MPs have questioned the legality of a company that was controversially registered to manage billions of shillings that were set aside to fight Covid-19 about two years ago.
The Kenya Covid-19 Emergency Fund Limited, which was registered under the Companies Act on June 12, 2020, is under the spotlight as legislators seek to examine how it was established at the height of the pandemic.
It was registered by the Covid-19 Emergency Response Fund (ERF) board chaired by Ms Jane Karuku.
The irregular registration has been flagged by Auditor-General Nancy Gathungu in a special report into utilisation of Covid-19 funds before the National Assembly. It covers between March 13 and July 31, 2020.
The Public Accounts Committee chaired by Ugunja MP Opiyo Wandayi has summoned Attorney-General Kihara Kariuki and Ms Karuku to explain the circumstances under which the company was cleared.
National Treasury Principal Secretary Julius Muia told MPs yesterday that only the State Law Office could explain the legality of the firm. It’s also not clear how much the fund collected and how it was spent.
President Kenyatta established ERF on March 30, 2020 under the Public Finance Management (Covid-19 Emergency Response Fund) Regulations to manage cash meant to assist vulnerable populations.
The ERF board is a blend of individuals from both the public and private sectors.
Its membership includes Interior Cabinet Secretary Dr Fred Matiang’i, former Council of Governors head Wycliffe Oparanya of Kakamega, Safaricom chairman Michael Joseph, Equity Bank chief executive James Mwangi, KCB’s Joshua Oigara, Barclays’ Jeremy Awori and Devki Group of Companies boss Narenda Raval.
Others are Wachira Waruru, Mohammed Hersi and Phylis Wakiaga. Under the PFM Act, Dr Muia was to be the funds administrator. However, Principal Secretary in the Office of the President, Mr Kennedy Kihara, was appointed the secretary to the board. Dr Muia never attended any of the fund’s meetings.
“It was not clear why an entity established with clear governance, management structures, systems and procedures outlined in the PFM Act and the attendant Regulations was again registered as a company, indicating it was a private company receiving donations from well-wishers,” the audit states.
Custodian of public funds
Dr Muia was at pains to explain how he allowed such a registration to happen under his watch as the custodian of public funds.
“Is it a fund under the PFM Act or another mongrel? There can never be two ways to it. We are still at a loss as to what this animal really was,” said Mr Wandayi.
Gatanga MP Joseph Nduati blamed the confusion on the National Treasury. “Being the custodian of public funds, you cannot run away from this matter. The Auditor-General is even on record accusing you of failing to play your role,” he said.
Dr Muia said the legal notice of March 2020 created the fund even as he admitted that he was privy to the registration process but still did nothing.
He only wrote to the fund secretary on February 8, 2021, almost a year after the company’s registration, instructing them to submit to the Auditor-General for auditing.
“Our letter was not an afterthought but to have them account for public funds. The AG can explain about the company’s legality,” he added.
His explanation was, however, rebuffed by the committee members and the Parliamentary Budget Office (PBO) on account that the creation of the private limited company meant the existence of two funds.
“The legal fund created under the PFM Act was abandoned in favour of a private entity, whose creation is irregular,” PBO stated in its presentation to the committee.
“When the President set up the board, he relied on the technocrats in government, including you, to do the job legally. But you chose to sit back and watch irregularities committed,” said Mr Wandayi.
The special audit notes that it sought advisories from Mr Kihara and the National Treasury on the status of the Covid-19 Emergency Response Fund, who provided conflicting conclusions.
The National Treasury advisory of February 8, 2021 maintained that the fund was required to facilitate the Auditor-General to audit its expenditures.
However, Solicitor General Ken Ogeto said on April 30, 2021 that money raised by the fund was not under statutory authority since the antecedent requirements for the establishment of such an authority were not carried out.
Consequently, the money under the fund would not fit within the definition of public funds, he said.