The Geneva-based donor has already written to the National Treasury and MoH, demanding the money be returned before the end of May this year.
The Fund said the money was lost at the National Aids and STIs Control Programme (Nascop), the MoH unit that implements and coordinates HIV and Aids programmes in Kenya.
Global Fund’s Office of Inspector General (OIG) discovered the loss through a special audit it conducted last year, following a tip-off by audit firm PWC, which GF contracts to monitor how its money is spent in Kenya.
The audit shows the money was stolen through inflated payments to hotels where Nascop held its activities, and through payments for non-existent printing services.
“Staff at Nascop engaged in fraudulent and collusive practices during the hotel selection process for programme activities. In a separate instance, staff at Nascop manipulated payment records to fraudulently pay third parties that did not deliver any goods or services,” Global Fund’s inspector general said in an audit report seen by the Star.
Global Fund is the second-biggest donor toward HIV services in Kenya after the US Pepfar.
But the fund said it now considers its HIV grant to Kenya as high-risk because of the high possibility of theft.
The fund says it lost more than Sh30 million (US$234,503) through payments to hotels and wants this money returned in full.
A total of Sh7.6 million ($59,112) was stolen through non-existent printing services but the Ministry of Health has already refunded Sh5.4 million ($42,164), leaving a balance of Sh2.2 million ($16,948).
The money was lost between January 2018 and June 2021, when Nascop managed a Sh3.2 billion grant.
Nascop said it had sacked a procurement officer and an accountant implicated in the malpractice.
Approximately 60 per cent of the Global Fund grant goes towards procuring ARVs and health products, mostly from abroad.
The rest is spent locally, presenting an opportunity for corruption. Nascop said it paid Sh179.2 million to 238 local hotels where it hosted meetings from 2018-2021; and another Sh179 million to vendors for printing services over the same period.
GF sampled 14 of these hotels and found the widespread malpractice.
Nascop selected overpriced hotels for meetings without any competitive bidding, as required by law. A procurement officer from Nascop would afterwards solicit quotations from different hotels or edit existing quotations and file them to pretend there was bidding.
“The OIG found seven instances where the losing hotel bidders confirmed that the quotations Nascop provided that were purportedly related to the respective losing hotel bidders had been falsified and did not originate from them,” the GF audit report says.
“Furthermore, the losing hotel bidders stated that their hotel prices were lower than those of the winning bidders'.”
When grilled last year, the procurement officer claimed that at times the programme activities deadlines were tight and there was not enough time to carry out an entire procurement process.
He admitted to fabricating documentation after the hotels had already been selected, the 16-page audit says.
"But then claimed that he did not receive monetary or non-monetary benefits from the 'winning bidders' and that he acted on his own without any outside direction," the audit says.
The report also mentions that an unnamed former director of Medical Services and Preventive and Promotive Services owns a hotel that received an irregular payment of Sh350,080 (US$2,735).
The amount was later refunded to Global Fund. The accountant who processed the payment was sacked.
The Ministry of Health has already been confronted with the audit and admitted wrongdoing.
“The Ministry considered the facts presented and concurs with the findings that the former procurement officer and former accountant engaged in malpractices and would take disciplinary actions against them,” it said in a letter to Global Fund last year.
“The Ministry recognised the systemic and structural shortcomings and will improve its internal controls,” the letter added.
GF says Nascop is still vulnerable because it prepares its books of accounts and cash book in Excel without using accounting software.
The fund also said the programme has failed to ensure that its bank provides detailed and transparent bank statements.
It said the statements did not include final beneficiary names and often listed payments through a single bank cheque wherein several payments were grouped together and presented to the bank.
"Moreover, any changes made after the approval of the payment voucher and before its presentation to the bank could not be validated directly through bank statements. Therefore, electronic funds transfer manipulation was able to go easily undetected," Global Fund said.
The Fund said the probe was made because corruption threatens its mission to end the Aids, tuberculosis and malaria epidemics.
“It [the practice]diverts funds, medicines and other resources away from countries and communities in need,” GF said.
(Edited by V. Graham)
