbursements No No disbursements No No
as at 31 July, 2020 disbursements disbursements
disbursements
as at 31 July, as at 31 July,
as at 31 July, 2020 2020
2020
3.2.10 The above bank accounts had balances amounting to Kshs.9,862,941,166 held in four
bank accounts related to COVID-19 Emergency response funds as detailed in table 6
below:
57
Table 6: Bank Accounts with balances amounting to Kshs.9,862,941,166
Bank Account Name Account Number Amount KSh.
Central Bank of Covid 19 Emergency 1000445057 288,754,937.30
Kenya Response Fund
Central Bank of Covid 19 1000446021 9,387,674,000.00
Kenya Investigative and
Prosecution
Agencies
National Bank of Covid 19 Emergency 1071225535900 6,308,010.30
Kenya response Fund
Central Bank of Voluntary pay cut 1000201924 179,207,769.45
Kenya account
Total 9,862,941,166.05
3.2.11 The special audit established the following irregularities:
Operation of the COVID-19 fund Bank Accounts by the National Treasury
3.2.12 Article 206 (1) of the Constitution of Kenya, 2010 provides that there is established
the Consolidated Fund into which shall be paid all money raised or received by or on
behalf of the National Government, except money that is reasonably excluded from
the Fund by an Act of Parliament and payable into another public fund established
for a specific purpose. Section 24 (4) of the Public Finance Management Act, 2012
provides that the Cabinet Secretary may establish a National Government Public
Fund with the approval of the National Assembly.
3.2.13 The Public Finance Management (National Government) Regulations, 2015 section
207(1) subsections (a) to (h) provides in part that the establishment of a Public Fund
shall at the minimum be initiated through a proposal by the Cabinet Secretary
responsible for the National Government entity under which the functions of the
Fund fall clearly setting out the justifications and submit it to the Cabinet Secretary.
3.2.14 It was established that the Cabinet Secretary to the National Treasury, established
the COVID-19 Emergency Response Fund under the Public Finance Management
(Covid-19 Emergency Response Fund) Regulations, 2020 which is also envisaged
under Section 24 (4) of the Public Finance Management Act, 2012.
58
3.2.15 It was noted that, various Bank Accounts were opened or had been in operation in
relation to raising funds for the Covid 19 pandemic emergency response/mitigation.
The bank accounts operated by the National Treasury, had closing balances of
Kshs.9,862,941,166.05 as at 31 July, 2020 as detailed above.
3.2.16 It was also established that besides the four bank accounts metioned above, there
is another Bank Account; Kenya Covid -19 Fund Account Number 2042554653
operated under ABSA Bank Kenya PLC which was opened by the COVID-19 Emergency
Fund Board that was established by the Executive for the purpose of the COVID-19
mitigation and emergency response. However, it was established that the current
board as constituted is not backed by any law or Act of Parliament or Public Finance
Management (Covid-19 Emergency Response Fund) Regulations, 2020 which is
essential in the operationalization of any Public Fund.
3.2.17 In addition, there was no evidence provided that the operation of the ABSA bank
account was established within the law contrary to Article 206 (1) (a) of the
Constitution of Kenya, 2010, section 24(4) of the Public Finance Management Act,
2012, and Public Finance Management (Covid-19 Emergency Response Fund)
Regulations, 2020. Section 9 (1) (2) of Part III of the Public Finance Management
(Covid-19 Emergency Response Fund) Regulations, 2020 requires the Adminstrator of
the Fund to be the Principal Secretary for the time being responsible for matters
relating to Finance whose responsibility should be among others supervise and
control the administration of the Fund and cause to be established proper systems
of control and oversight under the provisions of the PFMA, 2012. There was no
evidence that the Principal secretary for the National Treasury and Planning was the
Admistrator of the Fund contrary to Section 9 (1) (2) of Part III of the Public Finance
Management (Covid-19 Emergency Response Fund) Regulations, 2020.
3.2.18 Further, it was noted that the Covid -19 fund accounts were not centrally managed
as per the provision of the Covid-19 Emergency Response Fund Regulations, 2020
part iii. Some Accounts were being managed by The National Treasury while the
ABSA bank account was being managed by an appointed Board without an
Administrator.
59
Disbursements of funds to the Ministries, Departments, Agencies and the County
Governments
3.2.19 Article 206 (4) of the Constitution of Kenya, provides that, money shall not be
withdrawn from the Consolidated Fund, unless the Controller of Budget has approved
the withdrawal. Section 17 (2) of the Public Finance Management Act ,2012 requires,
the National Treasury, to maintain the Consolidated Fund in an account known as
the National Exchequer Account, kept at the Central Bank. Section 17 (4) of the
Public Finance Management Act, 2012 provides that, where a withdrawal from the
Consolidated Fund, is authorised under the Constitution or an Act of Parliament for
the appropriation of money, the National Treasury shall make a requisition for the
withdrawal, and submit it to the Controller of Budget for approval. Further, section
17 (5) of the Public Finance Management Act, 2012 provides that, the approval of a
withdrawal from the Consolidated Fund by the Controller of Budget, together with
written instructions from the National Treasury requesting for the withdrawal, shall
be sufficient authority for the Central Bank of Kenya to pay amounts from the
National Exchequer Account in accordance with the approval and instructions
provided.
3.2.20 It was established that, the National Treasury disbursed a total of
Kshs.162,685,604,780 through the National Exchequer Account to various Ministries,
Department and Agencies (MDAs) and various Counties in accordance with Article
206 (4) of the Constitution of Kenya, 2010 and Sections 17 (4) (5) of the Public
Finance Management Act, 2012 as summarized below and detailed in APPENDIX
IV.
Table 7: Amount disbursed by the National Treasury to various MDAs
Source Ministry of Counties Gradian Budget Support Total Disburse
Health (Kshs) (Kshs) Health (Kshs) ment
Systems date
(Kshs)
1 World Bank
Transformin 531,550,000 0 0 0 531,550,000 25.3.20
g Health
Care Project
Transformin 444,865,500 0 0 0 444,865,500 25.6.20
g Health
Care Project
Kenya Covid- 1,556,802,620 0 0 0 1,556,802,620 28.4.20
19
60
Source Ministry of Counties Gradian Budget Support Total Disburse
Health (Kshs) (Kshs) Health (Kshs) ment
Systems date
(Kshs)
Emergency
Response
Project
Direct 0 0 170,320,000 0 170,320,000 03.06.20
payment-
40% payment
for purchase
of
Ventilators
Kenya 0 0 0 80,250,000,000 80,250,000,000 Various
Inclusive detailed
Growth and in
Fiscal APPENDI
Management XV
Project
2 IMF 20,965,895,569 0 0 36,003,335,611 56,969,231,180 Various
detailed
in
APPENDI
X VI
3 ADB 751,460,000 0 0 21,661,375,480 22,412,835,480 Various
detailed
in
APPENDI
X VII
4 European 0 0 0 0 0
Union
5 DANIDA 0 350,000,000 0 0 350,000,000 29.06.20
as
detailed
in
APPENDI
X VIII
Total 24,250,573,689 350,000,000 170,320,000 137,914,711,091 162,685,604,780
disbursed
3.2.21 It was also established that:
• The amount of DANIDA funds amounting to Kshs.350,000,000 was disbursed
to the 47 The County Goverments by the National Treasury upon approval
by the Ministry of Health
• The World Bank, disbursed an amount of Kshs.170,320,000 budgeted under
the Ministry of Health Budget directly to the Gradian Comprehensive Care
Ventilators, a supplier contracted to supply ventilators to the Government
of Kenya. The amount was made through a direct payment of
61
Kshs.170,320,000, being 40% down payment for the supply of 250 units of
ventilators in accordance with the World Bank procurement guidelines.
• The Ministry of Health also utilized an amount of Kshs. 740,222,242 from its
GOK budgets to finance the COVID-19 related activities.
3.2.22 Therefore, a total of Kshs. 25,511,115,932 was received at the Ministry of Health for
the period under review, out of which Kshs.17,610,350,362 was specifically allocated
for the COVID-19 related activities.
3.3 Utilization of COVID-19 Funds and Donations by the MOH
Receipt of funds by the Ministry of Health
3.3.1 According to records at the Ministry of Health, an amount of Kshs. 25,511,115,932
was received from the National Treasury for the period 01 March 2020 - 31 July 2020
for both COVID-19 and Non-COVID-19 related activities as follows:
Table 8: Funds received at the Ministry of Health for COVID and Non-COVID
Activities
Source Amount (Kshs) Covid related (Kshs)
GOK 740,222,242 740,222,242
IMF 20,965,895,569 13,816,590,000
ADB 751,460,000 0
WORLD BANK 2,703,538,120 2,703,538,120
DANIDA 350,000,000 350,000,000
TOTAL 25,511,115,932 17,610,350,362
3.3.2 Out of this amount, Kshs.17,610,350,362 was received for the COVID-19 related
interventions while the rest was received for Non-COVID-19 activities such the
Universal Health Cover (UHC).
3.3.3 The table below details the receipt number, date in which the funds were received
and purporse of the funds.
62
Table 9 : Funds allocated to the Ministry of Health
ACCOUNT
DATE RECEIVED RECEIPT NUMBER RECEIVED AMOUNTS SOURCE COVID RELATED OTHERS REMARKS
NUMBER
RECURRENT
04-Mar-20 10810002235 1000181478 150,000,000.00 GOK 150,000,000.00 KNH Mbagathi IDU
25-Mar-20 10810002283 1000181478 91,500,000.00 GOK 91,500,000.00 DOD,NYS,SDBT,SDPW
National Referral
23-Apr-20 10810002286 1000181478 498,722,242.40 GOK 498,722,242.40 facilities covid
temporary staff
Conditional covid 19
05-Jun-20 10810002318 1000181478 5,000,000,000.00 IMF CREDIT 5,000,000,000.00
grants to county's
Kemsa Tax on USAID
08-Jun-20 10810002319 1000181478 333,470,837.30 IMF CREDIT 333,470,837.30
procured HPTs
KNH Supp II,KMTC
19-Jun-20 10810002342 1,024,628,930.75 IMF CREDIT 1,024,628,930.75 SuppII,Kemri Supp
II,others
Covid 19
30-Jun-20 10810002344 1000181478 9,099,830,982.20 IMF CREDIT 8,150,090,000.00 949,740,982.20 healthworkers
allowances,kemsa
SUB-TOTAL FOR RECURRENT 16,198,152,992.65 13,890,312,242.40 2,307,840,750.25
DEVELOPMENT
07-Apr-20 10810002232 1000181688 531,550,000.00 WORLD BANK 531,550,000.00 THS UCP CERC
170,320,000.00 170,320,000.00 CHERP
30-Apr-20 10810002321 1000181688 1,556,802,620.00 WORLD BANK 1,556,802,620.00 CHERP
09-Jun-20 10810002324 1000181688 4,485,850,513.20 IMF CREDIT 4,485,850,513.20 Kemsa UHC roll out
KUTTRAH 300
19-Jun-20 10810002338 1000181688 1,401,950,726.70 IMF CREDIT 526,500,000.00 875,450,726.70
bed,MES,others
30-Jun-20 10810002339 1000181688 444,865,500.00 WORLD BANK 444,865,500.00 THS UCP CERC
KNH Day care,Kemsa
30-Jun-20 10810002340 1000181688 371,623,579.00 IMF CREDIT 140,000,000.00 231,623,579.00
grant, others
SUB-TOTAL DEVELOPMENT 8,962,962,938.90 3,370,038,120.00 5,592,924,818.90
TH Direct Danida Funds
DANIDA FUNDS RECEIVED ON 30 June 2020 350,000,000 350,000,000
to County
SUB-TOTAL 9,312,962,939 3,720,038,120
TOTAL
RECEIPTS 25,511,115,932 17,610,350,362
63
Utilization of funds for the COVID-19 related items by the Ministry of Health
3.3.4 During the period 01 March, 2020 to 31 July 2020, the Ministry of Health received a
total of Kshs.17,610,350,362 for the COVID-19 related activities. Out of this amount,
the Ministry of Health utilized a total of Kshs. 15,773,644,422 as detailed in the table
below:
Table 10: Summary of Expenditures incurred by the Ministry of Health
Particulars World Bank DANIDA IMF (Kshs) GOK (Kshs) Total (Kshs)
(Kshs) (Kshs)
RECEIPTS 2,703,538,120 350,000,000 13,816,590,000 740,222,242 17,610,350,362
EXPENDITURE
Expenditure at 484,898,662 0 0 0 484,898,662
MOH
Disbursement to 0 350,000,000 7,355,899,000 0 7,705,899,000
Counties
Disbursement to 381,934,518 0 1,800,000,000 0 2,181,934,518
KEMSA
Disbursement to 0 3,942,245,000 648,722,242 4,590,967,242
Referral Hospitals
0
Quarantine 0 0 700,000,000.00 0 700,000,000
facilities
Other Gradian 0 0 18,445,000 91,500,000.00 109,945,000
Health Systems
Total expenditures 866,833,180 350,000,000 13,816,589,000 740,222,242 15,773,644,422
3.3.5 Included in the World Bank funding of Kshs.2,703,538,120, was Kshs.170,320,000
disbursed by the World Bank to the Gradian Health Systems for procurement of
Ventilators.
64
3.3.6 Details of the specific names of recipient entities, amount received and purpose is
attached as APPENDIX IX.
Expenditures incurred at the Ministry of Health Headquarters
3.3.7 The expenditure of Kshs.484,898,662 spent at the Ministry of Health headquarters
was under the Transform Health System-Universal Care Project (THS-UCP) and the
COVID-19 Health Emergency Response Project (CHERP) as summarized below and
detailed in APPENDIX X.
Table 11: Expenditures at the Ministry of Health Headquarters
Particulars Amount (Kshs)
1 Transform Health System-Universal Care Project (THS-UCP) 326,350,273
2 COVID-19 Health Emergency Response Project (CHERP) 158,548,389
Total 484,898,662
Transforming Health Systems for Universal Care Project (THS-UCP)
Background information on the project
3.3.8 The Transforming Health Systems for the Universal Care Project (THS-UCP) credit
number 5836-KE is a World Bank funded project in the Ministry of Health (MoH) which
commenced on 04 July , 2016. The Government of Kenya (GoK) through the National
Treasury requested for a second amendment to the financing agreement on 02
October, 2019, to provide for a Contingency Emergency Response Component
(CERC). The amendment to the financing agreement for THS-UCP was done on 14
February, 2020 to a sum of USD 10 million (equivalent to Kshs. 1 Billion).
3.3.9 To ensure proper implementation of the Contingency Emergency Response
Component (CERC), the Government prepared a Contingency Emergency Response
Component Manual referred to as the CERC Manual. In addition, the Ministry of
Health prepared the COVID-19 Contingency Emergency Response Implementation
Plan (CERIP) 2020 in accordance with the CERC Manual that was approved by the
World Bank. The CERIP was meant to guide the preparedness, early detection and
early response for COVID-19 in the country.
3.3.10 The National Treasury and the Ministry of Health wrote to the World Bank on 18
February, 2020 and 11 March, 2020 respectively requesting that the Contingency
Emergency Response Component (CERC) be triggered for a sum of USD 10 million and
65
to release USD 50 million under the COVID-19 financing facility to enable immediate
and timely response to the crisis caused by the virus. On 10 March, 2020, a request
for reallocation of funds across disbursements categories under THS-UCP from the
Ministry of Health vide letter Ref: No. MOH/ADM/1/1/171 Vol. 1(179) to the National
Treasury was done.
3.3.11 On 13 March 2020, the World Bank accepted the request to support COVID-19
response and the matrix showing different budget items. On 18 March, 2020, the
CERC was activated and disbursement requests were accepted by the World Bank
after withdrawal conditions were met by the government.
3.3.12 A request for Authority to Incur Expenditure Ref: No. MOH/ADM/1/1/171 Vol. 1(181)
under the CERC from the Ministry of Health to the National Treasury was done on 18
March, 2020. On 8 April 2020, a No Objection was issued by the World Bank for
utilization of Kshs. 935, 056, 847.25. This was indicated in a letter by the Ministry
of Health Ref: No. MOH/ADM/1/1/171 Vol. (192) dated 8 April,2020 which stated
that various activities that had initially been proposed for funding under the
Contingency Emergency Response Component (CERC) had to be reprogrammed to
enable priority activity to be supported since priorities for the country had changed
from preparedness to response.
3.3.13 On 17 April, 2020, a second No Objection was issued by the World Bank for
utilization of Ksh. 1,000,237,147 or 976,776,847.25. On 27 May 2020, a request for
approval of the work plan and the procurement plan under the CERC amounting to
Kshs. 1 billion was made vide letter Ref. No. MOH/ADM/1/1/171 Vol. (221) by the
Head of Intergovernmental Relations Department at the Ministry of Health to the
Principal Secretary (PS) to the Ministry of Health. The PS, approved the request on
29 May, 2020. This approval superseded all other approvals relating to the CERC that
had been issued as of 15 April, 2020.
