Mochache, CEO linked to Kemsa Sh8.3b scandal

Thursday, October 1st, 2020 00:00 |
Health PS Susan Mochache when she appeared before a Parliamentary Committee on Health. Photo/PD/FILE

Health Principal Secretary Susan Mochache and Kenya Medical Supplies Authority (Kemsa) chief executive Jonah Manjari should be held responsible for the loss of Sh8.3 billion in the Covid-19 procurement scandal, a report by the Auditor General recommends.

Auditor General Nancy Gathungu, in a report tabled in the Senate yesterday, details how the agency violated procurement laws, awarding huge tenders to briefcase companies and overspending against budgetary allocations.

“The Special Audit, therefore, established that a total of Sh8,388,872,706 Covid-19 related items were irregularly procured using retrospective direct procurement since the guidelines were not adhered to,” states Gathungu.

Of this, Sh7.6 billion was drawn from the Universal Healthcare kitty while Sh758 million was from the World Bank, according to the auditor.

The audit established that out of the total of Sh8.3 billion, Sh5 billion has already been paid out “resulting to pending bills amounting to Sh3.3 billion”.

The audit recommends that further investigations be conducted by the Directorate of Criminal Investigations (DCI) and the Ethics and Anti-Corruption Commission to establish criminality on procurement process for Covid-19 related items and possible collusion between the management and companies that supplied the equipment.

Already, the Kemsa board has suspended Manjari, Procurement Director Charles Juma and Director for Commercial Services Eliud Mureithi, to pave way for investigations.

The two have recorded statements with the EACC which have since been forwarded to the Director of Public Prosecutions for directions.

The Auditor-General has advised the Kemsa management to withhold any further processing of Covid-19 related claims until an independent audit is conducted.

“This should include reconciliation of the procurements made under Capital and Universal Health Coverage (UHC) budgets to establish eligibility of the claims,” reads the report.

The Kemsa board should consider overhauling its business model to ensure a robust supply chain management system that is efficient, effective, economical and transparent. 

Appropriate action should be taken against those found culpable, or responsible for actions as indicated in the Special Audit report.

The report was compiled following a request by the Senate Ad Hoc Committee on Covid-19, the Senate Health Committee and the Public Investment Committee of the National Assembly.

Approved Procurement

According to the report, Health PS Mochache approved procurement of goods by Kemsa worth Sh758,690,583.

Mochache is said to have informed Dr Manjari that the World Bank-funded Transforming Health Systems project through the Contingency Emergency Response Component would support Covid-19 response activities through procurement of critical goods and services.

She also informed Manjari that various items had been identified and approved by the World Bank for procurement by Kemsa.

“The PS personally wrote to the Chief Executive Officer of Kemsa requesting for urgent procurement of Covid-19 related items based on recommendations by the National Covid-19 Task Force projections.

The items included 25,000 Personal Protective Equipment, (PPEs), 10,000 pieces of N95 masks 6,000 laboratory Sample Transport Collection Consumable Kits and 60,000 laboratory test kits.

Upon follow-up by Ms Mochache, Mureithi (Kemsa commercial director) wrote an e-mail on April 1, 2020, submitting a status report indicating that the agency had ordered Covid-19 related items worth Sh2.2 billion out of which Sh149 million equipment had been delivered.

“The status report by Kemsa to the Ministry of Health had names of suppliers, prices of the items and quantity to be delivered.

It was noted that the quantity reported by Kemsa as having been ordered to the ministry was more than what Mochache had requested,” explains Gathungu.

Subsequently, Mureithi wrote an email to Mochache, submitting a rationalised list of the items to be procured.  

However, it emerged that the items were heavily overpriced by suppliers but the medical supplies agency went ahead and procured the same.

For instance, Gladlab Supplies Limited, in its letter of intent to supply, indicated it would sell surgical face mask ear loop at Sh95 per piece as at April 8.

“The face masks were received at Kemsa on April 9. This, therefore, means a pack of 50 pieces would cost Sh4,750,” states Gathungu.

But on the same day, a letter was received by Kemsa from the supplier stating that they would supply the surgical face mask ear loop at $30 per box of 50 pieces, therefore, the price per box of 50 pieces would translate to Sh3,183.

However, in a surprise move and despite the firm overpricing its deliveries, Gladlab Supplies was invited to tender for the supply of surgical mask and disposable three-ply ear-loop, negotiated from Sh4,750 to Sh4,500.

The report finds that the supplier was awarded to supply the masks at Sh4,500 which is higher than the agreed price of $30 or Sh3,183, a pricing difference of Sh1,317. 

It also emerged that Manjari gave authority for direct procurement of the items. 

“In view of the above significant inconsistencies, the price determination for the supply of 30,000 units of surgical mask disposable three-ply ear-loop is questionable,” says the auditor.

She observes that in this particular deal, Sh39.5 million may have been lost. But when she appeared before the parliamentary committee, Mochache denied any role in the procurement of Covid-19 emergency supplies.

The PS instead threw the ball back at the Kemsa management, saying the agency procured beyond its budget, bypassed the ministry and sought more than Sh5 billion directly from the National Treasury. 

Kemsa had requested to have Sh6.7 billion of the Universal Health Care (UHC) funds converted to pay for PPEs but Mochache had turned down the request.

The agency, according to the auditor, acted in total violation to the Public Procurement and Disposal Act. It also failed to conduct a market survey for items being procured. It also did not test samples in its Quality and Assurance department before issuing commitment letters.

Kemsa is also accused of engaging in businesses for which suppliers were not incorporated and in other instances suppliers being financially incapable of executing contracts.

The reports notes that, for instance, some of the companies that were awarded multimillion shilling tenders had only been in existence for a few months.

This indicated possible collusion between the companies and Kemsa’s top brass who have been fingered in the ongoing investigation.

Companies that had been in existence for less than a year were awarded contracts without having the necessary qualifications to supply medical equipment.

It also emerged that during the period under review, Kemsa irregularly utilised UHC and Capital Budget to procure Covid-19 related items worth Sh7.6 billion without approval by relevant authorities.

The procurement process, the report details, was not initiated based on needs assessment and planning, resulting in over-procurement of Covid-19 related stock worth Sh6.3 billion that is lying at Kemsa warehouses.

More on News