Wrangles between NHIF board chair and CEO threaten to destabilize reforms

Peter Kamunyo Gathege, NHIF CEO

There’s trouble at the National Hospital Insurance Fund (NHIF) pitting the board chair and the Chief Executive Officer (CEO).

NHIF Board chair Lewis Nguyai and CEO Peter Kamunyo are reportedly not seeing eye to eye.

The bone of contention is lucrative procurement deals and staffing.

Nguyai accuses the-Hannah-Muriithi-appointed CEO of sabotaging the hospital fund’s operations through high-handed decisions and looting.

Hanah Muriithi is the immediate former Board Chair of NHIF; she was sacked by Uhuru Kenyatta after she oversaw massive looting of the parastatal.

It is reported that some senior managers are taking administrative and operational directives from Nguyai while one faction of the board is leaning towards Kamunyo.

Problem is that Nguyai is working with the same board of directors that were used to Ms Muiithi’s looting and thus the cracks in the management.

The board chair recently appeared before the National Assembly Health Committee and revealed that staff in the scheme’s top management including directors are not qualified for the positions they are currently holding.

Kamunyo who is accused of hiring without following due procedure is also saddled with tales of nepotism, favouritism and promotions through sexual means.

Nguyai told the committee that the board, charged with policy guidance responsibility will meet on November 30 to endorse the new organisational structure that has already received approval from the State Corporations Advisory Committee (SCAC).

“There are staff currently holding positions they are not qualified for. The restructuring will see those who are not suitable exit. We will need to deal with some of them and we will need your protection as a committee to ensure that when we make a decision, we will not face a political barrage.” Nguyai said.

Skewed staffing, looting and giving contracts

Peter Kamunyo who came in illegally is still unwanted. In September, the board wanted him out.

In that month, Kamunyo had cancelled contracts of the healthcare providers following an audit that unearthed massive irregularities under the Comprehensive Secondary School Student Medical Scheme, popular as EduAfya.

The mooted restructuring plan comes at a time 65 per cent of the NHIF top management posts are being held in an acting capacity.

The board said the restructuring will also lead to the promotion of staff who have stagnated or acted in one post for a very long period of time.

NHIF has 1,835 employees against an approved staff complement of 2,200 and is seeking to hire 400 new employees to plug the staff shortfall.

Restructuring of the top management will result in some offices being scrapped, and employees redeployed or declared redundant.

NHIF will roll out Universal Health Care (UHC) as part of the government’s plan to provide affordable and quality healthcare to all Kenyans.

In May 2022, the National Assembly Public Investments Committee (PIC) questioned the shoddy procurement decision that awarded MMC Africa Sh336.3 Million without pre-qualification.

Auditor General’s office unearthed the scandal that taxpayers fully paid for the money in National Hospital Insurance Fund (NHIF) approved procurement plan for 2018/2019.

MMC Africa had not been pre-qualified, as required by law, to apply for tenders. It is contrary to the Public Procurement and Assets Disposal Act of 2015. No money had been allocated to pay for legal service and, therefore, it went against the Public Finance Management (PFM) Act.

In 2019, Cyprian Nyakundi blew the whistle on the scandal.

“It is true that the chair is very very corrupt because of the following story of a legal firm called MMC Africa which she has ties to and she brought to NHIF the minute she was appointed. It is suspected that she was a partner to the law firm but exonerated herself before she pushed for the firm to be given a mega deal. The mega-deal is worth close to 500,000,000 (1/2 a billion)”, a source wrote.

At that time, we had started serializing the corruption scandals under NHIF Board chair Hannah Muriithi.

Lewis Nguyai – NHIF Board Chairman

Ms Muriithi was unceremoniously sacked by Uhuru Kenyatta in February 2021, but she was replaced with an equally corrupt former Kikuyu MP Lewis Nguyai.

But it was Nguyai that Uhuru Kenyatta tasked with reforming the parastatal.

Then acting NHIF CEO Nicodemus Odongo was always a puppet when Ms Muriithi was board chair. Ms Muriithi acted as the defacto CEO and held numerous meetings in total disregard of the Mwongozo Act.

What the Auditor General found out

The Auditor-General Nancy Gathungu, in her report of the audited financial accounts, showed that NHIF paid Sh156.4 million in legal fees to private law firms whose names she did not reveal, without the consent of the Attorney-General (AG).

NHIF Reforms: Why all past looters like Hannah Muriithi must be charged

An April 16, 2014, circular issued by the AG, requires approval from the AG before government agencies engage private legal firms.

The audit report was presented before Parliament.

The law firm contracted to draft the contracts charged NHIF Sh43.3 million more for company search, printing, binding, travel costs, stamp duty and distribution of the contracts to the various hospitals and other health providers.