Budgeting and financing
3.3.14 The approved budget for the Contingency Emergency Response Component (CERC)
was Kshs 1billion as at 29 May, 2020 as detailed in APPENDIX XI. According to the
bank statements for the Project Account, the funds for the CERC were remitted to
the Ministry of Health Account No. 1000313878 at the Central Bank of Kenya in three
tranches as shown in the table below:
66
Table 12: Budget for the Contingency Emergency Response Component (CERC)
Date Transaction Number Amount in KShs.
02/04/2020 FT20093GP52K 500,000,000
29/05/2020 FT20150T66YW 31,550,000
02/07/2020 FT201844MWFH 444,865,500
Total 976,415,500
Budget Utilization
3.3.15 According to the Contingency Emergency Response Implementation Plan (CERIP), the
Project Management Team (PMT), was responsible, for ensuring that, the
procurement policies and procedures governing the project were adhered to.
Procurement of either goods, services or works was to be conducted in accordance
with World Bank Procurement Regulations for Investment Project Financing (IPF)
Borrowers and according to the provisions specified in the Financing Agreement.
3.3.16 The total amount utilized under this project for the COVID-19 related activities was
Kshs.158,548,389 as detailed in APPENDIX X . The special audit identified the
following irregularities in relation to the budget utilization of the Contingency
Emergency Response Component (CERC) project:
Inconsistencies in the dates within which various procurement activities were indicated to
have occurred amounting to Kshs.6,505,802
3.3.17 The procurement of assorted office stationery was done through request for
quotation to eleven bidders, all of whom were awarded tenders to supply the goods.
However, there were inconsistencies in the dates within which various procurement
activities were indicated to have occurred. Section 84 (1) of the Public Procurement
and Asset Disposal Act ,2015 requires the head of procurement function, to review
the tender evaluation report and provide a signed professional opinion to the
Accounting Officer. On the contrary, the audit established that, the professional
opinion was done and signed on the 19.03.20 before the suppliers were invited to
make their quotations on 08.04.20 contrary to section 84 (1) of the Public
Procurement and Asset Disposal Act ,2015. All the suppliers responded by 15 April,
67
2020. It was therefore not possible to ascertain the eligibility of these expenditures
amounting to Kshs.6,505,802 due to the inconsistencies noted.
Un-Explained Variance of Kshs.740,239 in the Payment of Import Duty
3.3.18 A review of Payment Voucher number 002347 established that the budget for
handling and delivery fees of goods procured under the Transform Health System-
Universal Care Project (THS-UCP) for Covid-19 response commodities through
UNICEF, (10% estimate) and any other contingency was Kshs. 6,403,947. However, a
total of Kshs. 6,678,166 was paid on 01 July, 2020 to KUEHNE+NAGEL for handling
and delivery fees for goods procured under the Transform Health System-Universal
Care Project (THS-UCP) for Covid-19 response commodities through UNICEF. In
addition, a review of supporting documents showed that import duty as per the
Single Administrative Document (IM4) was Kshs. 5,937,927 yet the Ministry of Health
paid an amount of Kshs. 6,678,166 resulting in an un-explained overpayment of
Kshs.740,239.
Issuance of LSO after provision of Catering Services to the Surveillance Team-
Kshs.1,536,000.
3.3.19 A review of payment voucher number 002394 established that, EAT and Tell Café
Limited was engaged by the Ministry of Health for provision of catering services to
Officers involved in COVID-19 prevention and mitigation at a cost of Kshs.1,536,000.
The payment voucher indicate that the services were provided between 27 April,
2020 and 03 May, 2020 both days inclusive.
3.3.20 Further, the review established that the Local Service Order (LSO) number 9110 was
issued to EAT and Tell Café Limited on 04 June, 2020, which was over one month
after the service had already been offered. It was also not possible to ascertain how
the suppliers were evaluated for the service since procurement documents relating
to the evaluation were not provided and no explanation was given.
3.3.21 Under the circumstances, the lawfulness and effectiveness of the amount of
Kshs.1,536,000 incurred by the Ministry of Health on Catering services could not be
confirmed.
68
Inadequate controls in Management of Fuel Amounting to Kshs. 14,000,000
3.3.22 Section 139 (1) of the of the Public Finance Management Regulations, National
Government Regulations, 2015 provide that the Accounting Officer of a National
Government entity shall take full responsibility and ensure that proper control
systems exist for assets and that; (a) preventative mechanisms are in place to
eliminate theft, security threats, losses, wastage and misuse; (b) movement and
conditions of assets can be tracked; and (c) stock levels are at an optimum and
economical level.
3.3.23 It was established that, Ramji Haribhai Devani Limited was awarded the tender for
the supply and delivery of fuel for Ksh 14,000,000. The Ministry of Health made an
advance payment of the entire amount of Kshs.14,000,000 to the supplier based on
a profoma invoice. However, the actual expenditure for the period May 2020 to July
2020 was Kshs. 2,074,764.55. The special audit established weaknesses in usage of
fuel cards since the Ministry of Health did not designate fuel cards to each vehicle
hence it was impossible to ascertain the amount of fuel consumed by each vehicle
for the period under review.
3.3.24 After reviewing of the fuel expenditure statements, it was established that, fuel
cards listed in the table below were open for use by any vehicle in different months
Table 13: Inadequate controls in Fuel Management
MONTH CARD NUMBER VEHICLE REG. NO AMOUNT-(KSH)
May 1408032986 Any Vehicle 163,535.00
1408035675 Any Vehicle 88,487.00
Sub-Total 252,022.00
June 1408032986 Any Vehicle 45,210.00
1408035675 Any Vehicle 127,532.00
Sub-Total 172,742.00
July 1408032984 Any Vehicle 51,425.00
1408032985 Any Vehicle 86,940.00
1408032986 Any Vehicle 101,809.00
1408035675 Any Vehicle 155,815.00
1408035676 Any Vehicle 648,458.35
1408037142 Any Vehicle 58,451.00
1408037143 Any Vehicle 26,826.00
69
MONTH CARD NUMBER VEHICLE REG. NO AMOUNT-(KSH)
Sub-Total 1,129,724.00
GRAND TOTAL 1,554,488.00
3.3.25 It was not possible to trace the transaction amounts in the monthly fuel expenditure
statements to respective work tickets hence the team could not confirm whether
fuel expenses incurred by fuel cards marked for use by ‘Any Vehicle’, were for
official assignments. There is a possibility of misuse of fuel cards especially fuel
cards marked for use by ‘Any Vehicle’, as such transactions cannot be traced to
drivers’ work tickets.
Un-supported expenditures for Airtime– Ksh 2,131,000
3.3.26 It was established that Safaricom Limited was contracted through direct
procurement to supply airtime for officers manning the Quarantine sites,
Surveillance teams, the Emergency Operation Centre (EOC) and the Contact Tracing
Teams for Kshs 3,000,000. A review of the stores ledger and stock control card no.
524481 of mobile airtime revealed that, 2,400 airtime scratch cards worth Ksh
2,400,000 were issued without any counter requisition and issue voucher. Thus the
special audit could not confirm whether the issuance of airtime scratch cards was
dully sanctioned and approved. The special audit also established that as of the date
of the audit, all airtime scratch cards worth Kshs. 3,000,000 had been fully issued.
However, a review of the availed list of beneficiaries of the cards revealed that,
only airtime worth Ksh 869,000 were dully signed for by the recipients. The audit
could not confirm how a balance of airtime worth Ksh 2,131,000 were issued out and
to which beneficiaries since there was no evidence that the recipients had signed
acknowledging receipt of the airtime.
Conflicting documentation on notification of tender award and letters of
acceptance- Kshs.5,273,670
3.3.27 It was also established that, Hadassah Hotel was awarded a tender for the provision
of full board accommodation services for the Ministry of Health officials undertaking
rapid response for the month of April and May 2020 for Kshs.5,273,670 commencing
70
on 07 April, 2020. However, the special audit established that the letter of
acceptance dated 04 April, 2020 was issued by the supplier three days before
notification of the tender award dated 07 April, 2020.
3.3.28 The Management of the Ministry of Health explained that, the service provider had
erroneously written the wrong date on the letter of acceptance and that the Ministry
of Health noted the error in the date and notified the service provider. In this regard,
the Ministry of Health submitted to the audit team, a corrected letter of acceptance,
the letter of notification and previous letter of acceptance.
3.3.29 Given the two conflicting set of documents, the special audit could not establish the
authenticity of either of the two documents and therefore the lawfulness and
effectiveness of the expenditure could not be confirmed.
The Covid-19 Emergency Response Project (CHERP)
Background information on the project
3.3.30 The Covid-19 Emergency Response Project (CHERP) IDA Credit 65980 is based on
the Kenya COVID-19 Emergency Response Project Appraisal document dated 25
March, 2020, page 7. The project objective is to prevent, detect and respond to the
COVID -19 outbreak and strengthen national systems for public health emergency
preparedness in the Republic of Kenya.
3.3.31 The main implementing agency is the Ministry of Health, the Kenya Medical Supplies
Authority (KEMSA), the National Emergency Response Committee on COVID-19
(NERC) and the National COVID-19 Task Force.
3.3.32 The Financing Agreement between the Republic of Kenya and the International
Development Associations of USD 50 Million was signed on 03 April, 2020 as detailed
in the table below:
Table 14: Financing Agreement between the Republic of Kenya and IDAs
No Project Component Cost (USD)
1 Medical Supply & Equipment 8,472,500
2 Response, Capacity building & Training 8,759,700
Quarantine & Isolation Centers; To Follow up activities in
3 the Counties (Isolation room facilities in High Risk 12,676,400
71
No Project Component Cost (USD)
Counties, Level 5 hospitals and High Volume Level 4
Hospitals.
4 Medical Waste Disposal 3,387,600
5 Community Discussion & Information Outreach 4,960,100
6 Availability of safe blood & blood products 10,000,000
7 Project Implementation & Monitoring 1,743,700
Total (USD) 50,000,000
Total (Kshs) 5,350,000,000 ( 1 USD= Kshs.107)
Budgeting and project mobilization
3.3.33 Section 36 (2) of the Public Finance Management Act, 2012 and the Treasury Circular
Number 13 of 2019 ES/032/’E’ (94) dated 28 August 2019 provides that all Ministries,
Departments and Agencies, Constitutional Commissions, Independent offices,
Parliament & The Judiciary are required to follow the guidelines provided in their
preparation of their midterm Budget and submit them for approval within the
timelines provided.
3.3.34 In this regard, the Ministry of Health, through the Supplementary III Development
Budget for financial year 2019/2020 allocated an amount of Kshs.5.35 Billion for the
CHERP Project under Vote Head 1081118200.
Budget utilization
3.3.35 Section 44 (2) of the Public Finance Management Regulation, National Government
Regulations, 2015, provides that, National Government Entities shall execute their
approved budgets based on the annual appropriation legislation, and the approved
annual cash flow plan with the exception of unforeseen and unavoidable spending
dealt with through the Contingencies Fund, or supplementary estimates.
3.3.36 According to an extract of an email from the World Bank, to the Project Manager at
the Ministry of Health, a No objection was issued to the Project Work and
Procurement Plan on 30 April, 2020 at 3.39pm. The procurement plan indicated
activities for the first 3 months (31 July, 2020) of the Project costing Kshs.
2,484,518,772. However, a total of Kshs.1,556,802,620 was received by the National
Treasury and disbursed on 27 May 2020 to the Ministry of Health Account Number
1000446684 at the Central Bank of Kenya.
72
3.3.37 As at the time of completion of the audit, an amount of Kshs.326,350,273 had been
incurred as detailed in APPENDIX X. A review of the project expenditures established
the following irregularities:
Un- Surrendered Imprest Kshs. 7,981,975
3.3.38 Section 104 of the Public Finance Management (National Government ) Regulations,
2015 provides that all receipts and payment vouchers of public moneys shall be
properly supported by pre-numbered receipt and payment vouchers and shall be
supported by the appropriate authority and documentation , Further Sections 93 ,
14 and 15 provides that when the imprest holder needs to have his/ her funds
replenished, he/she shall send an abstract and analysis of his memorandum
cashbook, plus originals of the supporting payments vouchers to the accounts
department for examination that the expenditure has actually been incurred and
there are no irregularities.
3.3.39 It was established that, there was un-surrendered Imprest of Kshs. 7,981,975 as at
30 September, 2020 as detailed in the table below.
Table 15: Un-surrendered imprest
Date paid Imprest Warrant Payee Amount (Kshs)
30/6/2020 3943175 Clara Gitonga 770,750.00
30/6/2020 3943173 Dr Mutile Mutiso 683,325.00
25/6/2020 3943167 Catherine Ahonge 976,400.00
25/6/2020 3943180 Jamlick Karumbi 831,575.00
25/6/2020 3943176 Bernadette Ajwang 701,200.00
25/6/2020 3943179 Hannah Kagiri 573,775.00
25/6/2020 3943177 Dr Elizabeth 553,825.00
Wangia
25/6/2020 3943178 Pepela Wanjala 469,725.00
25/6/2020 3943168 Joseph Njau 198,000.00
25/6/2020 3943170 Dr Anne Nganga 58,000.00
25/6/2020 3943169 Mary Wahito 39,200.00
73
Date paid Imprest Warrant Payee Amount (Kshs)
06-04-20 3943108 Joseph Mutangili 548,200.00
06-04-20 3943104 Victoria Ouma 414,800.00
06-04-20 3943109 Henry Mwale Luyali 355,800.00
06-04-20 3943110 Martin Owino 339,400.00
06-04-20 3943103 Pascalina Mukindi 246,000.00
06-04-20 3943107 Alfred Ashiembi 158,000.00
06-04-20 3943105 Mutua Kiilu 64,000.00
Total 7,981,975.00
3.3.40 Though the management of the Ministry of Health explained that the imprest had
since been surrendered and properly supported, there was no evidence that was
availed to support the same.
Disbursements of funds from the Ministry of Health to the County Governments
3.3.41 The Ministry of Health disbursed Covid-19 conditional grants of Kshs. 4,999,999,000
and health workers medical allowance of Kshs. 2,355,900,000 to the forty-seven (47)
counties as detailed in APPENDIX XII. The Disbursement of COVID-19 Conditional
Grants was based on the Commission of Revenue Allocation letter referenced
CRA/CSO/COG/13/VOL.II(1) dated 29 April, 2020.
3.3.42 According to the letter, the Commission of Revenue allocation recommended the
use of a composite index based on the County Health indices for the sharing of the
COVID-19 grant.
3.3.43 The Ministry of Health paid the COVID 19 conditional grant vide payment voucher
number 3901 dated 5 June, 2020. The amounts were credited to the respective
County Revenue Fund (CRF) Accounts held at the Central Bank of Kenya. It was
however noted that the Ministry of Health did not provide a framework for the
utilization of the conditional grant to counties.
3.3.44 The disbursements for the Medical Emergency Allowance and benefits for the
Frontline Health Workers was based on the Salaries and Remuneration Commission
letter ref SRC/TS/COG/3/61/48 dated 28 April, 2020. According to the letter, the
74
allowance was payable to the four (4) categories of healthcare workers classified as
follows:
Table 16: SRC Approved rates for the Frontline Health Care Allowances
SRC Categorization SRC proposed Rates per Month (Kshs)
1 Paramedics 20,000
2 All Technologists and Technicians 15,000
3 Other paramedics 10,000
4 Support Staff 5000
3.3.45 The Ministry of Health paid the COVID- 19 emergency allowance and benefits for
frontline health workers vide payment voucher number 4855 dated 30 June, 2020.
On 6 July 2020, the funds were credited to the respective County Revenue Fund
Accounts held at the Central Bank of Kenya.
3.3.46 The Government through the National Treasury further disbursed a DANIDA Universal
Health Care (UHC) conditional grant of Kshs. 350 million to County Governments as
detailed in APPENDIX VIII. The DANIDA UHC conditional grant was to support
Operation and Management costs for the gazetted County Public level 2 and 3 Health
Centers and Dispensaries. The amounts disbursed to each County was calculated
based on the County Allocation Revenue Act ,2018, number 8, First Schedule, section
4 (1). The counties were expected to share the allocation criteria for O&M support
to all public gazetteD level 2 and 3 health facilities.
