The Ministry of Health failed to account for Sh2.7 billion it spent on the controversial purchase of portable container clinics, free maternity, family planning and managed equipment service in the 2015/16 financial year, Auditor-General Edward Ouko has said in a report to parliament.

Mr Ouko says a special audit of the ministry found that “funds amounting to Sh2,679,088,560 had procedural infractions and could not be accounted for.”

Parliament ordered the audit in the wake of an exclusive story that the Business Daily published in October 2016 showing that Afya House had failed to account for up to Sh5 billion spent in the previous financial year.

A leaked internal audit report indicated that the ministry had lost billions of shillings in a mega corruption scandal involving diversion of funds, gross inflation of prices during procurement, double payment for goods, and manipulation of the Integrated Financial Management System (IFMIS).

Top on the list of fraudulent transactions identified in the internal audit report was the diversion of Sh889 million meant to be disbursed to county governments to support the free maternity care programme and its use in the purchase of phantom mobile medical clinics for urban slums.

Mr Ouko says he could not establish how the Sh1 billion set aside to procure portable clinics or containers, Sh879,088,560 meant for Free Maternity Fund and Sh800 million for family planning and medical equipment services were spent. That brings to Sh2,679,088,560 the total amount the ministry could not account for.

“Funds amounting to Sh2,679,088,560 were found to have procedural infractions,” Mr Ouko says in the report of the special audit of Ministry of Health accounts.

The audit found that the ministry violated numerous provisions of the Public Procurement and Disposal Act, 2005 and Public Procurement Regulations 2006 in the purchase of 100 portable container clinics at a cost of Sh1 billion.

It found that the ministry utilised Sh879 million free maternity funds and reallocated Sh800 million meant for family planning and medical equipment services without approvals from the Treasury as required by law.

The report says senior Ministry of Health officials stonewalled, and failed to cooperate with the auditors, making it impossible to complete the work in time.

“The special audit team encountered challenges in an effort to execute and report on the audit in time… These include missing documentation to support the request for approval of the supplementary estimates amounting to Sh2,552,087,201, therefore justification of the supplementary estimates could not be reviewed,” the report says.

Mr Ouko said records relating to the issuance of tenders under the Access to Government Procurement Opportunities (AGPO) amounting to Sh108,618,317 were not made available for review.

He said local purchase orders (LPOs), delivery notes, invoices and inspection reports for 20 portable clinic containers amounting to Sh200 million were also missing.

“Out of the 100 portable clinic containers contracted to be supplied by M/s Estama Investment Limited, only 80 LPOs were availed for audit review,” Mr Ouko says in the report, adding that documents relating to the procurement process and contracts signed with suppliers of food rations/supplements amounting to Sh512,084,944 were missing. Documents relating to the procurement processes totalling Sh200 million for upgrading Nanyuki District Hospital to a Teaching and Referral Hospital and Othaya County Hospital were also not produced for audit.

The special audit team also conducted an assessment of the resources at risk and a sample of payments amounting to Sh13,700,446,912 out of the ministry’s development exchequer issues of Sh17,019,501,618 were identified for review.