16/08/2024
SPECIAL REPORT PART ONE:
EXPOSED: KEMSA ROT AND THE BLAME GAMES
BY THE COUNTY CHAMPION TEAM
Kenya Medical Supplies Authority (KEMSA) top brass has come under scrutiny for dirty deals especially supply and tender awarding scandals among others.
Kemsa has been involved in one scandal after another.
Every other year, Kemsa is embroiled in what are mostly procurement-related scandals.
The award winning agency is known to have poor internal controls, including discrepancies in stock balances, missing drugs and difficulties in monitoring drug distribution.
Past audits have also exposed inconsistencies in Kemsa’s information system, such as unexplained adjustments and overstated prices for expired drugs.
In 2020, KEMSA was allegedly accused of mishandling a Sh7.7 billion tender
A special Audit from the Auditor General has shown the statement of cash flow reflects cash and cash equivalents as at 30 June, 2023 balance of Kshs.4,906,997,098.
However, the balance includes prior year adjustment of Kshs.186,947,924 under operating activities which relates to corrections of earlier transactions under assets, in progress and global fund.
However, the corresponding journal vouchers were not provided for audit.
In the circumstances, the accuracy and completeness of cash and cash equivalents balance of Kshs.4,906,997,098 as at 30 June, 2023 could not be confirmed.
MEDICAL COMMODITIES SOLD BELOW THE SET PRICE
According to the audit report, the total sales revenue of Kshs.8,039,143,44 generated from sale of various health products and technologies.
The Authority bills customers based on the price list captured in the Logistics Management lnformation System (LMIS) ordering tool.
However, warehouse issue report indicates a list of three hundred and sixty{wo (362) medical commodities with a sales revenue of Kshs.3,608,334,804 billed to various customers at Kshs.3,022,990,656 which was below the set selling prices resulting to revenue loss of Kshs.585,344,148.
MEDICAL COMMODITIES TO UNDISCLOSED HEALTH FACILITIES
The total sales revenue of Kshs.8,039,143,44 out of which Kshs.321,171,362 relates to medical supplies procured by the Ministry of Health and issued to twenty{hree (23) county headquarters without providing details of the beneficiary health facilities.
In addition, donated medical supplies of Kshs.572,492,393 were issued to non-existing two hundred and seventy-five (275) sub counties which have been created in the system as health facilities but do not exist physically.
In the circumstances, the accuracy and completeness of the sales revenue value of Kshs.8,039,143,444 could not be confirmed.
LACK OF FUEL REGISTER
The statement of financial performance reflects use of goods and services amounting to Kshs.2,003,659,568 which as disclosed in Note 12(b) to the financial statements includes Kshs.47,030,205 in respect of fuel and oil.
However, management did not maintain a fuel register and no reconciliation was performed for the expenditure reflected in the supplier fuel statement.
In the circumstances, the accuracy and completeness of expenditure on fuel and oil amounting to Kshs.47,030,205 could not be confirmed.
UN-APPROVED EXCHANGE OF PARCELS OF LAND
As previously reported, the land balance includes a parcel valued at Kshs.'151,538,002 situated along commercial street in Nairobi.
According to a deed of exchange dated 28 April, 2016 this first parcel of land measuring approximately 0.7676 belongs to a private company while a second parcel of land situated in Nairobi measuring approximately
0.1329 hectares belongs to KEMSA.
The parties agreed to exchange these parcels of land without an approval from the minister responsible for health and the National Treasury.
MISSTATED INVENTORY VALUES
The inventories balance includes units received from Global Fund and other program commodities valued at Kshs.303,514,749.
However, the commodities were erroneously issued to health facilities at a unit price of one shilling instead of the carrying amount resulting to overstatement of inventory by Kshs.303,509,260.
This was contrary to IPSAS which states that 'where inventories are acquired at a nonexchange transaction, their cost shall be measured at their fair value at the date of acquisition.
OVERSTATEMENT OF STOCK BALANCES
The inventory balance includes Kshs.6,664,823,360 relating to two hundred and forty seven (247) medical commodities.
However, review of opening inventory, receipts, issues, expiries and damages from these products indicated a closing balance of Kshs.6,361 ,251 ,822 resulting to unreconciled and unexplained variance of Kshs.303,571 ,538.
UNRECONCILED STOCK LSSUANCE
The inventory balance includes one hundred and ninety-one (191) medical commodities whose available stock for issue was 13,988,323 units valued at Kshs.2,228,938,380 but the warehouse issue report indicated issuance of 14,601,300 units valued at Kshs.2,661,049,865 resulting to unexplained and unreconciled variance (over issuance) of 612,977 units valued at Kshs.432,1 1 1 ,485.
In addition, the over issuance includes 287,284 units for eight three (83) commodities valued at Kshs.264,465,919 whose available stock balance was nil as reflected in warehouse management system.
IMPROPER STOCK ADJUSTMENTS
The inventories balance was arrived at after adjusting commodities worthy Kshs.81,732,145 explained to have historical issues and batch switch among other reasons.
However, these products could not be traced in the warehouse.
In addition, inventories schedules reflect adjustments for expiries of Kshs.1 ,331 ,441 ,264 while Note g reflects inventory adjustment variance (expiries and damages) amount of Kshs. 1,21 3,71 5, 1 86 resulting to unexplained variance of Kshs. 1 1 7,726,078.
UNACCOUNTED FOR INVENTORY OF MEDICAL COMMODITIES
The inventory balance of Kshs.12,899,915,421 includes Kshs.5,294,325,070 in relation to four hundred and forty-two (442) medical commodities.
However, review of these four hundred and forty-two (442) medical commodities' opening inventory, receipts, issues, expiries and damages indicated a closing balance of Kshs.8,800,283,288 resulting to unreconciled variance of Kshs.3,505,958,218.
These discrepancies represent undisclosed and unaccounted for medical commodities.
RETROSPECTIVE RECEIPTS AND LSSUANCE OF COMMODITIES
The inventory ledger indicates system receipt of medical commodities amounting to Kshs.83,826,000 whose physical delivery were indicated to have been made during the year 2020.
However, the inventory ledger did not indicate a corresponding issuance of these commodities despite the items not being included in the inventory closing balance.
NON-ADHERENCE TO CREDITS LIMITS
The receivables from exchange transactions balance of Kshs.6,008,541,865 out of which Kshs.3,079,326,856 relates to county governments while the balance of Kshs.2,892,174,856 relates to other credit customers.
However, it was noted that trading with customers beyond the 30 to 45 days credit limit continued contrary to Paragraph 2.7 of the Kenya Medical Supplies Authority Credit Policy 2014.
In the circumstances, the accuracy and completeness of receivables from exchange transactions balance of Kshs.6,008,541,865 could not be confirmed.
UNALLOCATED CUSTOMER ACCOUNT
The statement of financial position reflects hade and other payables balance of Kshs.8,602,982,309.
The balance includes customer unallocated payment of Kshs.35,928,606 received through direct bank deposit.
An amount of Kshs.27,861,163 is yet to be identified and allocated while the balance of Kshs.8,067,443 in relation to customers whose details were identified but yet to be allocated to respective customer accounts.
In the circumstances, the accuracy and completeness of customer unallocated payment balance of Kshs.35,928,606 could not be confirmed.
MORE TO FOLLOW……………..