Disbursement of funds to KEMSA
3.3.47 The Ministry of Health disbursed a total of Kshs.2,181,934,518 to KEMSA on 30 June
2020 as detailed in the table below:
Table 17: Disbursement of funds to KEMSA
Source of Funds Sub Head Allocation to Amount Recipient
KEMSA (Kshs) Received Bank Account
1 World Bank CERC- 758,690,583 304,160,118 EQUITY BANK
Transformi KEMSA Trade
ng Health Account
Systems number
Project 014002613985
(THS) 14
2 World Bank Kenya 454,840,000 77,774,400 EQUITY BANK
COVID-19
Emergency
75
Source of Funds Sub Head Allocation to Amount Recipient
KEMSA (Kshs) Received Bank Account
Response KEMSA Trade
Project Account
(CHERP) number
014002613985
14
3 Government of Procureme 1,500,000,000 1,500,000,000 EQUITY BANK
Kenya nt of Test Warehouse
kits and Construction
reagents Account
number
140026442636
2
4 Government of Supply of 300,000,000 300,000,000 NATIONAL
Kenya Facemasks BANK OF
to KENYA KEMSA
vulnerable Operations
groups Account
number
100300912500
3,013,530,583 2,181,934,518
Procurement of Comprehensive Care Ventilators and Related Services from the Gradian
health systems by the Ministry of Health
3.3.48 A Memo referenced MOH/PROC/GEN/MF/ADSCMS/Vol.1.1 dated 21 May, 2020 from
the PS Health to the Project Manager CHERP shows that the procurement for the
Supply of Comprehensive Care Ventilators & Related Services was done using World
Bank Facilitated Procurement Method as approved by the World Bank. A Step
Approval No KE-MOH-00001-GO-DIR/Procure 250 Gradian Comprehensive Care
Ventilators extract specified that, Direct Selection Method was adopted and
indicated that the Contract to supply 250 units at USD16,000 per unit at a total cost
of USD 4,000,000 (KShs. 424 Million rate 1USD=Kshs106).
3.3.49 The Contract for the Supply of 250 Gradian Comprehensive Care Ventilators (CCV)
and related services between the Ministry of Health and the Gradian Health Systems,
New York USA was signed on 30 March, 2020. According to Appendix C of the Contract
Agreement, price schedule 3, the contract sum was KShs. 424Million (USD
4,000,000).
76
Variation in payment terms
3.3.50 The terms of payment as stated in the conditions of contract clause 9.1 were;
• Advance payment, of 40% of the contract price to be paid within 10 days after
submission of claim and a bank guarantee for an equivalent amount to be
reduced proportionately as the goods are delivered.
• On shipment 60% of the contract price of the goods shipped to be paid within 15
days after submission of shipping documents
3.3.51 The advance payment bank guarantee of 40% of contract price was reviewed to a
letter of credit as per email extracts from, Dickson Lugonzo, of the Ministry of Health
to Grace Manaura of the World Bank on 3 April 2020 at 14:59 EAT. The extract states
that the Ministry of Health had agreed to replace the advance bank guarantee with
a letter of credit as requested by the supplier provided that the bank has no
objection in modifying the initial contract. However, the revised contract was not
availed for audit review.
3.3.52 A standby letter of credit number 69619216 of USD 1,600,000 was issued by Citibank
N.A Citicorp North America on 21 April 2020 with the advising bank being Citibank
N.A Kenya. The expiry date of the standby letter of credit was stated as the earlier
of 1 March, 2021 or the receipt of a copy of the payment certificate indicating that
90% of the contract price has been certified for payment.
Payment
3.3.53 According to a memo referenced MOH/PROC/GEN/MF/ADSMS/Vol.1 from the Project
Manager C-HERP to the PS, Ministry of Health dated 21 May, 2020, the payment was
to be processed through the National Treasury and the World Bank would pay the
supplier directly. On 22 May 2020, the Principal Secretary Ministry of Health
approved the processing of the payment. A Payment Voucher number 282 for Kshs
170,320,000 was prepared at the Ministry of Health on 3 June, 2020 being payment
of 40% advance payment. The payment voucher was forwarded on the same day to
the Director Resource Mobilization Department through a letter ref MOH/COVID
19/ACC/VOL. (003) to the PS Treasury requesting them to charge IDA credit 5836-
KE, the total amount of USD 1,600,000 (Kshs 170,320,000). It was however noted
that, IDA credit number 5836-KE is not C-HERP but Transforming Health Systems for
77
Universal Care Project (THS-UCP). On 22 June, 2020, a direct payment of USD
1,600,000 was made from IDA Credit 65980 account number 1000446366 at the
Central bank of Kenya.
Delivery of the Ventilators to Counties that did not have capacity to use the Ventilators
3.3.54 According to Appendix A of the contract on shipping and completion schedule, there
was to be a phased air shipping schedule of 8 phases between 30 April, 2020 and 31
December, 2020. However, on 13 April 2020, the Chief Executive Officer of the
Gradian Health Systems wrote to the PS MOH informing her of the delay in delivery
due to limited supply in a critical component used in the manufacturing of the
Gradian Comprehensive Care Ventilators. They also proposed a reassessment period
after delivery of 100 units in order for the MOH to assess whether they would
continue to purchase the remaining quantity.
3.3.55 On 2 June, 2020, the Principal Secretary Ministry of Health through a letter reference
MOH/ADM/1/1/159 wrote to the Gradian Health Systems informing them that, the
Ministry of Health had considered the proposal and decided that it would only
procure 100 ventilators.
3.3.56 On 3 June, 2020 the Principal Secretary Ministry of Health wrote to Gradian Health
Systems via letter ref MOH/DC/9/1/ instructing them on the distribution of 30
ventilators to Counties. Further distribution was as per the letter on distribution
referenced MOH/PROC/6/3/1 done by the PS, Ministry of Health on 19 August, 2020
instructing on the distribution of 45 ventilators. The special audit team visited the
health facilities listed in both letters and came up with the following observations:
Table 18 : Delivery of Ventilators to Counties
County Health Facility Dispatched Remarks
1 Kiambu Tigoni Level 4 5 Received and in use
2 Kitui Kauwi Level 4 5 Received but not in use since
the facility had no Intensive
Care Unit (ICU)
3 Nakuru Langa Langa level 3 5 Received on 11 June, 2020.
On 6 October, 2020, 2 units
were issued to Annex
Provincial General Hospital
78
County Health Facility Dispatched Remarks
(PGH). On 7 October 2020,
three units were Issued to
PGH Nakuru
4 Nyeri Othaya level 5 5 Received and transferred to
KNH.
5 Taita taveta Mwatate level 3 5 Received and in use
6 Laikipia Nyahururu level 4 5 Received at the Nanyuki
Teaching and Referral
Hospital Critical Care Unit on
11 June, 2020 since there was
no ICU at Nyahururu level 4.
7 Nairobi Mama Lucy Kibaki Hospital 18 Delivery note dated 14
September. Not installed as
facility did not have ICU
8 National Kenyatta University Teaching and 15 Received and in use
Government Referral Hospital
9 Kiambu Ruiru sub-county hospital 5 Received but not installed
since the facility was not
ready
10 Kajiado Ngong level 4 5 The 5 ventilators are still in
their original packaging.
11 Mandera Kamor Infectious disease Hospital 2 Received and in use
Total 75
3.3.57 As detailed above the ventilators were dispatched to some hospitals that were not
ready for such ventilators hence they were not installed and were still in their
original packaging.
3.3.58 According to a memo dated 8 October, 2020 from the project manager to the PS
MOH, the last batch of 25 ventilators had been received and was ready for
distribution. On 16 October, 2020 the, PS MOH wrote to Gradian health systems
through letter ref MOH/ADM/1/3/1/VOL 1/ (18) instructing on the distribution of
the last batch of ventilators as detailed in the table below;
79
Table 19 : Distribution list for last batch of Ventilators
S/No County Recommended Health Facility Number
1 Turkana Lodwar County Referral Hospital 2
2 Narok Transmara West Sub county Hospital 2
3 Kisumu Ahero Level 4 Hospital 2
4 Nairobi Pumwani Maternity Hospital 4
5 Kirinyaga Kirinyaga level 4 2
6 Meru Kanyakine Sub county Hospital 2
7 Machakos Matuu Level 4 2
8 Lamu Lamu County Referral Hospital 2
9 Bungoma Webuye Level4 3
10 Mandera Takava Level4 Hospital 2
11 Bomet Cheptalal Sub county Hospital 2
Total 25
3.3.59 Since the Ministry of Health had decided that it would only procure 100 ventilators
as per the letter reference MOH/ADM/1/1/159, no other deliveries are expected.
3.3.60 The above distribution list was shared to the audit team on 18 November, 2020 after
completition of field visits and hence the audit team did not conduct physical
verification on the same.
Receipt and Distribution of Donations by the Ministry of Health
3.3.61 The Principal Secretary to the Ministry of Health established a Covid-19 pandemic
response commodities clearance committee through an internal memo ref
MOH/DC/9/1/33 dated 29 April 2020.The Committee was a dedicated Multi-Agency
Team from the Ministry of Health, The National Treasury, the State Department of
Foreign Affairs and the State Department of Industrialization.
3.3.62 The terms of reference for the committee were:
• Processing of tax exemptions, KEBS fees and any other exemptions that may be required
to facilitate clearance of the goods in close collaboration with the National Treasury,
KRA, Government Clearing Agency (GCA) and KEBS.
80
• Processing and payment of cargo handling fees
• Confirm commodities received as per official documentation accompanying the
consignment.
• Coordinate the transportation and storage of commodities at a KEMSA warehouse.
• Liaise with the Resource Mobilization Team at the National COVID-19 Taskforce for every
consignment received and provide reports to facilitate preparation of distribution lists.
• Provide weekly reports to the Principal Secretary on donations received.
3.3.63 The special audit established that the Government of Kenya received donations from
philanthropists, development partners and other donors as detailed in APPENDIX
XIII. The Donations were received at the KEMSA WareHouses on behalf of the Ministry
of Health and later distributed to Counties and other institutions based on
instructions issued by the Ministry of Health. APPENDIX XIV details the quantities of
donations received, issued and the stock balances as at the time of audit on 14
September, 2020.
Disbursement of funds by the MOH to Referral Hospitals- Kshs 4,590,967,242
3.3.64 The Ministry of Health disbursed a total of Kshs 4,590,967,242 to seven referral
hospitals for various purposes as detailed below;
Table 20: Disbursement of Funds to Referral Hospitals
s/no Hospital COVID19 HR Allowances others Total (Kshs)
Emergency Recruitment for the
Response Frontline
Healthcare
Workers
1 Coast 500,000,000 0 0 0 500,000,000
General
Hospital
2 Jaramogi 400,000,000 0 0 0 400,000,000
Oginga
Odinga
Referral
Hospital
81
s/no Hospital COVID19 HR Allowances others Total (Kshs)
Emergency Recruitment for the
Response Frontline
Healthcare
Workers
3 Kitui 300,000,000 0 0 0 300,000,000
Referral
Hospital
4 Mandera 300,000,000 0 0 0 300,000,000
Referral
Hospital
5 Kenyatta 600,000,000 0 156,795,000 500,701,392 1,257,496,392
National
Hospital
6 Kenyatta 500,000,000 0 12,270,000 771,696,150 1,283,966,150
University
Research &
Referral
Hospital
7 Moi 400,000,000 42,824,700 106,680,000 0 549,504,700
Teaching &
Referral
Hospital
Total 3,000,000,000 42,824,700 275,745,000 1,027,201,392.4 4,590,967,242
3.4 Utilization of COVID-19 Funds by the Referral Hospitals
Coast General Teaching and Referral Hospital
Approved work plans, budgets, and procurement plans
3.4.1 Section 53 (2) and (5) of the Public Procurement and Asset Disposal Act, 2015 requires
entities to have in place procurement and asset disposal plans that are based on
indicative or approved budgets which should be integrated with the applicable budget
process and such plans should be approved. The special audit established that, the
Coast General Teaching and Referral hospital had in place a work plan, procurement
82
plan and approved budget for the conditional grants received from the National
Government and for their own source revenue.
Receipt of the Covid 19 Grant
3.4.2 The Coast General Teaching and Referral Hospital received two disbursements of the
funds from the Ministry of Health (MOH) totalling to Ksh. 500,000,000 as tabulated
below. The hospital subsequently opened a separate Bank Account Number
1560280107223 at Equity Bank for the Covid-19 grant. The special audit also
established that, the referral hospital spent Ksh. 63,839,000 of their own source funds
towards the Covid 19 preparedness.
Table 21: Receipt of the COVID-19 Funds by the Coast General Hospital
Source Amount Recipient Recipient Bank Account Budget Workplan Remarks
of Bank number
Funds
Ministry 150,000,000.00 Equity 1560280107223 Budgeted Approved Monies was sent
of Bank for and Workplan for to National Bank,
Health approved 2020 availed later transferred
Ministry 350,000,000.00 1560280107223 on 17 to Equity Bank
of July 2020 account to
Health separate the
funds.
Own 63,839,000.00 National 01001089054900 Approved Approved 25
Source Bank 25 March March 2020
2020
Total 563,839,000.00
Utilization COVID-19 Funds by the Coast General Teaching and Referral Hospital (CGTRH)
Utilization of Covid-19 Grant Kshs. 3,275,598
3.4.3 As at the time of audit in October 2020, the Coast General Research and Teaching
Hospital had spent Ksh 3,275,598 of the funds received from the Ministry of Health as
tabulated below. The special audit also obtained a certificate of bank balance from
the Equity Bank referenced EBL/MSA/156/54314737755 dated 22 October, 2020
showing the balance st Ksh 496,717,945.
83
Table 22: Utilization of the COVID-19 Funds by the Coast General Hospital
Date Payee Amount in Kshs Remarks
16/10/2020 BOC Kenya Ltd 1,465,698 Being payment for
oxygen
31/8/2020 KEMSA 844,000 Being payment for
non-pharmaceuticals
31/8/2020 KEMSA 746,900 Being payment for
non-pharmaceuticals
31/8/2020 KEMSA 219,000 Being payment for
non-pharmaceuticals
TOTAL 3,275,598
Utilization of the own source funds - Kshs. 34,558,755.00
3.4.4 In a special full board meeting held on 25 March, 2020, the Coast General Teaching
and Research Hospital approved a supplementary budget of Ksh 63,839,000 to cater
for the Covid-19 preparedness. The audit further reviewed procurements worth Ksh.
34,558,755. It was established that the procurements which were supported by a
procurement plan were done in accordance with procurement legislation except for
the following issues noted:
Failure to notify bidders of the outcome of the bidding process - Kshs.13,000,000
3.4.5 Section 87(1) of the Public Procurement and Asset Disposal Act 2015 requires that,
before the expiry of the period during which tenders must remain valid, the Accounting
Officer of the procuring entity shall notify in writing the person submitting the
successful tender that his tender has been accepted.
3.4.6 The audit noted that notifications to both successful and unsuccessful bidders were
missing in the following procurement files.
i. Supply and Delivery of Medical Equipment for CGTRH 1RW awarded to M/S Surgipham
Ltd at Kshs. 11,600,000
ii. Supply and Delivery of Medical Equipment for CGTRH RW awarded to M/S Asterisk
Limited at Ksh. 1,400,000
84
Failure to inspect purchased goods - Kshs. 11,600,000.00
3.4.7 Section 48 (1) of The Public Procurement and Asset Disposal Act, 2015, requires that
an Accounting Officer of a procuring entity may establish an ad hoc committee known
as the inspection and acceptance committee. It was noted that the procurement file
did not have evidence to show that the equipment supplied and delivered by M/S
Surgipham Ltd at a cost of Kshs. 11,600,000.00 were duly inspected.
Jaramogi Oginga Odinga Referral Hospital
Budget, work plan, procurement plan and training plan
3.4.8 According to the Supplementary Appropriation Act, 2020 approved on 05 May, 2020,
the Jaramogi Oginga Odinga Referral Hospital was allocated Ksh. 400,000,000 through
the Ministry of Health Vote R1081. The Act indicated that, these funds were ring-
fenced for the Covid 19 pandemic activities at the Jaramogi Odinga Oginga Teaching
Referral Hospital (JOOTRH).
3.4.9 The special audit established that, the Jaramogi Oginga Odinga Teaching Referral
Hospital Board of Directors approved a workplan, budget, procurement plan and
training plan for Covid 19 related activities funded by the emergency funds.
3.4.10 The Jaramogi Oginga Odinga Teaching and Referral Hospital received two Authority to
Incur Expenditure (AIEs) from the Ministry of Health amounting to Kshs.100,000,000
and Kshs.300,000,000 on 19 June, 2020 and 30 June, 2020 respectively. On 11 July,
2020, a total of Kshs.400,000,000 was received at Jaramogi Oginga Odinga Teaching
and Referral Hospital KCB Account Number 1150668849 in two tranches as detailed
below:
Table 23: COVID-19 Funds received by the Jaramogi Oginga Odinga Referral Hospital
S/No AIE Date AIE No Amount (Kshs) Recipient bank Date of
receipt
1 19/6/2020 A685788 100,000,000.00 KCB Account 11/7/2020
Number1150668849
2 30/6/2020 A685780 300,000,000.00 KCB Account Number 11/7/2020
1150668849
85
3.4.11 On 26 October, 2020, Kshs.380,028,749 was transferred from the KCB Account Number
1150668849 to the Covid-19 Emergency Account Number 1279777397 at KCB. It was
noted that, the Jaramogi Oginga Odinga Teaching and Referral Hospital transferred
Kshs.380,028,749 to the Special Purpose Account (SPA) instead of the Kshs.
