Holding the top brass responsible for loss of Kenya Medical Research Institute funds
March 16th, 2009
Is the report on misuse of funds genuine, or a way to get a sacrificial lamb to drive into the burning oil effortly to cool economic down-dive?
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Revealed: How Kemri lost over Sh550m
By Ramadhan Rajab
Details have now emerged of the financial malpractice that led to the loss of millions of public funds and workers’ savings at the Kenya Medical Research Institute (Kemri).
Former director Davy Koech
And some of the shocking revelations include the backdating of the salary of former director Davy Koech to July 1, 2004, enabling him to pocket a basic salary of Sh5.2 million in March 2006.
According to an audit report that was commissioned after Dr Koech was suspended, only one board member was involved in the move to backdate his salary.
The two audit reports indicate that Koech irregularly transferred more than Sh19.3 million of CDC funds into private accounts and mismanaged more than Sh536 million of pensioners’ money together with two board trustees. When reached for comment by telephone yesterday, Koech said: "there is a Government agency that has taken over the matter. I will not comment on that report you are talking about for now."
The sleaze, as two audit reports indicate, left Kemri on its knees grappling with a budget hole of more than Sh650 million.
Just a week after Public Health Minister Beth Mugo disbanded the board, The Standard has obtained the audit reports that adversely implicate Koech and two trustees of the board.
One of the reports was compiled by Roberts Insurance Brokers (RIBL) on the Interim Administration of Kemri Staff Retirement Benefits while the other was done by Inspectorate of State Corporations (ISC).
The RIBL audit says three trustees — Koech, Dunstan M Ngumo and Renison K Kirui — diverted the money through account numbers 010206938300 in the name of Kemri Pension Fund and 0102028690400 in the name of Kemri Retirement Benefits Scheme maintained at Standard Charted Bank, Yaya Centre Branch.
It also says the circumstances under which the two accounts were run and maintained at Standard Chartered were unclear because the organisation didn’t make use of the services of a financial custodian as required of pension schemes by law.
The reports found that there was no audit department at Kemri — a structural weakness that may have given leeway for the financial opaqueness and misappropriation.
There were, however, some officers designated as accountants and who were signing vouchers as auditors and reporting to Kirui, the finance assistant director.
Personal accounts
"Initially the scheme funds was insured with Kenya National Assurance Company Limited (KNAC) and retained by the company until 1996 when it was put under statutory management, where we trace contributions due from the date the scheme was made paid-up from 1990 to 1996.
"However, we have established that the management made constant remission of contributions from July 1996 through August transferring the funds from KNAC to personal accounts," the report reads in part.
An independent forensic audit of the schemes from June 1997 to June 2008 confirmed irregular payments to third parties (contrary to the law) and other organisations which were not beneficiaries of the scheme funds.
"It is notable that Koech made series of transfers and drawings on the Kemri Pension and Kemri Retirement Benefits Scheme accounts," the report says.
It further notes that such funds were either drawn and deposited in his name or through his Trust, styled, African Medical Services Trust (Amset) 1 and 2 that got over Sh350.1m and 37.2m respectively. Koech was the founder and Trustee of Amset.
In the documents, Kemri was allegedly given Sh60.6m while Koech and Ngumo paid themselves Sh26.8m and Sh2.6m respectively.
Other accounts are Actuarial and Benefits Consultants Sh19m, Funds Transfer to unknown parties Sh17.7m, Oseko and Company Sh8.8m, Njane Enterprises Sh5.5m, Maimme Management Ltd Sh2.3m, Zenith Stationers Limited Sh1.4m, Global Health Sh1.2m, Web Net Africa ltd Kensington Publications Sh1.1m and Essential Management Company Sh870,000.
"There is no doubt in our mind that the three trustees conspired with the entities and individuals that were paid the sums… indeed we found no evidence to suggest that the said entities had given specific services for which payment would have arisen," reads the report.
Waste of resources
The Special Audit report by ISC that looked into circumstances of the Sh19.3million CDC money unearthed gross financial and management irregularities coupled with misuse of parastatal assets.
The report says that on August 20, 2007, the then PS Ministry of Health wrote to Koech informing him about the concerns from American Embassy on the irregular transfer of Sh19.3 million made between August 2006 to December 2006 from the Kemri/CDC project account No. 0102098542100 to Amset account No. 0102069082600 both accounts being at the Standard Chartered Bank Kisumu and Yaya Centre branches respectively.
For these irregular transfers, the report recommends that Koech be held responsible.
The ISC report also recommends that the board takes appropriate action against Kemri’s Dr John Vulule; the Kisumu Centre Director and Mr Dennis Ali, the project accountant for validating the said transactions long after they were effected.
As for Kemri’s human resource management, the audit team established that there was serious structural organisational rot.
It found out that there were no established approved recruitment and deployment guidelines, something that facilitated the board members to make decisions to favour their ‘selfish’ ends.
For instance the Kemri board Chairman, Dr Joel Achiba reviewed Dr Koech’s remuneration package backdating it to July 1, 2004, without the board’s approval, raising Koech’s pay from Sh284,000 to Sh622,000.
The review and backdating of Koech’s pay package to July 1, 2004, earned him a basic salary arrears totalling to Sh5.2 million in March 2006 the report reveals.
The report also reveals that Koech though not a medical doctor, was drawing a monthly non-practice allowance of Sh60,000 thus flouting the government regulations.
Sh1.17m airtime
The audit reveals that Koech used more than Sh1.17million as telephone expenses for four months in 2007.
The team also found that there were eight ghost employees who are said to have worked for between 22 days to 43 months at the cost of Sh2.1million.
The audit teams also noted that over the years, Kemri board has never constituted a board audit committee to provide oversight role despite being alerted to do so in 2005 by then finance PS through a circular.
The audit report also recommends that Koech and Ngumo, former Deputy director, be surcharged a total of Sh221 million for misusing the official car registration number KAT 333T, and abuse of office.
source.standard.ke