Auditor says Sh1.9bn lost in NYS scam


Ms Josephine Kabura arriving at the Ethics and Anti-Corruption Commission’s offices at Integrity Centre in Nairobi. PHOTO | FILE

Kenyan taxpayers lost Sh1.9 billion in the National Youth Service (NYS) scandal, Auditor-General Edward Ouko says in a new report that identifies businesswoman Josephine Kabura as the principal beneficiary of the theft.

The report says Ms Kabura received Sh1.3 billion on account of 11 companies that did business with the NYS and was to receive part of the fraudulent payment of Sh675.4 million that flopped.

“The special audit noted fraudulent practices that led to the losses of Sh1,863,512,256 in various circumstances as is in Case 1 (Sh791,385,000), Case 2 (Sh609,252,760), Case 3 (Sh240,751,576) and Case 4 (Sh222,122,919),” the report says.

The special audit, which the National Assembly’s Public Accounts Committee ordered in the wake of the massive scandal, revealed that the infamous Sh791.3 million was fraudulently paid to Form Homes Builders, Reinforced Concrete Technologies , Roof and All Trading.

All three acted as suppliers of the agency. Out of the total, Sh218 million was irregularly paid to Form Homes Builders five months before it was even registered as a company.

The other two companies started receiving their payments two months after registration, Mr Ouko says in the report.

The audit report says the payments highlighted cases of fundamental disregard to internal controls at NYS and failure to conduct proper due diligence on suppliers before they were awarded contracts.

The audit says that Ms Kabura’s were actually shell companies that exist as mere business names at the Registrar of Companies and not as active entities in the market place.

“The Registrar of Companies confirmed that these suppliers are just recognised as business names and not companies or entities,” the report says, adding that Ms Kabura was the proprietor of all the three.

“Ms Josephine Kabura Irungu received the entire Sh791.385 million on account of the three business names through their corporate bank accounts held at Family Bank, KTDA Plaza,” Mr Ouko says.

READ: Kabura affidavit offers defence to NYS scam suspects

The report, which is silent on former Devolution and Planning secretary Anne Waiguru and sacked principal secretary Peter Mangiti’s role in the NYS saga, has recommended criminal investigations to be conducted against all officers involved in any fraudulent payments and/or irregularities and action taken against them in accordance with the law.

Ms Waiguru resigned in November last year amid public pressure while Mr Mangiti was suspended and later sacked in a Cabinet mini-reshuffle.

The auditor also wants all companies, suppliers and businesses named in the report as having received irregular payments barred from trading with the government and prosecuted for their role in the scam.

Mr Ouko told MPs that the special audit also exposed the fact that the NYS associates’ wage bill of Sh3 billion was at the risk of misappropriation due to inadequate controls.

“These could have led to the funding of NYS operations using funds meant to be held in trust at Saccos and at the NYS Huduma Funds amounting to Sh551,750,000, that was subsequently reimbursed in January 2016,” the report says.

The control weaknesses also led to payments of Sh70 million in appropriations in aid (A.I.A) to the NYS Gilgil Field Unit that has not been satisfactorily accounted for, the report says.

The audit further blames structural and operational changes that took place at the NYS even as it was being repositioned as the flagship agency for youth empowerment.

The changes in the reporting structures/assignments of roles and responsibilities affected critical components of control increasing the agency’s exposure to fraudulent activity.

“These changes took place when the NYS was instituted as a flagship initiative for youth empowerment in the financial year 2014/15 and budgetary allocation to implement this agenda increased significantly,” Mr Ouko said, giving the example of the revocation of NYS Director- General Nelson Githinji’s role as the AIA holder and his replacement with Mr Adan G Harakhe.

Subsequently, instructions were issued to the director IFMIS at the National Treasury to define Mr Aden G Harakhe as the A.I.A holder for the NYS. Interestingly, it was during this time time that Sh460.9 million of the stolen Sh791.4 million was fraudulently paid out.