400,000,000. The explanation given was that the difference of Kshs. 19,971,251 was
utilized for the Covid-19 related expenses which were paid from the operations
account before opening the Special Purpose Account. The Management availed
payment vouchers in support of the expenditure of Kshs. 19,971,251.
Utilization of Covid 19 Funds at Jaramogi Oginga Odinga Teaching Referral
Hospital
Irregular utilization of Covid-19 Funds from the operations – Kshs. 19,971,251
3.4.12 The special audit established that the Jaramogi Odinga Oginga Teaching and Referral
Hospital (JOOTRH) had not utilized the emergency funds as at 31 July, 2020. However,
as at the time of audit in October 2020, the hospital had utilized a total of Kshs.
19,971,251 as summarized in the table below:
Table 24: Utilization of Funds by the Jaramogi Oginga Odinga Referral Hospital
Expenditure item Amount (Kshs.)
Medical drugs 2,186,163
Food and Ration 1,081,150
Laboratory Material supplies 3,089,804
Production & Audio visual 417,544
General stationery 35,368
Telephone Telex 50,000
Sanitary and cleaning material 1,847,468
Refined fuels 2,947,368
Maintenance of Plant Machinery Equipment 488,880
Purchase of oxygen 882,510
Water sewerage 2,500,000
Casual laborers 30,000
Contracted professionals 395,184
Construction and building 3,869,812
86
Expenditure item Amount (Kshs.)
Standing imprest 150,000
Total 19,971,251
3.4.13 It was established that, payment for the expenditure was made form the operations
account instead of the Special Purpose Account. According to the letter from The
Principal Secretary Ministry of Health reference number MOH/FIN/1/A/VOL III (70)
dated 19 June, 2020, the guidelines issued for the Conditional grant were to apply in
the utilization of the Kenya Covid-19 Emergency Response Funds.
3.4.14 The Ministry of Health (MoH) vide a letter Reference No. MOH/ADM/1/1/171 Vol. I
(280) dated 22 June, 2020 to all County Executive Committee Members for Health and
Chief Officers, instructed all Counties to open a Special Purpose Account (SPA) for the
COVID-19 grant. The letter also refers to the Ministry of Health framework for the
management of the additional conditional grants for the COVID-19 emergency response
for guidance on transfers of the funds including transfers to the special purpose
accounts.
3.4.15 It was established that as at 31 July, 2020, the Jaramogi Oginga Odinga Teaching and
Referral Hospital had not opened a Special Purpose Account (SPA) for the COVID 19
grant. The Chief Executive Officer (CEO) of the Jaramogi Oginga Odinga Teaching and
Referral Hospital requested the Chief Officer for Health for the authority to open a
Covid 19 Account at Equity Bank on 29 September, 2020. Further, a reminder was sent
on 14 October 2020 vide a letter reference number ACCT/1/VOL.XII (104). Approval to
open the SPA was granted vide a letter reference number KC/FIN/B.ACCNTS/305 dated
15 October, 2020 from CECM Finance and Economic Planning to the Manager Kenya
Commercial Bank Kisumu.
3.4.16 It is not clear why Chief Officer Health delayed granting approval to open the Special
Purporse Account leading to the delay in service delivery in the Hospital as stated by
the CEO in his reminder letter of 14 October, 2020.
Kitui Referral Hospital
Absence of budget, work plan, procurement plan and training plan
3.4.17 According to the Supplementary Appropriation Act 2020 approved on 5 May, 2020,
Kitui Referral Hospital was allocated Ksh.300, 000, 000 through the Ministry of Health
87
Vote number R1081. The Supplementary Appropriation Act indicated that, these
funds were ring-fenced for the Covid-19 pandemic activities at Kitui Referral
Hospital.
3.4.18 There was no separate budget, workplan, procurement plan or training plans at the
hospital specific to the Covid-19 related activities for utilization of this funds.
Irregular transfer of Kshs. 298,966,655 from the Kitui Hospital Account Number
01141303838201 to the Kitui County COVID -19 Account number 1000455543
3.4.19 The Principal Secretary Ministry of Health, in a letter reference number
MOH/FIN/1/A/VOL III (70) dated 19 June, 2020 informed the Chief Executive Officer
of Kitui Referral Hospital concerning the disbursement of Kenya Covid-19 Emergency
Response Funds. It was reported that, the Supplementary II budget had been
approved and A.I.E number A685792 dated 16 June, 2020 for Kshs. 50,000,000 was
enclosed specifically for the Covid-19 pandemic interventions. According to the
letter, the guidelines for the conditional grant were to apply. In addition, the
hospital was to provide to the Ministry of Health expenditure items for the budgeted
amount and implementation of the same. On 30 June, 2020, A.I.E number A685773
for Kshs. 250, 000, 000 was received by the Kitui Referral Hospital.
3.4.20 On 7 July, 2020, a total of Kshs. 300, 000, 000 was credited to the Kitui Refeeral
Hospital Account number 01141303838201 in two tranches of Kshs.50,000,000 and
Kshs. 250,000,000. The County Executive Committee Member (CECM) Finance, in a
letter reference number CGKTI/CT/ADM/33/24 dated 23 July, 2020 to the Chief
Officer Health and Sanitation, instructed the transfer of Kshs. 300,000,000 from the
Kitui General Hospital Account to the Special Purpose Account (SPA) for the Covid-
19 interventions. The letter stated that, the funds had been budgeted for under the
County Supplementary II budget. According to the budget, the funds were earmarked
for spending in 4 departments, namely Health, Trade, Agriculture and Education,
ICT and Youth Development.
3.4.21 On 27 July, 2020, the Heath Administrative Officer at Kitui Referral Hospital and the
Accountant vide a letter reference number CGKTI/KCRH/FIN/1 (48) to the Manager
Cooperative Bank-Kitui Branch instructed the transfer of Kshs. 298, 966, 655 from
the Kitui Hospital Account number 01141303838201 to the Kitui County COVID -19
Account number 1000455543 at the Central Bank of Kenya.
88
3.4.22 On 3 August, 2020, Kshs. 298, 966, 655 was debited from the Kitui County Hospital
Account to the Kitui County COVID-19 Account no: 1000455543 at the Central Bank
of Kenya. The transfer of Kshs. 298, 966, 655 from the hospital operations account
to the Kitui County COVID-19 account was irregular and contrary to the
Supplementary Appropriation Act, 2020 which indicated that the funds were ring-
fenced for Covid-19 pandemic activities at the Kitui County Referral Hospital.
Consequently, the beneficiaries of the funds were: Department of Trade;
Department of Agriculture; and Department of Education, ICT & Youth Development
in addition to Department of Health & Sanitation.
3.4.23 Further, it was established that the total funds disbursed by the Kitui County to the
Kitui Referral Hospital were Kshs. 36,105,454 as detailed below:
Table 25: Disbursement of funds from Kitui County to Kitui Referral Hospital
Date Amount received from County Government (Kshs)
17 June, 2020 26,466,745.00
17 June, 2020 5,254,060.00
25 June, 2020 4,384,649.00
Total 36,105,454.00
3.4.24 A comparison between what the National Government and what the County
Government had allocated and disbursed to the Kitui Referral Hospital reflects an
under funding of Kshs 263,894,546 which is equivalent of 82%.
Failure to open a special purpose account for the COVID-19 activities –
Kshs.1,033,350
3.4.25 According to the letter, from the Principal Secretary, to the Ministry of Health
reference number MOH/FIN/1/A/VOL III (70) dated 19 June, 2020, guidelines issued
for the conditional grant were to apply in the utilization of Kenya Covid-19
Emergency Response funds.
3.4.26 The Ministry of Health (MoH) vide a letter Reference No. MOH/ADM/1/1/171 Vol. I
(280) dated 22 June, 2020 to all County Executive Committee Members for Health
and Chief Officers, instructed all Counties to open a Special Purpose Account (SPA)
for the COVID 19 grant. The letter also refers to the Ministry of Health framework
89
for management of the additional conditional grant for the COVID-19 emergency
response for guidance on transfers of the funds including transfers to special purpose
accounts.
3.4.27 The special audit established that Kitui Referral Hospital expended Kshs. 1,033,345
from the operations account contrary to the guidelines. Details of the expenditure
incurred are in the table below:
Table 26: Expenditure of the COVID-19 Funds by the Kitui Referral Hospital
S/No Payee Description Cheque Amount
number (Kshs)
1 Dennis Kimanzi Imprest to Mwingi Hospital for 006105 249,845
Woiye purchase of food and rations
2 Catherine Kalee Optometrics-payment in arrears 006214 220,985
following her non-payment at
CHMT
3 Defensy Stores Ltd Supply of electrical materials 006140 361,520
4 Young Rays Solutions General office supplies 005998 168,800
5 Kitui Multipurpose Down payment for 006140 32,200
accommodation of hospital
Covid 19 staff
Total 1,033,350
Mandera Referral Hospital
Amount of funds received - Kshs.300,000,000
3.4.28 The special audit established that there was an approved work plan, an approved
budget and a procurement plan for Utilization of the Conditional Grants sent by the
Ministry of Health to the Mandera County Referral Hospital.
3.4.29 The Ministry of Health sent a Conditional Grant of Kshs. 300,000,000 to the Mandera
County Referral Hospital. The Amounts were received on 02 July, 2020 in the
Mandera County Referral Hospital, Kenya Commercial Bank Account Number
1149105127.
90
Utlization of the funds - Kshs. 300,000,000
3.4.30 The special audit reviewed the expenditures incurred by the Mandera County
Referral Hospital and established the following irregularities:
Procurements done without evidence of professional opinions - Kshs. 228,910,610.00
3.4.31 Section 84 (1) of the Public Procurement and Asset Disposal Act, 2015 requires that,
the Head of the Procurement function of a procuring entity shall, alongside the
report to the Evaluation Committee as secretariat comments, review the tender
evaluation report and provide a signed professional opinion to the Accounting Officer
on the Procurement or Asset Disposal proceedings.
3.4.32 It was established that the Mandera County Referral Hospital received in its Kenya
Commercial Bank Account No.1149105127 Kshs.300,000,000 on 02 July, 2020 from
the Ministry of Health. The amount had been appropriated by Parliament and
budgeted for in the Ministry of Health Recurrent Supplementary II budget for the
COVID-19 Response. However, the special audit established that procurements
amounting to Kshs. 228,910,610.00 did not have professional opinions contrary to
the provisions of the Act. The procurements that did not have professional opinions
are as shown in the attached APPENDIX XV.
Inappropriate use of procurement method - Kshs. 272,531,900.
3.4.33 Section 59(1) of the repealed Public Procurement and Disposal Regulations, 2006
require that, a procuring entity, that conducts procurement using the Request For
Quotations (RFQ) method shall be subject to the procurement thresholds set out in
the First Schedule.
3.4.34 The special audit established that procurements amounting to Kshs. 272,531,900.00
were undertaken through Requests for Quotations (RFQs) and did not meet the
threshold set under the regulations. These procurements process should have been
done through open tender since the amounts involved were above the RFQ threshold.
The procurements referred to above are as shown in the attached APPENDIX XVI.
Absence of documents to support openning and evaluation of bids - Kshs.39,857,500.
3.4.35 It was also established that expenditure amounting to Kshs.39,857,500 was incurred
whose procurement procedures had the evaluations done before opening of
91
quotations, missing opening and evaluation meeting minutes and missing letters of
appointments for opening and evaluation committees as detailed in APPENDIX XVII
Unsupported Expenditure - Kshs.14,012,632
3.4.36 Section104 (1) of the Public Finance Management Regulations, 2015 requires, that
all receipts and payments vouchers of public moneys shall be properly supported by
pre-numbered receipt and payment vouchers and shall be supported by the
appropriate authority and documentation.
3.4.37 The special audit established that expenditures amounting to Kshs. 14,012,632 was
not supported by the relevant documentation and support schedules. Therefore, the
authenticity of Kshs. 14,012,632 could not be ascertained as detailed in APPENDIX
XVIII.
3.4.38 In addition, the audit established that the County made a payment of Kshs.
3,300,000 to M/S Rivital Power Limited vide LSO number 417863 for the Renovation
of Maternity and Staff Quarters at Mandera County Referral Hospital. However, bid
documents and the evaluation report availed for audit were not legible inhibiting
the audit review process.
Kenyatta National Hospital
Programme planning and Financing
Absence of workplans on utilization of COVID-19 Funds - Kshs. 740,000,000
3.4.39 The Management of Kenyatta National Hospital (KNH) had in place a plan of
requirements for the operationalization of a 20 bed Capacity at the Kenyatta
National Hospital Infectious Unit at Mbagathi Hospital dated 26 February, 2020
costing Kshs.150.49 Million. The plan envisaged to enhance the existing KNH 6 bed
capacity in the Infectious Disease Unit ward to a 20 bed capacity. The plan however,
did not provide timelines on implementation of the various renovation activities.
3.4.40 On the contrary, there was no evidence that Kenyatta National Hospital had in place,
work plans to guide in the utilization of the following funds:
• Kshs.350,000,000 for COVID-19 Emergency Response, AIE 685777;
• Kshs.250,000,000 for COVID-19 Emergency Response, AIE N0 685793;
• KShs.140,000,000 for 'Conversion Day CARE Center to Ward for COVID-19
Health Care Workers , Receipt Number 05266351.
92
3.4.41 Absence of work plans on utilization of COVID-19 funds implies inadequate
programme planning that may have resulted in inefficient and ineffective utilization
of funds resulting in value for money risks.
3.4.42 However, it was noted that the Kenyatta National Hospital had prioritized COVID-
19 procurement needs in the Annual Procurement Plan.
3.4.43 According to an Internal Memo Ref: KNH/CS/74/VOL.2/100 dated 24 September,
2020, The Kenyatta National Hospital Board of Management (BOM) resolved that The
COVID-19 funds be realized through review of budget lines and reallocations of funds
from one vote to another based on need without affecting the overall approved
budget. The said Memo further provided BOM approvals of the revised budget.
3.4.44 The special audit confirmed that a total of Kshs. 1,257,496,392 disbursed by the
Ministry of Health to Kenyatta National Hospital had been captured in the Final
Revised Budget for the financial year 2019/2020.
Amount received by Kenyatta National Hospital including recipient bank
accounts
3.4.45 Kenyatta National Hospital received a total of Kshs. 1,257,496,392 from the Ministry
of Health. The respective funds were then transferred to the Kenyatta National
Hospital Bank Account as detailed in the table below;
Table 27: Amount of COVID-19 Funds received by the Kenyatta National Hospital
AIE Details Total Amounts Recipient Bank Date
Number (Kshs)
685883 Funds for 125,701,392 National Bank of 22 April, 2020
Recruitment of Kenya, Limited
additional Health Hospital Branch A/C
Workers No. 01003058005200
685889 Funds for 85,000,000 National Bank of 22 April, 2020
compensation to Kenya, Limited
temporary Hospital Branch A/C
employees engaged No. 01003058005200
in COVID-19
685918 Funds allocated to 150,000,000 National Bank of 7 July, 2020
Mitigate Corona Kenya, Limited
Virus Threat Hospital Branch A/C
No. 01003058005200
685793 Funds for Kenya 250,000,000 National Bank of 7 July, 2020
COVID-19 Emergency Kenya, Limited
Response Hospital Branch A/C
No. 01003058005200
93
AIE Details Total Amounts Recipient Bank Date
Number (Kshs)
685723 COVID-19 Medical 156,795,000 National Bank of 7 July, 2020
Allowances for Front Kenya, Limited
Line health workers Hospital Branch A/C
No. 01003058005200
Funds were Conversion of 140,000,000 National Bank of 7 July, 2020
sent directly Daycare Center to Kenya, Limited
to the Bank. Ward for COVID-19 Hospital Branch A/C
Receipt No Health Care No. 01003058005200
05266351 Workers
685777 Funds for Kenya 350,000,000 National Bank of 7 July, 2020
COVID-19 Emergency Kenya, Limited
Response Hospital Branch A/C
No. 01003058005200
Total 1,257,496,392
Utilization of Funds
3.4.46 A review of the individual expenditure reports revealed the following;
Recruitment of additional health workers at Kenyatta National Hospital and
Mbagathi Hospital and compensation of temporary employees engaged on COVID-
19 activities - Kshs. 244,655,850
3.4.47 An amount of Kshs. 244,655,850 was allocated for the recruitment of additional
health workers and compensation of temporary employees engaged in COVID-19
mitigation as detailed in the table below;
Table 28: Allocations by KNH for recruitment and compensation of health workers
Date of AIE AIE No. Amount (Kshs)
1 April, 2020 685883 125,701,392
2 March, 2020 Reallocation from AIE No 685918 33,954,458
31 March, 2020 685889 85,000,000
Total 244,655,850.
