Kemsa rejected discounts, says audit

The management of the Kenya Medical Supplies Authority (Kemsa) rejected discounts by suppliers of Covid-19-related items, a special audit has revealed, raising the red flag on the controversial tendering which may cost taxpayers up to Sh2.3 billion. 

A forensic audit by the Office of the Auditor-General found that Kemsa officials chose to pay Sh4,500 for a pack of 50 face masks, way above the Sh3,183 quoted by suppliers — a variation equivalent to 41.37 per cent.

A report tabled in Parliament said Ms Gladlab Supplies Limited had on April 9, 2020 offered to supply Kemsa with surgical face masks with ear-loops at a discounted price of $30 (Sh3,183) per box of 50 pieces, down from an earlier quote of Sh4,750.

Auditor-General Nancy Gathungu said Kemsa Chief Executive Officer Jonah Manjari, however, ignored the discount offer and instead requested the company to supply the items for Sh4,500 a pack as had allegedly been agreed during negotiations between the supplier and the agency’s tender evaluation committee.

“In view of the above significant inconsistencies, the price determination for the supply of 30,000 units of surgical face mask disposal 3-ply ear-loop is questionable. An analysis of the price on the letter of intent of April 9, 2020 and the award price reveals that public funds of up to Sh39.51 million were potentially lost,” Ms Gathungu said.

Sh2.33 billion loss

The audit findings imply that Kemsa may realise a loss of Sh2.33 billion if the products are to be sold at the current market price.

The Auditor-General said that besides the inflated prices, Kemsa failed to conduct a comprehensive needs assessment of the Covid-19 purchases, leaving it stuck with stocks worth about Sh6.34 billion in its warehouses. 

Ms Gathungu said 97 per cent of the Covid-19-related stocks have been lying in the Kemsa warehouses for more than three months, implying inadequate market forecasting and planning by the managers of the State agency.

She recommended that the Directorate of Criminal Investigations (DCI) and the Ethics and Anti-Corruptions Commission (EACC) investigate Kemsa officials for any collusion with the supply companies and action taken against those found culpable.

“By irregularly procuring items valued at Sh7,632,068,588 under Universal Health Care (UHC) and capital budgets without requisite approvals, the accounting officer and the management of Kemsa violated Section 68 (1) of the Public Financial Management Act,” Ms Gathungu said.

Freeze all payments

The Auditor-General also recommended a freeze on all payments for Covid-19-related supplies by Kemsa and that the agency’s board overhaul its procurement system.

Out of the Sh7.6 billion set aside to procure Covid-19-related items, data shows that Kemsa has since paid Sh4.7 billion to suppliers, leaving a balance of Sh2.9 billion.

Dr Manjari remains suspended alongside directors Eliud Muriithi (Commercial) and Charles Jume (Procurement) while investigations continue into the Covid-19 procurement saga.

Meanwhile, senators have rejected the report of the ad-hoc committee that investigated the Sh63 billion Managed Equipment Service (MES) scandal and called for a fresh probe in order to get value for money.

While rejecting the report in a debate that went late into the evening on Tuesday, senators said the committee failed to offer solutions regarding the medical equipment leasing scandal.

Now senators want the information collated by the Fatuma Dulo-led committee to be subjected to a further probe by either the Health committee or a Committee of the Whole House.

Under the controversial MES deal, the national government contracted five firms to supply specialised equipment under a leasing deal in 2015.

Additional reporting by Samwel Owino and Angela Oketch