Muraguri letter to Rotich that sought removal of auditor


Health principal secretary Nicholas Muraguri (left) and Treasury Secretary Henry Rotich. PHOTO | FILE

Health principal secretary Nicholas Muraguri attempted to remove the ministry’s internal auditor “for constantly producing qualified audit reports on the ministry’s spending”, documents show.

Dr Muraguri, in a July 12 letter seen by the Business Daily, asked the Treasury secretary, Henry Rotich, to transfer the internal auditor because his reports were reportedly causing trouble with donors over the huge funds that the ministry handles every year.

“During the past few financial years, the ministry has been getting qualified audit reports due to ineligible expenditures which could have been avoided if strong internal controls were in place,” the PS said.

Dr Muraguri, after complaining to Mr Rotich over the qualified audit reports, went ahead to suggest that the current holder of the office, Bernard Muchere, lacked the skills and experience for the job.

“The purpose of this letter therefore, is to request for posting of internal auditors in senior positions who are conversant with audit of donor projects and other funds,” the PS said. 

Mr Rotich, whose ministry is in charge of financial accountability in all government ministries, agencies and departments surprisingly agreed to the request and asked the Internal Auditor General (AIG) to move Mr Muchere, effectively allowing Dr Muraguri to choose who should audit the department’s affairs.

Dr Muraguri wrote to Mr Rotich barely a month after Health secretary Cleopa Mailu commissioned the ministry’s internal auditor to investigate management of funds at Afya House, resulting in the damning internal audit report.

Dr Mailu was not copied in the official communication to the Treasury.

READ: Business as usual at Afya House as MPs demand action on scam

Sources at Afya House indicate that the internal auditor has been under intense pressure over the leaked report and the public outcry its publication has caused in the past week.

Government internal audit records show that Mr Muchere is an experienced professional, who has led a number of high-profile audits, including the Ronald Ngala Utalii College scam and the Sh791 million NYS theft.

Mr Muchere was also part of the team of auditors who worked on the Sh1.5 billion Tokyo Embassy scam. The audit report said that the country did not get value for money in the transaction.

The Treasury posted Mr Muchere to the Health Ministry early June this year — one month before Dr Muraguri wrote to Mr Rotich seeking his transfer.

Dr Mailu is said to have scuttled the plan arguing that he had just commissioned Mr Muchere to conduct an internal audit.

Dr Mailu, Dr Muraguri and Mr Rotich had not responded to our queries on this matter by the time of going to press.
Officials in various ministries where Mr Muchere has worked, including Afya House, said his refusal to cooperate with looters of public funds had earned him many powerful enemies in government.

Mr Muchere, who is also the founder and president of the Association of Certified Fraud Examiners, is known in government circles as a no-nonsense fraud buster.

Despite his initial defence of the auditor and promise that he would get to the bottom of the massive fraud, Dr Mailu has lately defended Afya House and instead embarked on a campaign to discredit the audit report.

The minister on Sunday produced an account that effectively defends companies named in the audit report as beneficiaries of the diverted free maternity funds, including Estama Investments.

The report says that Estama was illegally paid Sh800 million from diverted free maternity money to supply 100 portable clinics to urban slums at a cost of Sh10 million each.

At the time of audit, Estama did not have a tax compliance certificate and PIN certificate.

Dr Mailu on Sunday said the company had supplied all the clinics as required in the contract and has since been paid up to Sh800 million.

Payments to Estama were, however, contrary to the Public Finance Management (PFM) Act 2015, which requires that goods are delivered before purchase orders and payment vouchers are raised.

Records show that a senior chief finance officer at the ministry signed the payment voucher on January 22, 2016, over four months before the May 30, 2016 receipt of the delivery note and June 2 signing of the invoice.

“How do you originate payment before invoice and delivery of goods is made?” asked the internal auditor.

Dr Mailu said that the diverted free maternity fund was actually Sh586 million and not Sh889 million as reported in the audit report.

He did not respond to queries on why audit documents, including Estama’s tax records, were not presented to the auditor during the audit and did not act on requests for copies of the same.

The unnamed vendor, who was paid another Sh265.7 million through Co-operative Bank, was revealed as Lifecare Medics, a company associated with Paul Wanderi Ndung’u, a director of a sports betting firm.

The report says the money was paid to Co-op Bank without disclosure of payee but Dr Mailu said on Sunday that the payment was for a letter of credit that the ministry opened for the company that imported special food supplements for persons living with HIV.

The PFM Act, however, does not recognise letters of credit as an acceptable mode of payment for local companies.
Letters of credit (LC) can only be used to pay international companies supplying the country and do not have a local bank account.

Co-op Bank’s head of marketing and communication, Ngumo Kahiga, said that the LC payment was established on a customer’s bank account in the ordinary course of banking business and the commodities delivered to Kenya Medical Supplies Authority (Kemsa).

Kemsa acknowledged that they received food and rations for warehousing and distribution that was paid through the Global Fund and not the Health Ministry, as indicated in the audit report.

This contradicting information raises a red flag on a possible fraud scheme that has been ongoing at Afya House for a while now.

“The payments were allegedly made in the ministry headquarters; however, the foods were received and stored in Kemsa warehouses. This posed a challenge in accountability of the two procurements and raises a red flag on possible double payments of the same supply,” says the audit report.