3.4.48 The Kenyatta National Hospital (KNH) Human Resource Department made a
recruitment request through a memo ref: KNH/HR/335/04 dated 4 March, 2020 done
by the Acting Deputy Director, Human Resource Department. The requisition did not
state the number and category of staff requested. However, the audit team observed
that KNH had followed the KNH Human Resource Manual on Recruitment Manual
94
paragraph 2.13.2 which states that, “The CEO shall declare to the Board in
accordance with the procedures set out in this Manual, all vacant posts within the
establishment, which are to be filled substantively, or in an acting capacity. Such
declaration shall originate from the various Heads of Departments and must be
supported by good justification for the recruitment and confirmation that the
positions are not only within the approved establishment but also fully funded within
the budget”.
3.4.49 Two Internal advertisements were done due to urgency. Through these two
advertisements, Kenyatta National Hospital recruited 202 Officers for a period of 3
months with effect from March 2020 as detailed in the letter done by CEO of KNH to
the Principal Secretary Ministry of Health dated 8 May, 2020 referenced KNH/FIN/46.
The Officers comprised 122 health workers for the Kenyatta National Hospital
Mbagathi Infectious Diseases Unit and 80 Officers for the main Kenyatta National
Hospital.
3.4.50 The Kenyatta National Hospital further recruited 296 more health workers on need
basis through the memos indicated below:
Table 29: Addittional Health Workers recruited on temporary basis
From To Date Ref No. No. employed
HOU- Public Deputy Director, 17 March 2020 KNH/PH/14/VOL.IV/3 10
Health Human Resource 3
Ass. Chief Chief Executive 20 March 2020 KNH/MED-IDU/VOL.6 40
Nurse, IDU Officer
Deputy Chief Executive 24 April 2020 KNH/HR/330/45 148
Director, HR Officer
HOU-Public Deputy Director, HR 7 April 2020 KNH/PH/4A/VOL.1 6
Health
HOD-Health Director, Clinical 7 May 2020 KNH/HI/9 10
Information Services
Deputy Chief Executive 7 May 2020 KNH/DCS/28/VOL.IX/ 67
Director, Officer 57
Clinical
Services
Director, Deputy Director, HR 12 May 2020 KNH/DCS/60/VOL.IV/ 7
Clinical 165
Services
Deputy Chief Executive 21 May 2020 KNH/HR/330/(74) 8
Director, HR Officer
TOTAL 296
95
Over expenditure on recruitment of additional health workers – Kshs. 19,018,361.90
3.4.51 As at the end of September 2020 the total number of temporary staff recruited
through the needs of user departments were 498. KNH was allocated Kshs.
244,655,850 for compensation of temporary employees engaged on COVID-19.
According to the payment vouchers for utilization of COVID-19 funds availed to the
audit team by the Finance Department as at the end of September 2020 KNH had
spent Kshs. 263,674,211.90. This resulted in an over expenditure of Kshs.
19,018,361.90 above the approved budget.
Disbursement of KNH Othaya Teaching Referral Recurrent Supplementary Budget
II - AIE No. A685918 of Kshs.150,000,000
3.4.52 An amount of Kshs.150,000,000 was disbursed to Kenyatta National Hospital through
AIE No. A685918 under the KNH-Othaya Referral Hospital Supplementary Budget II.
However, the funds were directed to fund the Infectious Disease Unit (IDU) -
Mbagathi Hospital as per letter Ref. MOH/DC/9/1/33 from the Ministry of Health
Dated 25 February, 2020 and utilized as detailed below;
Table 30: KNH Othaya Teaching Referral Supplementary Budget II recurrent
expenditure
Category Amount (Kshs)
1 Human Resource 33,954,458
2 Medical Equipment and Renovations 76,309,990
3 Recurrent expenditure 27,428305
4 Unutilized Funds 12,307,246
Total 149,999,999
3.4.53 According to the Executive Order Number 2 of 2020 dated 28 February, 2020 the IDU
Centre at the KNH Mbagathi Hospital was to be completed and ready to receive
patients within 7 days.
96
3.4.54 KNH immediately advertised the Direct Procurement of Medical Equipment for the
Mbagathi IDU through tender No.KNH/T/DP/05/2019-2020. The tender document
was sent via emails dated 29 February, 2020. The interested suppliers had until 2
March, 2020 to submit their filled tender documents. Tender opening and evaluation
was done on the same by a committee appointed by the Chief Executive Officer.
Absence of evidence of notification of unsuccessful bidders contrary to Section 87(3)
of the Public Procurement and Asset Disposal Act, 2015
3.4.55 The notification of award was done to the successful bidders on 4 March, 2020 and
the bidders were required to make deliveries before the close of business the same
day.
3.4.56 Section 87(3) of the Public Procurement and Asset Disposal Act, 2015 requires that
when a person submitting the successful tender is notified under subsection (1), the
Accounting Officer of the procuring entity shall also notify in writing all other
persons submitting tenders that their tenders were not successful, disclosing the
successful tenderer as appropriate and reasons thereof. There was no evidence that
the unsuccessful bidders; Medisel Surgical Ltd and Angelica Medical Supplies Ltd
were notified.
Delay in delivery of equipment thereby negating the justification for Direct
Procurement - Kshs 4,330,000
3.4.57 KNH used the Direct Procurement method to purchase medical equipment to set up
the Infectious Disease Unit (IDU) at Mbagathi Hospital. The reason for use of the
Direct Procurement method was because they were dealing with an emergency and
the Centre needed to be established within 7 days.
3.4.58 One of the conditions of the tender was that the suppliers had to deliver the
equipment within 24 Hours after award of the contract which was done on 4 March,
2020. It was however noted that there were firms that delivered the equipment later
than 4 March, 2020 contrary to the conditions of the tender as detailed below.
97
Table 31: Delayed delivery of Medical Equipment at KNH
Supplier Item Date delivered Amount (Kshs)
Medifest Africa Infrared thermometers 23/4/2020 3,100,000
Ltd- and infusion pumps
Harleys Ltd Examination lights 21/4/2020 856,000
Medionics Oximeter/baby 2/4/2020 374,000
Healthcare mechanical scale
Total 4,330,000
3.4.59 It was also established that there were suppliers who had delivered items in April
2020 and had not been paid as at October 2020 as detailed below.
Table 32: Pending Bills for Kenyatta National Hospital
Supplier Delivery date Amount (Kshs)
1 M/S Crown Solutions Ltd- Crown Healthcare 4/3/2020 834,530
Division
2 Medionics Healthcare Ltd 4/2/2020 374,000
1,208,530
3.4.60 There was no explanation as to why the amounts had not been paid.
KNH Othaya Teaching Referral supplementary II Recurrent Expenditure- AIE NO
685793 of Kshs.293,000,000
3.4.61 The Ministry of Health allocated Kshs.250,000,000 to Kenyatta National hospital to
operationalize the Othaya Referral Hospital while an additional Kshs.43,000,000 was
reallocated from the KNH Hospital COVID-19 Emergency Response Fund of Kshs.350
million to finance operations at the Othaya Teaching and Referral Hospital. This is
according to an extract of KNH Board resolution minutes dated 24 September, 2020.
3.4.62 The Cabinet Secretary Ministry of Health through a letter reference
No.MOH/ADM/1/1 dated 30 October, 2019 directed the commencement of
preparation of takeover of Othaya Referral Hospital as a satellite facility of the
Kenyatta National Hospital. This directive issued by the Cabinet secretary referred
98
to the Presidential Directive Ref No. OP/CAB.11/34. This Presidential Directive was
not provided to the audit team.
3.4.63 On 5 November, 2019 the Medical Supretendant for Othaya Teaching and Referral
Hospital was directed by the Principal Secretary to the Ministry of Health via a letter
reference MOH/MI/4/4/12 VOL.1 to hand over the management of the hospital to
KNH.
3.4.64 According to the letter reference MOH/MI/4/4/12 VOL .1, the KNH management was
expected to ensure that Othaya Hospital is optimally utilized, provide specialized
services, address the issues of staffing and work on the projection of provision of
the facilities that are not currently existing such as Mortuary and kitchen expansion.
It was noted that Othaya Hospital was functionally and administratively operating
under KNH.
3.4.65 In a letter Ref: KNH/CEO/79/B dated 14 April, 2020, the CEO of KNH made a request
to the Ministry of Health requesting for additional funding for services including
conversion of KNH-Othaya Level 6 hospital into an Isolation center. The Ministry of
Health issued an AIE Ref: 685793 for Kshs. 250,000,000 on the 16 June, 2020. These
funds were received in National Bank A/c No. 01003058005200 on 7 July, 2020.
3.4.66 The audit team noted that funds amounting to Kshs. 293,000,000 were committed
as follows.
Table 33: Commitment of funds for Othaya Referal Hospital
Contract Item Supplier LSO/LPO Amount
KNH/T/57/2020- Purchase of JIMTEC Services Various 5,230,000
2021 Equipment
Purchase of Light up Africa Various 9,211,600
Equipment Ltd
KNH/T/64/2020- Construction of Trancend 04205
2021 Borehole-works Engineering Ltd 9,316,000
Construction of 04206
KNH/T/65/2020- Oxygen -
Debra Ltd
2021 Generating 15,917,874
Plant-works
Construction of 0174310
Oxygen
KNH/T/65/2020-
Generating Debra Ltd
2022 65,949,741
Plant- Purchase
of Equipment
KNH/T/60/2020- Purchase of Debra Ltd Various 14,602,325
2021 Equipment
KNH/T/60/2020- Purchase of Total Hospital Various 3,615,153
2021 Equipment Solutions
99
Contract Item Supplier LSO/LPO Amount
KNH/T/58/2020- Construction of Scopes Project 04201
18,035,320
2021 Internal Roads Ltd
KNH/T/62/2020- Construction of Watercore 04203
37,292,470
2021 Laundry Building Services Ltd
Construction of 04204
KNH/T/63/2020- Mortuary Rimun Ventures
2021 Building Ltd 49,219,625
KNH/T/61/2020- Construction of Good Luck 04202
2021 Kitchen-works Logistic Ltd 40,075,596
KNH/T/59/2020- Purchase of JIMTEC Services Various 24,676,210
2021 Equipment
Total 293,141,914
3.4.67 The audit team further noted that the procurement process had been completed
and works had commenced but no payment had been made as at the time of the
audit. However, the status of projects that had already commenced were as
summarized in the table below.
Table 34: Project Completion status for Othaya Referral Hospital
Project Status (Completion)
Construction of Laundry 15%
Construction of Kitchen 10%
Construction of Oxygen Plant 8%
Construction of Mortuary 4%
COVID-19 Medical Allowances for Front Line Health Workers - Kshs. 156,795,000
3.4.68 Kenyatta National Hospital received a total of Kshs. 156,795,000.00 on 7 July, 2020
through AIE No. A 685723 for payment of Allowances for the Frontline Health
Workers. The allowance was paid in the months of July, August and September 2020.
3.4.69 KNH paid 4,680 permanent and pensionable health workers a total of Kshs.
153,315,000 as Frontline Health-Worker’s Allowance in the months of July, August
and September 2020 leaving a balance of Kshs. 3,480,000.00. However, KNH did not
pay any temporary Frontline Health-Workers yet they had worked in the same period
from April to June, 2020.
3.4.70 In a letter referenced Ref: KNH/HR/333/75 dated 19 October, 2020 referring to SRC
circular Ref. No. SRC/TS/COG/3/61/48, the Director KNH requested for more funds
to pay the Frontline Health Workers from internal accounts through the hospital’s
Short-Term Contracts Account. It was noted that a total of Kshs. 36,155,000 was
100
requested for these payments. This amount included a balance of Kshs.
3,480,000.00 which had not been exhausted in the initial amount of Kshs.
156,795,000 allocated to pay the front-line health workers.
3.4.71 Out of this amount, KNH paid Kshs. 33,811,500 to 1,198 Temporary staff in October
2020 leaving a balance of kshs. 2,343,500.00 as detailed in the table below;
Table 35: Un-utilized Frontline Health Workers Allowances for KNH
Frontline Health Workers (Temporary PV no No. Of Staff Amount paid
Staff) paid (Kshs)
October Doctors & Nurses-Main Hospital) 0152 435 17,071,000.00
October (Mbagathi) 0153 396 11,797,500.00
October (General Staff (clerks, support 0154 367
staff etc.) 4,943,000.00
Total 1198 33,811,500.00
Balance 2,343,500.00
3.4.72 The audit team noted that these payments were made from KNH accounts and not
from the initial Kshs.156,795,000. allocated to pay the front-line health workers.
Conversion of day care Centre to a COVID-19 ward for healthcare workers - Kshs.
140,000,000
3.4.73 The funds provided for the conversion of the day care center to a COVID-19 ward for
Health Care Workers amounting to Kshs. 140,000,000 had not yet been utilized as at
30 October, 2020. According to the Supply Chain Management Department, KNH
advertised the tender in the daily Nation dated 10 November, 2020 under tender
number KNH/T/73/2020-2022 with a closing date of 01 December, 2020. As at the
time of audit, the procurement process was still ongoing.
COVID-19 Emergency response - Kshs.350,000,000
3.4.74 Out of the Kshs.350,000,000 disbursed to KNH for emergency response, Kshs.
43,915,820 was reallocated to KNH-Othaya Referral Hospital for capital projects
leaving a balance of Kshs. 306,084, 180. As at 30 October, 2020 KNH had committed
Kshs. 27,571,524.00 in form of local service orders to the various suppliers for the
items listed in the table below;
101
Table 36: COVID-19 Emergency response - Kshs.350,000,000
Firm Description Request Tender No. Quantity Delivery Amount
of Items NO requested Committed
M/s Scrub suits 128/10/20-21 KNH/T/2A/2018- 6668 350 Pieces 1,890,378
Mullighan and patients’ 2020
rehab identification
services bands
ltd
M/S Respiratory 135/10/20- KNH/T/72/2020- 20000 20000 pieces 1,800,000
lablink ltd KN95 MASK 21 2021
M/s Disposable 125/10/20- KNH/T/2A/2019- 5001 Not 5,131,026
Hospital surgeon gowns 21 2020 delivered
comfort reinforced
company
M/s Disposable 123/10/20- 123/10/20-21 20000 4300 753,800
Hospital Aprons 21
comfort
company
M/s Crown Disposable 117/11/20- 117/11/20-21 4000 Not 2,880,000
solution Gloves 21 delivered
Ltd
M/s Quillar Pair of pre- 89/11/20- 89/11/20-20 100000 10000 pieces 4,450,000
Enterprise sterile Gloves 21
M/s Disposable 110/10/20- KNH/T/72/2020- 16000 Not 10,320,000
Outlook surgeon Mask 21 2021 delivered
Innovation
Ltd
M/s Medi Surgeon Mask 133/10/20- KNH/T/2A/2018- 666 666 346,320
Surge 21 2020
Enterprise
Total 27,571,524
3.4.75 M/s Mullighan Rehab supplied 350 of the 6,668 Scrub suits and patients’
identification bands. They issued a credit note dated 28 October, 2020 indicating
that they will not supply the balance of 6,318 amounting to Kshs. 1,795,878. It is not
clear why they failed to supply the goods as requested by KNH. Further, there was
no evidence of inspection and acceptance reports by the Kenyatta National Hospital
to confirm the quality and quantity of items delivered.
3.4.76 As at the time of the audit M/S Hospital Comfort Company had delivered 4,300
disposable aprons to KNH out of 20,000 which was required. M/S Lablink, Quillar
102
Enterprises and M/S Medisurge Enterprise had delivered all the merchandise ordered
but had not yet been paid the total amount of kshs. 6,596,320. M/S Crown Solution
Limited and M/s Outlook Innovation Ltd were yet to deliver disposable gloves and
disposable surgeon masks respectively.
Donations
Donations from KEMSA to Mbagathi IDU – Kshs. 6,984,708,939
3.4.77 KNH with the resources allocated to them to equip Mbagathi IDU could only afford
to equip it to 20 bed capacity. A meeting held on 4 March, 2020 however gave KNH
the authority to increase the bed capacity to 120 beds. The CEO of Kenyatta National
Hospital wrote a letter Ref KNH/SCM/ADM/43 dated 4 March, 2020 to KEMSA to assist
in acquiring the additional equipment.
3.4.78 KNH identified the suppliers of hospital equipment. The supplier would then invoice
KNH for the budgetary proportion for 20 beds and then invoice KEMSA for the
proportion for 100 beds. Through this arrangement, KEMSA supplied beds and
medical equipment worth Kshs. 6,984,708,939 as detailed in APPENDIX XIX. All such
supplies were recognized in KNH books as donations.
Failure to value donations in kind received contrary to section 47 (8) of the PFM Act,
2012
3.4.79 According to Section 47 (8) of the PFM Act 2012, the recipient of a grant or donation
from a development partner shall record the amount or value of the grant or
donation in its books of accounts.
3.4.80 During the period 1 March, 2020 to 31 July, 2020, Kenyatta National Hospital
received donation in terms of Masks, Ventilators, Face Shields, Gowns and other
materials and equipment relating to COVID-19 from KEMSA and other Donors as
detailed in APPENDIX XX.
