Audit: Kemsa to lose Sh2.3b in sale of Covid-19 supplies

Taxpayers are set to lose Sh2.3 billion worth of Covid-19 supplies that will now be sold at lower prices than they were bought.

A special audit of the Covid-19 funds done by the Office of the Auditor General (OAG) shows there was irregular use of retrospective direct procurement method, commencing the procurement process without approved budgets and failure to integrate procurement plan to the budget process.

In addition, Auditor General Nancy Gathungu said the Kenya Medical Supplies Agency (Kemsa) failed to conduct a market survey for items being procured, engaged non-prequalified suppliers with inadequate experience in the market, and conducted inefficient stock management procedures thus exposing public funds to value for money risks and red flags indicating possible procurement frauds.

The special audit also shows the procurement was not conducted for Kemsa’s best interest, but could have been influenced by suppliers.

“There is need for further investigations on all companies engaged by Kemsa to establish acts of procurement fraud. The items were procured at a higher price as compared to the current market pricing implying that Kemsa may realise a loss of Sh2,338,261,175 if the products are to be sold at the current market price,” reads the report.

The audit notes that Shop ‘N’ Buy Limited, Kilig Limited and Nanopay Limited had been in existence for less than one year before being awarded the contracts worth Sh900 million, Sh9 million and Sh349 million, respectively, to supply K95 masks and personal protective equipment.

“The special audit established that there was no evidence that the initiation of procurement process for Covid-19 related items under Kemsa capital budget was triggered by a needs assessment to establish the demand for these products,” reads the report.

According to Gathungu, Kemsa initiated procurement without planning and budgeting and used direct procurement in the guise of urgency, yet the products are still lying at the agency’s warehouse for as long as six months.

The report comes barely two months after the Senate Standing Committee on Health and the Senate Ad Hoc Committee on Covid-19 requested the OAG to conduct a forensic audit on the procurement undertaken by Kemsa.

The report shows that Kemsa’s management violated the Public Procurement and Asset Disposal Act in all material aspects. The budgetary management process for capital budgets did not comply with the Public Finance Management Act and, given that 97 per cent of supplies procured are still lying unused, there was no value for money.

“Kemsa irregularly utilised Universal Health Coverage and Capital Budget to procure Covid-19 related items worth Sh7,632,068,588 without evidence of approval of the budgets by relevant authorities,” says Gathungu in the report.

She has recommended further investigations be conducted by the Directorate of Criminal Investigations and the Ethics and Anti-Corruptions Commission to establish criminality on the procurement process.