What you need to know:
- Fraudsters working with wayward officials have managed to siphon billions of shillings from state coffers using dubious supplies contracts.
- In the NYS scandal, Sh1.8 billion is feared to have been stolen through fraudulent payments.
- In the famous Health ministry scandal, another Sh5 billion has not been accounted for.
Senior officials of an agency under the ministry of Health tried to steal Sh30 million by manipulating the Integrated Financial Management System (Ifmis) in a case that lifts the lid on an elaborate theft syndicate that involves corrupt government officials and crooked suppliers.
The attempted theft in May this year was detected and stopped at the last minute as accountants at Afya House prepared payment for alleged supplies by six companies.
The case could go a long way in explaining how fraudsters working with wayward officials have managed to siphon billions of shillings from state coffers using dubious supplies contracts.
The latest cases include the much publicised NYS scandal where as much as Sh1.8 billion is feared to have been stolen through fraudulent payments and the famous Health ministry scandal where another Sh5 billion has not been accounted for.
Curiously, however, there’s no evidence that Health minister Cleopa Mailu and the PS, Dr Nicholas Muraguri, have acted on the glaring case of attempted fraud even after one of the officials involved made a confession in writing.
Procedurally, the ministry ought to have notified the various investigative agencies such as the Ethics and Anti-Corruption Commission (EACC) and the Directorate of Criminal Investigations (DCI) to conduct further investigations and possibly recommend prosecution of the culprits to the Director of Public Prosecutions (DPP).
Our efforts to obtain comments from both Dr Mailu and Dr Muraguri did not bear fruit as they failed to pick up our calls or respond to short text messages we sent to their respective phone numbers.
The man who blew the whistle on this attempted fraud, Dr Hezekiah Chepkwony, also failed to return our calls since Friday when the Nation called his office to seek his comment on the scandal.
According to correspondence seen by the Nation, middle level staff at the finance and procurement departments at the National Quality Control Laboratory (NQCL) forged signatures of the institution’s Director and holder of the Authority to Incur Expenditure (AIE), Dr Chepkwony, in the elaborate scheme to execute the scandal.
PREPARED FAKE PAYMENT
The correspondence details how the conspirators in this botched theft manipulated the IFMIS system to create the impression that the six firms had supplied chemicals to the agency and were due for payment of the millions of taxpayers’ money. Initially, the fraudsters had targeted a total of Sh30 million but had prepared fake payment vouchers amounting to Sh18 million before the scandal was detected.
The fake vouchers were processed through the system with purported approvals from Dr Chepkwony whose signature they had already forged.
The theft was only detected at the final stages of payment when the agency’s Chief Finance Officer contacted Dr Chepkwony to confirm whether he had authorised the payments.
It is then that Dr Chepkwony commissioned an investigation into the matter while also notifying Dr Mailu and Dr Muraguri of the attempted fraud.
“This is to draw your attention to an interception on 19th May 2016 of forged payment vouchers amounting to Ksh18,249,000 (eighteen million, two hundred and forty-nine thousand) for purported supply of chemicals and reagents to the Laboratory, which had undergone several payment processes up to the office of the Chief Finance Officer. The matter came to our attention when the Chief Finance Officer sought confirmation on the subject documentation,” states Dr Chepkwony in a letter to Dr Muraguri dated May 20, blowing the whistle over the attempted theft.
“I immediately confirmed vide attached copy of letter that no such documentation for procurement and or supply of chemicals and reagents had originated from the NQCL and that as such, payment should not be made. The said documentation had forged signatures of the NQCL’s AIE holder,” he goes on.
Upon investigations, a procurement officer at the agency confessed in writing that she forged Dr Chepkwony’s signature in order to facilitate the attempted theft.
In the handwritten confession, the staff, whose name we cannot reveal for legal reasons, explains in detail the ABCDs of forging signatures, preparing fake documents and feeding them into the system to facilitate payments without supplying any goods or services.
“They informed me that there was a vote in the Ministry of Health with Sh30m that needed to be spent. They requested me to prepare documentation as if they originated from director NQCL. I prepared them and gave them to Mugo, a source for a person to forge Dr Chepkwony’s signature for the process to continue,” she explains.
“I did documentation for the following companies, Springline Agencies Ltd, Silken Ltd, Wondergate Supplies Ltd, Kuste Traders, Skyline Global Services Ltd, Elite Business Solutions, Sardine Merchants and Online Technologies,” she adds.
“The documentation underwent the normal IFMIS process until approval by CFO. It is at this stage that I was following then I realised the documentation had been intercepted by your office and you asked me to explain,” she states.
The latest revelations are bound to further raise questions about loopholes in a system repeatedly touted by the national government as the panacea to procurement fraud in both the national and county governments.
The Controller of Budget (CoB) has also been very critical of the failure by several county governments to fully adopt the system in the implementation of their respective budgets in order to seal avenues of corruption and waste.
The IFMIS has been at the centre of corruption claims with millions of public funds being looted at both the national government and county governments, most famously the NYS scandal.
The head of internal audit at the Health Ministry Bernard Muchere is on record admitting that there were financial discrepancies in the ministry’s financial records relating to the Sh5 billion scandal despite some of the financial transactions having passed through the system.
Mr Muchere, who conducted the audit that is at the focus of investigations into the scandal, admitted that the IFMIS, just like any other technology, is prone to errors.
“For computers, it is a case of garbage in, garbage out. Feed it with anything and it will produce. IFMIS balances are unrealistic in some of the transactions,” he said when he submitted the final audit report on the contentious areas, to the Senate.
Governors have also complained that the system was not helping instill discipline in the use of public funds. Council of Governors chairman Peter Munya is on record as stating that IFMIS was a rushed decision and there is a need to review the system to ensure it is not used to siphon public funds when it was expected to help tackle graft. “County governments seem to be a frustrated lot with the inefficiency of this system yet we are being blamed for failure to account for funds,” he said.
Kilifi County is investigating the loss of Sh 51 million in what is considered to be due to collusion amongst banks in Nairobi, Ifmis and county officers. Other counties like Siaya, Kitui and Kakamega have also raised concerns that they system was prone to manipulation.
But, the Treasury Cabinet Secretary Henry Rotich has defended claims that the introduction of IFMIS has not been successful in tackling corruption as anticipated.
He says the government financial system currently being used to improve the country’s financial management is working well and is set for routine reviews to see how it can be enhanced.
“The reality is that there is nothing wrong with IFMIS. It has helped track all you are seeing like the National Youth Service (NYS),” Mr Rotich recently told the Senate Finance committee.
He said the government has tendered seeking a reputable organization to review the whole system that was acquired in 2012.
“We are in the process of getting an international expert to do quality review checks of the system, which is supposed to be done after 3-4 years,” Mr Rotich said.
Additional reporting by Dennis Odunga