3.4.81 A review of the KNH Annual Report and Financial Statements for the year ended June
30, 2020 under note 8 revealed that the COVID-19 Donations had not been disclosed
contrary to Section 47 of PFM Act 2012. The donations captured under note 8 were
General Donation in Kind that were not COVID-19 related.
103
Donation Items Not taken on Charge
3.4.82 Section 159 (2) of the PPADA Act 2015 provides that an Accounting Officer of a
procuring entity shall record goods, works and services received. Further Section 162
indicates that no inventory shall be used until taken on charge and as a basis for
ensuring that all items are properly accounted for and put in proper use as intended
by the procuring entity. The audit could not ascertain whether some of the items
donated to KNH were taken on charge since no store records were availed. The list
of the items whose store records were not availed is as shown in APPENDIX XXI.
Verification of Othaya-KNH C-HERP Ventilators
3.4.83 According to Reference Letter MOH/DC/9/1/33 dated 2 June, 2020 from the Ministry
of Health to Gradian Health Systems, 5 ventilators were to be delivered by Gradian
Health System to Othaya Referral Hospital.
3.4.84 Gradian Health Systems delivered the 5 ventilators to Othaya Referral Hospital. A
review of Internal Memo: KNH/SDCS/112/Vol.1/42 from Office of the Senior Director
Clinical Services to Chief Executive Officer dated 19 June, 2020 communicates a
request for authority to move the 5 Othaya ventilators to KNH- Main Hospital. The
authority was granted on the same day by the Chief Executive Officer.
3.4.85 On 30 June, 2020, 5 ventilators were Issued from Othaya ICU to KNH-Main Hospital
through Counter Requisition Issue and Voucher S11 No 3633641 and were received at
KNH Main store on the same date through Counter and Requisition Issue Voucher No
3635555. They were then taken on charge on the same date through Store Ledger &
Stock Control Card (S3) No 000553.They were then Issued for use on 06 August 2020
at KNH Private Wing HDU.
Status of isolation centres
3.4.86 The audit team did not carry out Physical Verification of the store balances &
isolation centers at Kenyatta National Hospital because of the spike of COVID-19
confirmed cases in the hospital and its facilities. However, according to letter Ref:
KNH/FIN/47/VOL.I/ (70) dated 11 November, 2020, the hospital had set up an
isolation centre detailed as follows;
3.4.87 The hospital mobilized existing medical equipment to set up the isolation centre for
health care workers at the Day Care Centre consisting of 22 beds in May 2020
104
awaiting the procurement of equipment as per the designated funds of Kshs. 140
million. The mobilized equipment was sourced from Mbagathi and the Main Hospital.
3.4.88 The Mbagathi isolation facility was envisaged to have a capacity of 120 beds but
when it was set up, considering Ministry of Health guidelines set up for COVID-19
care and dialysis services, 70 beds were installed to provide for the recommended
spacing.
3.4.89 The Hospital has set up and equipped other isolation/treatment units in the hospital
to serve different groups of COVID-19 patients as highlighted below:
Table 37: Status of Isolation Centres at the Kenyatta National Hospital
Unit Population served Bed capacity Critical care beds
Main KNH IDU Confirmed COVID 19 critical care 8 8
CCU patients
Ward 42 and 41 Very sick suspected and confirmed 57 15 (HDU)
COVID 19 patients
Medical wards Suspected and Confirmed COVID 19 79 6
(7A, 7D, 10B) medical patients awaiting transfer
to isolation unit
Surgical Wards Suspected and Confirmed COVID 19 32 0
(5C) surgical patients awaiting transfer
to isolation unit
Paediatric ward Suspected and Confirmed COVID 19 38 6
(3c) children awaiting transfer to
isolation unit
Obstetric unit Suspected and Confirmed COVID 19 10
pregnant women
Kenyatta University Teaching Research and Referral Hospital (KUTRRH)
Amount of funds received by the KUTRRH for Covid-19
3.4.90 It was established that, the Kenyatta University Teaching and Referral Hospital
received an anmout of Kshs. 1,294,416,150 for the COVID 19 related activities as
detailed below:
105
Table 38: Amount of funds received by the KUTRRH for Covid-19 related activities
Source and purporse Amount (Kshs) Bank Name Recipient bank
and Branch account
1 GOK for the Frontline Health Workers 12,270,000.00 KCB TRM 1258637243
Allowances
2 GOK for the compensation for recruitment of 245,196,150.00 KCB TRM 1258637243
health workers to address the COVID-19 crisis
3 GOK Infrastructure Development 526,500,000 KCB TRM 1258637243
4 GOK Recurrent Expenditure 500,000,000 KCB TRM 1258637243
Amount received from the Ministry of Health 1,283,966,150
5 IGAD Staff Apartment- 51 Units 10,450,000 KCB TRM 1258637243
Total Receipts 1,294,416,150
Utilization of the funds
The Frontline Health Workers Allowances - Ksh 12,270,000
3.4.91 The above amount was utilized for Health workers allowances as required by the AIE
received. However, some legible health workers were not captured and this resulted
to an extra expenditure of Kshs. 1.27M which was utilised from the Recruitment of
Health Workers Fund. This is unlike other entities that opted to utilize their Own
Source Funds or salary vote funds.
The Covid Grant for Recruitment of Health workers - Ksh.245,196,150
3.4.92 Based on the work plan and budget provided, it was noted that, there was a budget
line whose main activity in the COVID-19 pandemic response workplan was to hire
Clinical and non-clinical staff to handle the COVID-19 patients. According to the
letter from the PS to the Ministry of Health referenced MOH/FIN/1/A VOL II (435)
dated in 01 April, 2020, an Authority to incur Expenditure (AIE) Number 685887 of
106
Kshs. 245,196,150.00 was issued to the Kenyatta University Teaching Research and
Referral Hospital to cater for the recruitment of additional health workers to address
the COVID-19 pandemic for a period of three months up to 30 June, 2020.
3.4.93 A review of the expenditures charged to the Covid-19 Grant for Recruitment of
Health workers established that an amount of Kshs. 1.27Million being the additional
expenditure for the payment of the Frontline Health Workers Allowances was
charged from these funds. The funds were appropriated and purposed for the
compensation and recruitment of health workers to address the COVID-19 crisis and
was therefore used without express authority from the National Treasury but based
on a board meeting that decided and made approval to proceed to pay the extra
frontline healthcare workers allowances.
3.4.94 From the extract of the recruitment plan availed, KUTRRH was to hire a total of 568
staff who were to be paid a total salary of the KShs. 245,196,150 for a period of 3
months ending 30 June, 2020. Based on the payrolls provided, as at July, 2020, there
were 165 staff plus other additional temporary staff who had been paid a total of
Kshs. 88,717,996.08 as at July, 2020 as per the utilization report availed for the
245m funds. The Fund therefore was underutilized as at 30 June, 2020.
3.4.95 Further, the audit noted that some 50 newly recruited staff were sent to Seychelles
for a two year support mission and their monthly remuneration is being charged from
the fund. The 50 newly recruited staff are serving in another country institution
contrary to the purpose of the funds. This mission being a government-to-
government agreement should have received its own funding and not the
institution’s conditional fund. As at October 2020, KUTRRH had utilized a total of
Kshs. 203,536,078.01, leaving a balance of Kshs. 41,660,071.99 still unutilized as
detailed below:
Table 39: Expenditure by KUTRRH for Recruitment of Healthcare Workers
DETAILS Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 TOTAL
6,918,291.47 16,552,427.86 16,869,340.39 16,091,170.01
SALARIES 12,928,501.36 16,669,036.80 16,531,170.00 102,559,937.89
MEDICAL 9,327,274.00
INSURANCE 5,236,217.38 14,563,491.38
9,998,400.00
TRAINING 9,998,400.00
TRAVELLING 1,850,761.00
PER DIEM 1,850,761.00
STAFF 3,350,000.00
UNIFORMS 3,350,000.00
GRATUITY 31,793,580.75
PROVISION 31,793,580.75
COVID 4,308,600.00 3,898,800.00 2,715,600.00 10,052,650.00
TEAM 9,325,600.00 8,178,200.00 38,479,450.00
107
DETAILS Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 TOTAL
LOCUM
STAFF
FRONTLINE
ALLOWANCE 940,456.99 940,456.99
TOTAL 22,117,452.47 17,237,101.36 29,778,501.86 19,584,940.39 57,937,400.76
25,994,636.80 30,886,044.37 203,536,078.01
ACTUAL
SPENT 203,536,078.01
BALANCE OF
THE FUND 41,660,071.99
AMOUNT
RECEIVED 245,196,150.00
GOK Infrastructure Development - 526,500,000
Payment for Expenditures incurred before COVID-19 was declared in Kenya - Ksh.
12,388,797
3.4.96 Section 43 (1) of the Public Finance Management Act, 2012 requires that an
Accounting Officer may reallocate funds from authorised use but may not reallocate
funds where - (a) the funds are appropriated for transfer to another government
entity or person; (b) the funds are appropriated for capital expenditure except to
defray other capital expenditure; (c) the reallocation of funds is from wages to
nonwages expenditure; or (d) the transfer of funds may result in contravention of
fiscal responsibility principles.
3.4.97 Section (2) further requires that, an Accounting Officer for a National Government
entity, other than a State Corporation, may reallocate funds between programs, or
between Sub-Votes, in the budget for a financial year if— (a) there are provisions in
the budget of a program or Sub-Vote which are unlikely to be utilised; (b) a request
for the reallocation has been made to The National Treasury explaining the reasons
for the reallocation and The National Treasury has approved the request; and (c) the
total sum of all reallocations made to or from a program or Sub-Vote does not exceed
ten percent of the total expenditure approved for that program or Sub-Vote for that
financial year.
3.4.98 The special audit, established that KUTRRH had utilized Kshs. 177,029,923.20 out of
the Kshs. 526,500,000 received as GoK Covid Grant for Development. KUTRRH also
had commitments of Kshs. 99,920,436.69. Review of the related payment vouchers
revealed that the institution had reallocated Kshs. 12,388,797 to previous
commitments made before COVID-19 Pandemic was declared in Kenya. The authority
to reallocate the COVID-19 Funds for these payments was not availed to the special
audit. The table below gives details of the payments and expenditure whose
108
procurement had commenced and in some cases goods delivered before the COVID-
19 period of March 2020, but payments were made using the Conditional Covid
Grants.
Table 40: Expenditure by KUTRRH before COVID-19 was declared a pandemic in Kenya
Purpose of payment L.P.O No. Amount (Kshs) Remarks
Supply & installation of AC 1757585 3,323,897 User request on 15th Feb, 2020.
system at the main Internal memo REF:
pharmacy store KUTRRH/PRS/F1/366
Supply @ delivery of fridge 3478305 1,870,000 User request on 4th Mar, 2020.
& freezer for food storage Internal memo REF:
KUTRRH/CD/F1/74
Purchase of desktop 3478080 431,500 User request on 23rd Jan, 2020.
computers for CEO & Board Internal memo REF:
Chair KURRH/ICT/REQ/109 RFQ done on 7th
Feb,
Installation of AC at clinical 3473688 408,900 Certificate of completion states work
Lab completed on 31st Jan 2020 REF:
KUTRRH/IPRJ/F1/263
Supply of Ipad Pro 11 3478075 594,000 RFQ done on 5th Feb, 2020. REF
keyboard leather cases KUTRRH/PD/SOP/F.01
Supply and delivery of 3473983 1,856,000 RFQ done on 24th October, 2019 &
pharmacy store racks professional opinion on 6th Nov 2019
REF KUTRRH/PD/PO/VOL1(1520
Supply and fixing of non-slip 3,904,500 The approved requisition of Kshs.
matt 3,664,625 budgeted amount for the
service was dated 14th October,
2019.The bid opening and the
professional opinion were done on
22nd January,2020. Quotation
NO.309/2019-2020/KUTRRH/PUR
TOTAL 12,388,797
Delivery notes dated before tender opening and award - Kshs. 849,620
3.4.99 A review of Payment Voucher Number 1073 to Windson Services Ltd, quotation
number .584/2019-2020/KUTRRH/PUR for the purchase of materials for creation of
washrooms and Board Members lounge at the centre for specialized clinics,
established that delivery notes attached to the payment vouchers were dated
109
between 10 April, 2020 to 13 April, 2020, which was before the bid opening and
professional opinion that took place on 14 April, 2020. The reason for the service
delivery before the tender opening was not given by the entity.
The GOK Recurrent Covid-19 Grant –Kshs. 500 Million
Award of tender amounting to Kshs. 3,978,500
3.4.100 Section 106 (5) of The Public Procurement and Asset Disposal Act, 2015 requires
that, the following shall apply with respect to the contract resulting from a
procurement by a request for quotations — (a) the procuring entity shall place a
purchase order with the person submitting the successful quotation; (b) the person
submitting the successful quotation shall confirm the purchase order in writing; and
(c) an accounting officer shall consider recommendations for award arising from a
contract under procurement by a request for quotations for approval or rejection.
3.4.101 The audit team noted that Request for Quotation approach was used in
procurement for selecting and awarding a suitable company to supply the Covid-19
consumables. Medspan Labaratory Supplies Limited was awarded the tender
amounting to Kshs. 3,978,500. It was established that the company had through an
email on 2 April 2020 acknowledged the award and confirmed that it was able to
supply 3 ply face masks at Kshs. 2,000 inclusive of VAT. However, it was awarded a
tender to supply 3,300 and 5,570 pieces of N95 Masks and face shield at a cumulative
amount of Kshs. 3,978,500.
Services offered before Awarding of tender - Kshs. 1,350, 000
3.4.102 The audit noted that services by Ragely Investment Ltd, Quotation NO. 422/2019-
2020/KUTRRH/PUR/PROVISION OF FUMIGATION SERVICES were offered before the
professional opinion was given. The Company provided a medical fumigation of ICU
using magnesium phosphate chemical at a cost of Kshs. 1,350, 000. The Professional
Opinion highlighted that the entity used the request for quotation in awarding the
tender. The Public Procurement and Asset Disposal Act, 2015, Section 84(3) requires
that, the Accounting Officer takes into account the views of the Head of
Procurement in the signed professional opinion in making decision to award a tender
110
in request for quotation method. However, Ragely Investment Ltd offered the
fumigation service between 24th – 26th February, 2020 which was before the tender
opening and professional opinion that took place on 28th February, 2020 and 3rd
March, 2020 respectively. The reason for awarding the tender to Ragely Investment
Ltd before the bids were opened or even before a professional opinion was given
was not provided by the entity.
Payments made to non covid-19 activities amounting to Kshs. 167,000
3.4.103 Section 54 (1) of The Public Finance Management Act (National Government)
Regulations, 2015 requires that, except as provided for in the Act and these
Regulations, an Accounting Officer of an entity may not authorize payment to be
made out of funds earmarked for specific activities for purposes other than those
activities.
3.4.104 The audit team noted that Smart Funeral Services was awarded a tender for
supply and delivery of coffins for resale through a letter dated 29 January, 2020. It
was established that funds for the Covid-19 were used to pay for supply of coffins
done before establishment of KUTRRH as a covid-19 facility. The supplies amounting
to Kshs. 167,000 was part of the cumulative payment amounting to Kshs. 959,000
made through Payment Voucher No. 001353. The details of the irregular payments
are shown in the table below.
Table 41: Payments incurred by KUTRRH on non covid-19 activities
Date Sold Description/Code Quantity Receipt No. Supplier Price
25/02/2020 Half opening round bar H-004A 1 912021/912033 23,000.00
25/02/2020 Half opening round bar H-004A 1 12024/912031/68585 23,000.00
02/03/2020 Half opening swing bar H-004B 1 912040/912045 28,000.00
04/02/2020 High roof sliding R.B. H-003 1 0912043/925904 22,000.00
07/03/2020 Mwananchi coffing big H-0010A 1 925902 10,000.00
10/03/2020 Half opening round bar H-004A 1 925907 23,000.00
13/03/2020 Three in one -002 1 925916 15,000.00
16/03/2020 Doom swing bar handle -008A 1 925919/0925938 23,000.00
Total 167,000.00
111
Utilization of IGAD funds - Kshs 10,450,000
3.4.105 The KUTRRH received Kshs. 10,450,000 from IGAD which was used to furnish the
51-unit staff apartments that are being used to quarantine the Covid-19 working
staff. As at 30 June, 2020, KUTRRH had utilized Kshs.11,091,156 resulting in an over
expenditure of Ksh. 641,156. The audit noted various procurement risks such as
inflation of prices and procurement of substandard goods. KUTRRH procured curtains
at a cost of Kshs. 1500 per unit yet the user request had indicated unit cost of Kshs.
900 in tender NO. KUTRRH/DT/F1/053 amounting to Kshs. 1,907,066. Reason for this
60% markup was not explained and a market survey was not provided. A physical
verification of the beds procured under tender No KUTRRH/PD/SOP/F.01 and
delivered in June were of substandard quality and were already breaking apart.
