Ministry of Health officials connived to siphon off public funds through the Sh63 billion Managed Equipment Services programme, according to a special audit report.
The report exposes how the officials manipulated procurement laws, varied contracts and bulldozed county governments to accept the equipment.
It says the officers violated Public Procurement and Asset Disposal Act and Regulations and exposed the programme to "risks of failure to realise value for money" and cast doubt on the sustainability of the project.
The damning report submitted to a Senate ad-hoc committee investigating the contentious programme shows the ministry abandoned the Public-Private Partnership and adopted public procurement, exploiting a clause that allows restricted tendering.
In some counties, the equipment is idle because of the lack of technical personnel to operate the machines, while in others, there is no room for the equipment.
“Most county governments indicated that they were not informed and therefore did not plan and budget for the operational costs such as consumables,” reads the report.
The audit was done in 2015-16 following an order by the National Assembly Public Accounts Committee.
The project entails leasing of assorted medical equipment – renal, laboratory, ICU, radiology and theatre – to at least two hospitals in each of the 47 counties for a seven-year period. It also includes the installation and training of technical staff to use the equipment.
In the deal signed at State House in 2015 between the Ministry Health, Counties and six internal equipment manufacturers, a fixed sum of Sh95.7 million was supposed to be deducted annually for seven years at source from each of the 47 counties accounts to service the equipment.
The initial contract sum was Sh38 billion. However, the deal was varied along the way and deductions increased to over Sh200 million per county in unclear circumstances.
The equipment was supplied by M/S Shenchem Mindary Biochemical Electronic Company (supplied theatre equipment worth Sh4.5 billion), M/s Esteem Industries Inc (supplied theatre, central sterile stores department equipment worth Sh8.8 billion), M/s Sysmex Europe GMBH (supplied laboratory equipment worth Sh2.9 billion) and M/s Bellco Ltd (supplied renal equipment worth Sh2.3 billion).
M/s Philips Medical System supplied ICU equipment worth Sh3.6 billion while M/s General Electric East Africa Services supplied radiology equipment worth Sh23.8 billion.
The programme has been shrouded in mystery after governors protested that they were manipulated, blackmailed and coerced to sign the agreement under duress. They claimed that most of the equipment was idle due to lack of technical staff despite the Ministry deducting the money every year.
According to the report, Sh4.5 billion was paid annually for three financial years from 2015-16 to 2017-18, Sh9.8 billion in 2018-19 and 6.2 billion in the current financial year – all deducted from the counties.
“The MES concept paper indicated that the MES was supposed to be implemented through long-term lease assessment for medical equipment in accordance with the PPP Act 2013 on the Build-Lease and Transfer model,” according to the report.
Deputy director of audit Sammy Kimunguri, who also conducted the special audit, told the committee chaired by Isiolo Senator Fatuma Dullo that the Ministry abandoned the public-private arrangement and adopted public procurement form contrary to the Health Sector Policy of 2014 that provides for PPP as a form of financing health projects.
Further, the report casts doubt on the method the Ministry used to procure financial and legal consultants – PKF, an audit firm that conducted a financial analysis to justify the choice of MESS over direct purchase, and M/S Iseme, Kamau and Maema Advocates (IKM).
The two were procurement through restricted tendering at Sh68.6 million. This is what alerted and alarmed the auditors.
“The urgency cited as a basis of using direct procurement, could not be justified since procurement of legal services would have been foreseen at project initiation level and planned for adequately to allow for a competitive process,” noted the report.
It also faulted the Ministry for failing to either consult or share the need assessment done in the counties to justify the leasing of the equipment.
“Though the Ministry of Health indicated that the report was subsequently shared with various leaders of the county governments including governors, county executive committee members for health, county directors of health, the management of the county governments refuted claims that the report was shared with them,” it says.
In a verbal submission, Kimunguri told the committee that the Ministry’s failure to consult the counties before supplying the equipment has landed the counties in serious challenges.
Some lack adequate spaces to keep the machines while in others, the equipment is lying idle because of lack of technical staff to handle them. Some counties have been forced to incur additional costs to build new rooms or refurbish existing ones to create space for the equipment.
The committee recommended the strengthening of the Ministry’s procedures by putting in place robust internal controls and following due process as required by the public finance and management laws, public procurement laws and other legislative frameworks.
“Clear programme management and sustainability strategy should be developed in consultation between the two levels of government to cushion the project from any future political risks,” it recommends.
Today, the committee will grill the Council of Governors and a consortium of county health executives as inquiries into the deal intensified.
Cabinet Secretary Sicily Kariuki and her Treasury counterpart Ukur Yatani are among top officials lined up for questioning.
The ad hoc committee was formed last month to unearth the mystery shrouding the programme.