Accountability of Donations
3.4.106 The sources of Covid-19 related goods available for use in KUTRRH were
purchases and donations from both the National Government and private
institutions. A schedule detailing the distribution of donations from KEMSA/MOH to
counties and other MDAs was provided from KEMSA. The audit team conducted a
document examination and physical verification to establish receipt of goods
dispatched from KEMSA/MOH
3.4.107 It was established that the items had been received by the Kenyatta University
Teaching Referral and Research Hospital as dispatched. The high moving
consumables such as surgical gowns and face shields were already in use. The audit
team therefore confirmed that indeed the number dispatched was received,
properly recorded in the store bin cards and requisitioned before issuance. In
addition, for the large machines such as the ventilators, the audit team was able to
confirm their receipt and a further physical count confirmed that the 10 units were
in the main store. However, no physical verification was done to ascertain the
conditions of Comprehensive care ventilators store in the High Dependency Unit
store since it was within the isolation zone for covid-19 patients.
3.4.108 It was also observed that there were donations in the KUTRRH schedule specified
to be from KEMSA but not included in the schedule of donations that the audit team
had received at KEMSA headquarters to facilitate verification in the Counties and
112
MDAs. It was therefore not possible to establish the accuracy of the donations
dispatched to the facility as detailed in APPENDIX XXII.
Failure to include estimate of non-cash donations in the budget
3.4.109 Section 74 (4) of the Public Finance Management Act (National Government)
Regulations, 2015 requires that where grants and donations are receivable in kind,
the value of such donations shall be determined and included in the estimate and
reflected as expenditure in the financial year.
3.4.110 The audit team examined the approved budgets and the succeeding
supplementary budgets I and II in the financial year 2019/2020. It was established
that the Kenyatta University Teaching Referral and Research Hospital did not
estimate the value of donations received from KEMSA, MOH and other donors and
consequently their values are not reflected in the Donations Schedule provided. In
that respect, section 74 (4) of the Public Finance Management Act (National
Government) Regulations, 2015 was contravened.
MOI TEACHING AND REFERRAL HOSPITAL
Planning and Budgeting
Absence of approved work plans, budgets, procurement plans and training plans specific
to COVID-19 resulting in failure to utilize Government grants
3.4.111 The special audit established that the hospital had only the Annual Work plan,
procurement plan, training plan and budget for its normal hospital operations. On
the contrary, there was no evidence of existence of approved budget, procurement
plan and training plan specific to Covid-19 funds utilization for any of their sources
of the Covid-19 Funds
Amount of funds received/budgeted by Moi Teaching and Referral Hospital including
recipient bank accounts
3.4.112 The total amounts of funds received by the Moi Teaching and Referral Hospital
(MTRH) for the COVID-19 activities are as detailed below:
113
Table 42: Amount of funds received by MTRH
Source Amount (Kshs.) Bank name and Recipient bank
branch account
1 GOK Recruitment of Health 42,824,700 KCB 1103464329
workers
2 GOK Health Workers 106,680,000 KCB 1103464329
allowances
3 AIE Ministry of Health 400,000,000 KCB 1151682268
Amount received from MOH 549,504,700
4 Own Source Revenue
Covid 19 Emergency Fund 155,000,000 KCB 1103464329
(Financial year 2019/2020,
Kshs.55,000,000 and
Financial year 2020/2021
Kshs.100,000,000
Emergency Fund (Financial 60,000,000 KCB 1103464329
year 2019/2020
Kshs.30,000,000 and
Financial year 2020/2021
Kshs.30,000,000)
Total 764,504,700
Utilization of COVID-19 funds by Moi Teaching and Referral Hospital (MTRH)
GOK Conditional Grants
3.4.113 As at 31 July, 2020, the Moi Teaching and Refferal Hospital, had received funds
from the National Government through the Authority to Incur Expenditures (A.I. Es)
from the Ministry of Health amounting to Kshs. 400,000,000 as detailed below:
Table 43: GOK Conditional grants received by the MTRH
AIE No. Financial Year Vote-Account AIE Date Amount(Kshs.)
A685789 2019/2020 0-2630101 16/6/2020 200,000,000
A685779 2019/2020 0-2630101 30/6/2020 200,000,000
Total 400,000,000
3.4.114 As at the time of the audit, the Funds were still held in the Hospital’s Training
center KCB Account number 1151682268 after being transferred from the hospital’s
main account no 1103464329 KCB, where it had been received. However, most of
the money has been committed to various projects with some being past the award
stage of procurement.
114
3.4.115 The special audit established that the Conditional grant from the Ministry of
Health had been incured by the Moi Teaching and Referral Hospital in two category
of projects procured through open tender method as follows:
Table 44: Exependitures incurred on Conditional grants by the MTRH
Partciluars Approved Budget Amount incurred (Kshs.)
(Kshs.)
1 Procurement and installation of ICU 200,000,000 99,230,241
Medical Equipment and Medical
appliances
2 To facilitate the pandemic 200,000,000 104,925,959.47
infrastructure project at MTRH
Total 400,000,000 204,156,200.47
Procurement and installation of ICU Medical Equipment and Medical appliances
3.4.116 This procurement process was tendered under tender numbers MTRH/T/3/2020,
MTRH33/2020 and MTRH/25/2020. As at the time of audit, an amount of
Kshs.99,230,241 had been incurred as detailed below:
Table 45: Procurement and installation of ICU Medical Equipment by MTRH
Tender no Contractor Amount(Kshs.) Item Remarks
and LPO /LSO
No
MTRH/T/3/2020 Supply of 76,431,451 Supply, delivery, Procurement
Various installation of still at the award
equipment medical equipment stage. LPO has
(see copy of not been issued
MTRH33/2020 Ms Recot 15,386,189.50 Supply, delivery, Procurement
Enterprises installation, testing still at the award
Ltd and commissioning stage. LPO has
of HVAC at MTRH not been issued
world bank isolation
unit.
MTRH/25/2020 Ms Recot 7,412,600 Supply, delivery, Procurement
Enterprises installation and still at the award
Ltd commissioning of stage. LPO has
HVAC system in not been issued
isolation Ward-
Rafiki centre.
Total 99,230,241
115
The pandemic infrastructure project at MTRH
3.4.117 This procurement process was tendered under tender numbers MTRH/T/24/2020
and MTRH/T/26/2020 as follows:
Table 46: Procurement process for the pandemic infrastructure project at MTRH
Tender No Contractor and Amount (Kshs.) Item Remarks
LPO /LSO No
MTRH/T/24/2020 Ms Debra Ltd 98,480,959.47 Supply, delivery, Tenders
installation, was at the
testing and
award
commissioning of
stage as at
1500lm oxygen
the time of
plant
our audit
MTRH/T/26/2020 Ms Medoquip Ltd 6,445,000.00 Supply, delivery, Tenders
installation and was at the
commissioning of award
oxygen piping and stage as at
accessories to the time of
isolation ward our audit
Total 104,925,959.47
Recruitment of health workers and payment of frontline health workers
allowance by the National Government
Irregular payment of Health Workers Allowances to Non-eligible staff – Kshs.
2,695,000
3.4.118 The Moi Teaching and Referral Hospital (MTRH) received an amount of Kshs.
106,680,000 from the Ministry of Health for the Frontline Health Workers
Allowance and another Kshs. 42,824,700 for the recruitment of health workers on a
3-months contract. The appropriated amount for the Frontline Health Workers
Allowance was Kshs. 106,680,000. However, a total payment of Kshs. 99,830,000 was
116
made thereby leading to a variance of Kshs. 6,850,000 on the appropriated amount.
The Management of the MTRH did not account for the un-utilized amount of Kshs.
6,850,000.
3.4.119 It was also established that an amount of Kshs. 2,695,000 was paid as Allowances
to non-eligible staff who were not Frontline Health Workers contrary to the SRC
circular Ref. No. SRC/TS/COG/3/61/48 of 28 April, 2020 which had clearly indicated
that only the Frontline Health Workers should be paid. The payments were explained
to be relating to Covid-19 Health Committee Allowances as detailed in APPENDIX
XXIII.
Over payment of the Frontline Health Workers Allowances - Kshs. 1,055,000
3.4.120 Further, some health workers were paid amounts exceeding the SRC allocation
by Kshs. 1,055,000 as detailed below. No explanation was given on this issue.
Table 47: Over payment of the Frontline Health Workers Allowances by MTRH
NAME COVID 19 STIPEND SRC APPROVED TOTAL TO BE PAID EXTRA PAID (KSHS)
PAID (KSHS) RATE (PM) FOR 3 MONTH
(KSHS)
JOSEPHAT M. SABILA 85,000.00 15,000.00 45,000.00 40,000.00
JANE KARIUKI 90,000.00 15,000.00 45,000.00 45,000.00
TUM FLORENCE CHEPYEGON 105,000.00 15,000.00 45,000.00 60,000.00
DR. WILSON ARUASA 140,000.00 15,000.00 45,000.00 95,000.00
JACKLINE ODAWO OPONDO 105,000.00 15,000.00 45,000.00 60,000.00
OLE KUYO RICHARD 70,000.00 15,000.00 45,000.00 25,000.00
MISS. CAROLYN JERUTO SANG 105,000.00 15,000.00 45,000.00 60,000.00
KIMITEI ANDREW BOWEN K 90,000.00 15,000.00 45,000.00 45,000.00
TITUS KIPCHUMBA TARUS 110,000.00 15,000.00 45,000.00 65,000.00
DR. KIRWA PHILIP KIPTANUI 130,000.00 15,000.00 45,000.00 85,000.00
DR. MAINA KIPYEGON VICTOR 125,000.00 20,000.00 60,000.00 65,000.00
KOECH CALEB KIPROP 105,000.00 15,000.00 45,000.00 60,000.00
KOROS ELIJAH KIPKORIR 105,000.00 15,000.00 45,000.00 60,000.00
TOOTSE MUTU DANIEL 75,000.00 15,000.00 45,000.00 30,000.00
DR. KORIR DAISY C 120,000.00 15,000.00 45,000.00 75,000.00
DR. KWOBA EDITH W.K. 100,000.00 15,000.00 45,000.00 55,000.00
Dr. KIBET KIBOR KEITANY 100,000.00 15,000.00 45,000.00 55,000.00
DR. KIRUI NICHOLAS K. 125,000.00 15,000.00 45,000.00 80,000.00
MRS. MARGARET W. MUNGAI 40,000.00 15,000.00 45,000.00 5,000.00
TOTAL - KSH 1,925,000.00 870,000.00 1,055,000.00
117
3.4.121 The MTRH was further allocated Kshs. 42,824,7000 by the National Treasury to
help in recruiting health workers on a contract basis. They considered a list of
candidates previously approved and shortlisted in 2018 but had not been contracted.
Further, the contract for the newly recruited staff was to end after three months
but the audit analysis revealed that this was not the case. Management’s response
on the issue is that due to increase in Covid-19 pandemic numbers, they are still
retaining some doctors. This amount has therefore exceeded the appropriated
amount of Kshs. 42,824,700 by Kshs. 3,737,991 as shown below:
Table 48: Payment of allowances by MTRH beyond the approved Budget
PERIOD NO OF STAFF TOTAL PAID (KSHS)
APRIL-20 27 5,491,585.90
MAY-20 27 5,491,585.90
JUN-20 76 10,926,099.43
JUL-20 80 12,326,710.23
AUG-20 80 12,326,710.23
TOTAL 46,562,691.69
Utilization of COVID-19 funds from the Hospital’s own Funds
Un-Accounted for Kshs.115,000,000
3.4.122 Section 53 (1) of the Public Finance Management Act Regulation, 2015 provides
that except as provided for in the Act and these Regulations, an Accounting Officer
of an entity may not authorize payment to be made out of funds earmarked for
specific activities for purposes other than those activities. Section 53 (2) further
provides that a public officer who makes a payment contrary to paragraph (1)
commits an offence under the Act.
3.4.123 It was established that, the Moi Teaching and Referal Hospital (MTRH) had funds
set for emergency and for Covid-19 intervention as follows:
118
Table 49: Un-Accounted for Kshs.115,000,000 at MTRH
Funds 2019/2020 (Ksh) 2020/2021 (Ksh) Total (Kshs)
Emergency Funds 30,000,000 30,000,000 60,000,000
Covid-19 Funds 55,000,000 100,000,000 155,000,000
Total 85,000,000 130,000,000 215,000,000
3.4.124 The Management of the Moi Teaching and Referral Hospital did not avail
documents to support expenditures of Kshs. 85,000,000 incurred in the financial year
2019/2020 and Kshs. 30,000,000 incuured in the financial year 2020/2021. Under the
circumstances, the special audit could not confirm the lawfulness and effectiveness
of an amount of Kshs. 115,000,000 incurred by the Moi Teaching and Referral
Hospital from Own Source funds.
3.4.125 It is recommended that further investigations should be conducted on utilization
of the funds to establish any criminal activities.
Accountability of Donations
3.4.126 Items from the KEMSA were all well received at the station and had all been
distributed as requisitioned by various users. Further, the hospital availed a
documentation of all their donations including KEMSA donations having been valued
and updated. The status of each of the items are in relevant books of accounts as at
the time of audit. The total value of the donations received was Kshs. 27,959,182.
Financial and Non-Financial Reporting on Covid-19 funds
3.4.127 It was established that the Hospital produced and submitted to the Ministry of
Health both financial and non-financial reports on utilization of COVID-19 funds as
supported by minutes of the board meetings.
3.4.128 The Hospital holds weekly Emergency Covid-19 Committee meetings for both the
hospital and Northern and Rift Economic Block (NOREB) regions. All these are
supported by the availed board minutes.
119
Disbursements to Quarantine facilities - Kshs. 700,000,000
3.4.129 The Ministry of Health disbursed a total of Kshs. 700,000,000 to quarantine
facilities as detailed in the table below:
Table 50 MOH Disbursements to Quarantine facilities
Institution Amount (Kshs)
1 Kenya Medical Training College 500,000,000.00
2 Kenya Medical Practitioners & Dentist Board 154,338,619.00
3 Moi Girls School 3,575,000.00
3 The Co-operative University 2,395,000.00
4 Lenana School 1,504,341.00
5 Jomo Kenyatta University of Agriculture & Technology 1,657,800.00
6 Kenya Medical Training College 18,251,500.00
7 Kenyatta University 7,577,850.00
8 Kenya Water Institute 1,134,000.00
9 St. George's Girls Secondary School 7,438,000.00
10 Corat Africa 750,000.00
11 Kenya Institute of Special Education 680,000.00
12 Nairobi School 697,890.00
Total 700,000,000
3.4.130 Out of the Kshs. 700,000,000 disbursed, Kshs. 154,338,619 was paid to Kenya
Medical Practitioners and Dentist Board as funds for payment of Quarantine Facilities
verified Bills while the kshs. 500,000,000 paid to Kenya Medical Training College was
to be utilized for COVID 19 Emergency response resultant expenditure for isolation
services.
120
3.4.131 Section 104 of the Public Finance Management (National Government) ,2015
provides that all receipts and payment vouchers of public moneys shall be properly
supported by pre-numbered receipt and payment vouchers and shall be supported
by the appropriate authority and documentation.
3.4.132 It was established that payment voucher number 4040 being payment to Jomo
Kenyatta University of Agriculture & Technology amounting to Kshs. 1,657,800 for
57 quarantined persons was paid on 30 June, 2020. However, only quarantine
expenditure schedules for 51 individuals had been provided. The facility offered
accommodation at the rate of Kshs. 4,000 per day for thirteen days meaning that
Kshs.312,000 for the extra 6 persons may have been incurred for services not
provided contrary to section 104 of the Public Finance Management (National
Government), 2015.
Disbursements by the MOH to other MDAs – Kshs.109,945,000
3.4.133 The Ministry of Health disbursed a total of Kshs. 109,945,000 to other MDAs as
detailed below.
Table 51 MOH Disbursements to other MDAs
s/no MDA Amount (Kshs)
1 1,500,000.00
PS State department for Public works
2 75,000,000.00
PS Ministry of Defense
3
5,000,000.00
PS for Broadcasting & Telecommunication
4
10,000,000.00
Director -General, National Youth Service
5 PS Ministry of Foreign Affairs 10,000,000
6 Kenya Medical Research Institute 8,445,000
7 Total 109,945,000
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3.5 Utilization of the COVID-19 Funds by the COVID-19 Emergency Response Fund
GOVERNANCE AND OVERSIGHT FRAMEWORK
3.5.1 The Legal Notice No.38 of 27 March 2020, the Public Finance Management (COVID-19
Emergency Response Fund) Regulations, 2020 established the COVID-19 Emergency
Response Fund Board with the principal object of mobilizing resources towards
containing the spread, effects and impact of the pandemic. Section 4(2) of the
Regulations outlines the purpose of the fund.
3.5.2 Section 7(1) of the COVID-19 Emergency Response Fund Regulation, 2020 established a
Board responsible for the management of the fund. The Fund Board comprised of the
following members appointed by the President through a press release by the State
House Spokesperson on 30 March,2020 as per APPENDIX XXX
Board Member Capacity
1 Ms. Jane Karuku Chairperson
CS, Ministry of Interior and Coordination of National
2 Dr. Fred Matiang’i Government
3 Hon. Wycliffe Oparanya Chairperson, Council of Governors
4 Mr. Michael Joseph Member
5 Mr. James Mwangi Member
6 Dr. Narenda Raval Member
7 Mr. Joshua Oigara Member
8 Mr. Jeremy Awori Member
9 Mr. Wachira Waruru Member
10 Mr. Mohammed Hersi Member
11 Ms. Phyllis Wakiaga Member
12 Mr. Kennedy Kihara Secretary
3.5.3 It was established that on 12 June 2020, the Fund Board registered the Kenya Covid-19
Emergency Fund Limited under the Companies Act, 2015 as a Company limited by
guarantee. The audit noted that the Fund Board approved the establishment of the Fund
as a corporate entity for procurement and logistics purposes in a Board meeting held on
14 April, 2020.
122
3.5.4 The certificate of incorporation indicates the Company Registration Number as CLG-
PPFDDA and the registered office of the company as ALN House, Eldama Ravine Close
Off Eldama Ravine Road, P.O. Box 200-00606 – Sarit Centre.
3.5.5 It was not clear why an entity established under the Public Finance Management (COVID-
19 Emergency Response Fund) Regulations, 2020 as the COVID-19 Emergency Response
Fund Board with clear governance, management structures, systems and procedures
outlined in the Public Finance Management Act, 2012 and the attendant Regulations was
again registered as a Company Limited by Guarantee under the Companies Act, 2015
indicating it was a private company receiving donations from well-wishers.
3.5.6 Further, the special audit sought advisories from the Office of the Attorney General &
Department of Justice and the National Treasury on the status of the COVID-19
Emergency Response Fund. The advisories provided conflicting conclusions.
3.5.7 (i) The National Treasury advisory dated 8 February,2021 maintained that the Covid-19
Emergency Response Fund was established pursuant to Section 24 (4) of the Public
Finance Management Act,2012.The Fund was therefore required to facilitate the Office
of the Auditor-General to audit its expenditures in line with Article 229 of the
Constitution, Public Finance Management Act,2012 and Public Finance Management
(Covid-19 Emergency Response Fund) Regulations,2020 Legal Notice No.38 of 26
March,2020.
3.5.8 (ii) The Solicitor General in an advisory dated 30 April,2021 was of the opinion that the
money raised through the framework of the COVID-19 Emergency Response Fund could
not be deemed to have been collected under statutory authority since the antecedent
statutory requirements for the establishment of such authority were not carried out in
respect of the Fund. Consequently, the money under the fund would not fit within the
definition of public money as articulated in Section 2 of the, Public Finance Management
Act and would be outside the remit of the Auditor-General. However, the Solicitor
General recommended that the Auditor-General undertake an audit of the Fund
operations due to the public interest nature of the Fund and the nexus between the
Fund and the Government for the purpose of securing effective COVID-19 mitigation
outcomes.
3.5.9 Although the Solicitor-General seems to have concluded that the funds raised by the
COVID-19 Emergency Response Fund were not public funds, the Auditor-General audited
the funds based on the Regulations. The Fund Board has since submitted documents for
audit to the Auditor-General.
123
FUND ADMINSTRATION AND ACCOUNTABILITY
Irregular Administration of the Fund
3.5.10 Section 9(1) of the PFM (COVID-19 Emergency Response Fund) Regulations, 2020 provides
that the Principal Secretary to the National Treasury should be the Administrator of the
Fund. The roles of the Administrator as provided in Section 9 (2) include to; supervision
and control of the administration of the fund, establishing proper systems of control and
oversight, cause proper books of account to be kept and other records relating to the
fund, prepare financial statements for the fund and transmit to the Auditor-General for
audit. Section 9(4) of the PFM (COVID-19 Emergency Response Fund) Regulations, 2020
provides that the Administrator of the Fund should designate officers under the National
Treasury as the Secretariat to the Fund.
3.5.11 A review of the inauguration Board meeting minutes (MIN 5/1/4/20 held on 1 April 2020)
notes that the Members were briefed about the Fund Regulations issued by the National
Treasury but unanimously resolved to adopt a private sector steered approach for
purposes of instilling and assuring public confidence in the process. The Board decided
to develop its own procedures and workplan in the performance of its mandate.
3.5.12 There was no evidence that the Principal Secretary of the National Treasury exercised
his duty as the Fund Administrator as provided by the Regulations establishing the Fund.
Instead, the Fund Board engaged Ernst and Young, PwC, Deloitte and KPMG on pro-bono
basis. A review of minutes of the Fund Board meeting held on 20 April 2020 established
that the professional firms were incorporated to develop the requisite governance audit
systems to ensure transparency in the Board operations. The professional firms were to
provide support to the Fund Board operations and activities on roles that ought to have
been the responsibility of the Administrator of the Fund. This significantly affected the
application of the Government’s Financial and Procurement Laws and Regulations in
management of public funds.
3.5.13 The following are the roles of the professional firms engaged by the Fund Board:
v) Ernst and Young (EY), is the Program Management Office, responsible for implementing
the approved program design from end-to-end and managing overall real-time program
reporting including donor specific reporting.
124
vi) PwC serves as the Fund Accountant with the responsibility of maintaining complete and
accurate books of accounts managed by an ERP system that is reviewed and approved
by the Board.
vii) KPMG provides assurance services by documenting key controls across the projects and
committees and continuously ensures that they meet the defined key performance
indicators and service level agreements and comply with approved procedures.
viii) Deloitte provides external audit services.
Absence of evidence of Revenue and Expenditure Estimates and Work Plan
3.5.14 Section 9 (2) (b) of the PFM (COVID-19 Emergency Response Fund) Regulations, 2020
requires the Fund Administrator to prepare estimates of the annual revenue and
expenditure of the Fund relating to its obligations and operational expenses and submit
it to the Board for adoption. Section 8(a) provides that upon adoption, the Board should
recommend Estimates of the Annual Revenue and Expenditure from the Fund to the
Cabinet Secretary of The National Treasury for approval.
3.5.15 No evidence was provided to the Auditor-General that revenues and expenditures to and
from the Fund Account were prepared and communicated to the Cabinet Secretary of
The National Treasury for inclusion in the 2019/2020 or 2020/2021 Budgets contrary to
section 9(2)(b) of the PFM (COVID-19 Emergency Response Fund) Regulations, 2020.
3.5.16 In addition, there was no evidence that the Fund Board had developed a work plan to
guide its operations and to ensure proper linkage between budgeting and planning for
efficient and effective utilization of resources. Consequently, the special audit could
not give assurance on the lawfulness and effectiveness of the Fund’s expenditures and
operations for the period under review. The Management explained that approved work
plans and budgets were not applicable since the Fund was set up to address urgent
procurement interventions based on dynamic conditions considering donations were
received either in cash or in kind.
Approvals for opening the Bank Account
3.5.17 Section 10 (1) of the PFM (COVID-19 Emergency Response Fund) Regulations, 2020
requires the Fund Administrator to open Bank Accounts with the approval of the Board
as may be approved by The National Treasury. The audit established that, the Fund
opened a Bank Account with Absa Bank Kenya PLC, the account name being Kenya
125
COVID-19 Fund, Account Number 2042554653 at Absa Towers Branch. Though the
decision to open the Bank Account was approved by the Fund Board, there was no
evidence of approval by the Cabinet Secretary to The National Treasury for opening the
Bank Account. The Fund also operated an MPESA pay-bill number 999000.
Amount of funds received by the Covid-19 Emergency Response Fund Board
3.5.18 An analysis of the bank statements provided reflects total cash inflows of
Kshs.1,355,468,968 as at 31 December, 2020 which included contributions from private
entities and individuals of Kshs.1,016,981,315 and contributions from Government
Entities of Kshs. 338,487,653 as follows:
Source Amount (Kshs)
1 Private Entities and Individuals 1,016,981,315
2 Government Entities 338,487,653
Total 1,355,468,968
3.5.19 As at 31 December, 2020, the Kenya Covid 19 Fund Account held at Absa Bank had a
balance of Ksh.855,468,918.
Donations in Kind- Kshs.409,602,009
3.5.20 The Kenya Covid-19 Emergency Response Fund Board had received donations in kind
amounting to Kshs. 409,602,009 as at 31 December, 2020 as detailed below:
Category Value (Kshs)
1 Health - Medical Supplies (PPE, Oxygen 286,702,300
and Sanitizers)
2 Livelihood - Food items 113,375,328
3 Livelihood – Household items 9,524,381
Total 409,602,009
3.5.21 The Kenya Covid-19 Emergency Response Fund Board provided a schedule indicating the
donors, dates of distribution, items, quantities, and the costed value with an
126
explanation that the donors did direct delivery to the beneficiaries. As a result, the
audit was not able to verify the donations in kind amounting to Ksh.409,602,009.
PPEs distribution by the Kenya COVID-19 Fund and Equity Group Foundation
Procurement of 1st Tranche PPEs – Kshs.259,373,300
3.5.22 In a Board meeting held on 19th May 2020, the Fund Board resolved (MIN 4/19/5/20) to
have the Equity Group Foundation as the contracting entity for purposes of the initial
purchases by the Board. This was an interim measure to allow the Secretariat to finalize
the incorporation of a legal entity.
3.5.23 The Equity Group Foundation procured and paid for the 1st Tranche of PPE at Kshs.
259,373,300. This amount has been recorded in the Fund’s Books as a donation in kind
from the Equity Group Foundation.
Procurement of 2nd Tranche PPEs – Kshs.150,486,050
3.5.24 The Covid 19 Fund Board procured for the 2nd Tranche of PPEs at Ksh.150,486,050 from
various suppliers. Out of this Ksh.100,000,050 had been paid for by 31 December, 2020
as detailed below;
Date Payee Details Amount (Kshs)
13/10/2020 Texplast Rfb/Inv Nos 68050 20,000,050
Industries 69258/56
Limited 68985
18/09/2020 Alpha Knits Rfb/Invs 14235/182/179 14,000,000
Limited
18/09/2020 Texplast Rfb/Supply of Reusable 14,000,000
Industries Cloth
Limited Face Masks
Cs 390542
30/09/2020 Alpha Knits Rfb/Invs 14343 14295 14,000,000
Limited 14273 2nd
Tranche Procurement
Award
30/09/2020 Texplast Rfb/Inv 68583 And 14,000,000
Industries 68838 2nd Tranche
Limited
127
Date Payee Details Amount (Kshs)
15/09/2020 Manchester Rfb/ Inv 5631 12,000,000
Outfitters Ltd
30/09/2020 Manchester Rfb/Inv 5724 2nd 12,000,000
Outfitters Ltd Tranche
Procurement Award
Total 100,000,050
Commitments
3.5.25 The fund had outstanding commitments of Ksh.50,486,000 as at 31 December ,2020
which were subsequently settled on 7 January, 2021.
Supplier Items 31 December, 2020
Kshs
Superior Products Africa Limited Goggles 3,400,000
Omega Apparels Limited Gowns 5,511,000
Texplast Industries Limited Surgical Masks 6,250,000
Scrubs 12,000,000
Coveralls 16,250,000
Bakpharm Limited Face shield 2,475,000
Nairobi Enterprises Limited Hair covers, Aprons, KN95 4,600,000
Total 50,486,000
3.5.26 The fund did not subject the procurement of the PPEs to the Public Procurement and
Asset Disposal Act,2015 and the attendant Regulations. The Fund had resolved through
(MIN 5/1/4/20) to adopt a private sector steered approach.
3.5.27 The Fund Board resolved (MIN 5/28/4/20) to use the TenderSure procurement system
that would be supported by QED Solutions Limited on pro-bono basis. The following
procurement process was applied;
3.5.28 The Fund relied on specifications provided by the Ministry of Health which were
vetted/validated by the Fund’s Technical Committee on Health. It was noted that
Request for Quotation was sent to 72 bidders comprising of local manufactures and
128
direct importers using TenderSure System on 29 July, 2020 and closed on 5 August, 2020.
Out of the 72 bidders, 41 bidders responded, they were automatically evaluated by the
system and 28 passed the Quality Assurance.
3.5.29 The 28 bidders were then subjected to Technical Evaluation which was conducted in
two parts; physical sample review and documentation due diligence and 24 suppliers
with samples were approved. The bidders who passed both sample review and the
quality assurance were considered for financial evaluation where suppliers were
selected on lowest price per item.
3.5.30 From the evaluation, the most competitive suppliers were selected and recommended
for award. The Fund Board approved the tender awards vide (MIN 2/27/5/20).
Procurement contract with Bedi Industries - Kshs. 48,165,000.
3.5.31 It was noted in a report dated 22 October, 2020 on supply and delivery of Personal
Protective Equipment for COVID-19 Emergency Medical Care Health Workers (Batch 2)
for Equity Group Foundation and COVID-19 Emergency Response Fund that, Bedi
Industries had been engaged on 20 July, 2020 to supply 100,000 coveralls at a price of
Kshs. 95,000,000. From the report, the first order for 50,700 coveralls of Kshs.
48,165,000 was placed immediately, with the balance of the 49,300 coveralls (Kshs.
46,835,000) to be ordered upon approval of the second PPE procurement cycle.
3.5.32 Although, the Contract and procurement documents for this engagement were not
availed for audit review, the audit team noted that the report indicated the Contract
was for 3 months and had lapsed on 20 October, 2020 before the second order was
placed. The report stated that the second order was not placed because there was
negative feedback from various institutions on the quality of the coveralls supplied and
the second order was subject to approval of the procurement of second batch of PPE.
3.5.33 From the information above, the audit team could not ascertain whether the Equity
Group Foundation or the Fund had appointed an Inspection and Acceptance Committee
responsible for inspecting the goods delivered to confirm conformity with the required
specification prior to receiving them.This control embedded in Section 48 of the Public
Procurement and Asset Disposal Act, 2015 is a safeguard to ensure Public Entities
procure goods that meet the technical specifications in the contract and achieve value
for money. The special audit could not also establish whether the contract was between
129
the Equity Group Foundation and Bedi Industries as donations in kind or direct
procurement from the Fund.In this regard, there is a risk that the Fund may not have
realized value for money in the procurement of the 50,700 coveralls at Kshs. 48,165,000.
3.5.34 There was no evidence that the procurements were paid for by the Fund Board and the
amounts had not been recorded in the Fund’s Financial Statements as contribution in
kind from the Equity Group Foundation.
Utilization of the Cash Transfer Program Funds – Kshs. 400,000,000
3.5.35 It was noted that there was a Cash Transfer Program of Kshs.400, 000,000 aimed at
benefitting 100,000 Kenyans weekly in urban informal settlements for a period of one
month. The mapping of the vulnerable categories of persons to benefit from the cash
transfer programme would be guided by considerations such as persons who were on
employment but rendered jobless due to COVID-19, persons within a family set up and
those who had not been beneficiaries of funds from any Government related
intervention. The Board approved the cash transfer programme on 2 June,2020 and Kshs.
400,000,000 was transferred to MPESA Holding Company Limited to be disbursed to the
identified beneficiaries.
Date Details Amount (Kshs)
22/06/2020 MPESA HOLDING CO. LIMITED 100,000,000
17/07/2020 MPESA HOLDING CO. LIMITED 100,000,000
03/08/2020 MPESA HOLDING CO. LIMITED 100,000,000
11/08/2020 MPESA HOLDING CO. LIMITED 100,000,000
Total
400,000,000
3.5.36 The disbursements were done in 4 phases. Detailed Mpesa blasting reports showing the
recipient’s phone number, names, receipt number, dates and amounts disbursed were
provided for audit from Safaricom through the Fund Accountants
(PricewaterhouseCoopers). Location of the recipients was, however, not indicated, and
as a result, the special audit could not therefore confirm if the beneficiaries were from
urban informal settlements. The audit revealed that a total of 97,515 persons benefited
from the cash transfer program. Out of these, 95,727 were registered Mpesa users while
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1,788 were not registered. The highest amount disbursed to a beneficiary was Kshs
24,000 while the least amount disbursed was Kshs 1,000.
3.5.37 Analysis of the data provided revealed that, there were 38 payments done to the same
Mpesa telephone number but with different names amounting to Kshs 72,000. Similarly,
there were 7,850 beneficiaries who shared names but had different Mpesa telephone
lines who were paid a total of Kshs.32,626,000. The identity card (ID) numbers of the
recipients were not provided for audit and analysis. In absence of the identity card
numbers and in view of the time constraint, the special audit was not able to
independently verify that the recipients of the cash transfers were the bona fide
beneficiaries or that the cash was received. Consequently, the lawfulness and
effectiveness of utilization of the Kshs.400,000,000 could not be confirmed.
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