The audit report indicated that Sh432.8 million was the negotiated instruction fee to draw 6,700 contracts. Out of this amount, Sh336.3 million was paid to the law firm. This means that each contract costs the taxpayer about Sh65,000 to draft.

Former National Hospital Insurance Fund (NHIF) chief executive officer Geoffrey Mwangi on November 2, 2017 during a media briefing at Crown Plaza Hotel in Nairobi.  SALATON NJAU (NAIROBI)

The audit report further noted that, on November 5, 2018, the law firm reviewed the terms of engagement and added 309 more contracts for drafting at an additional cost of Sh26.75 million without NHIF board’s approval.

“Under the circumstances, NHIF was in breach of the law and the propriety of the legal fee paid to the law firm could not be confirmed,” the audit report says.

Hannah Muriithi: former NHIF Board chairperson. Her legacy of looting still haunts the parastatal and she might still be calling the shots as her appointed CEO Peter Kamunyo continues to steer NHIF in her style of looting.

The audit report also showed that the NHIF board spent Sh32.1 million in sitting allowances among other expenses for 35 full board meetings and seven meetings for its audit committee in a year. In the process, Sh12.5 million was spent for the meetings in sitting allowances alone. This means that the board violated its own approved calendar of five full board meetings and four audit committee meetings for the period under review.

Interestingly, the sitting allowances were not supported with signed minutes as required by the law. The Auditor-General has also questioned the Sh21.8 million the NHIF management paid its staff as Christmas gifts and a token of appreciation to its retirees during the year under review.

The report noted that the management failed to provide justification or the basis for the payment, an indication that public funds may have been lost.

About Sh6.7 million paid to 12 officers employed during the year was also questioned.

The audit report noted that the NHIF management did not provide documents relating to the hiring process—advertisements of the vacancies, shortlists, interviews and recruitment reports—to support the recruitment.

The audit also questioned how NHIF paid a whopping Sh340.5 million to Moi Teaching and Referral Hospital (MTRH) without a signed loan agreement between the two institutions.

Nicodemus Odongo, former Acting NHIF CEO.

From the report tabled in parliament in May 2022, the loan was advanced by NHIF to the institution at an interest rate of three per cent per annum without any agreement or documentation, which means that NHIF may not recover the amount in case of default.

The audit report further indicated that the loan did not reflect in MTRH financial statements for the 2018/19 financial year and the subsequent financial years, raising questions whether the failure to include it in the hospital’s books was deliberate or whether it will be paid.

Reforms in the hands of criminals?

As this continues to happen at the fund, the spotlight shifts to the NHIF board, which has oversight responsibility over the management. The NHIF board is currently chaired by former Kikuyu MP Lewis Nguyai.

President Kenyatta controversially appointed Mr Nguyai as NHIF board chairman in a special gazette notice of February 2021 to replace Ms Hannah Muriithi, who had served since April 2018.

Mr Nguyai was the owner of the collapsed Mediplus Limited, a company that was at one time contracted by NHIF to offer government employees medical cover. However, Mediplus Limited did not meet its part of the bargain, forcing some hospitals, among them the Agha Khan Hospital, to sue the firm for failing to pay for the services rendered.

Then Mvita MP Abdulswamad Sharif (now Mombasa County Governor), who chaired the Public Investments Committee (PIC) of the National Assembly, said the audit report raises serious issues that NHIF will have to explain.

“As a committee, we shall have a session with the management of NHIF over these audit queries as raised by the Auditor-General. If it is discovered that public funds were irregularly used, we shall recommend to the House appropriately,” said Mr Sharif.

Janet Nancy Kabui Gathungu – Auditor General

Section 93 (1) of the Public Procurement and Assets Disposal Act allows for pre-qualification of firms in lieu of open tendering. This, the law says, is to identify the best few qualified firms for procurement. Failure to observe the procurement plan as provided for in the law could also land NHIF into problems.

Section 45 (3) of the procurement law provides that all procurement processes shall be within the approved budget of the procuring entity and factored into its annual procurement plan.

NHIF was appointed as the driver to spearhead the roll-out of universal health coverage (UHC) in the country. In a bid to fulfil one of its key commitments to Kenyan citizens, the government has released Sh6 billion to NHIF for implementation of the UHC programme.

However, there can be no UHC without NHIF being managed well. This is not the first time financial scandals are hitting the 56-year-old state agency. Although the government undertook policy interventions to streamline NHIF operations and seal the corruption loopholes, very little has changed.

CAPTION: Wakili Edward Muriu who runs MMC ASAFO with offices in Johannesburg, Abidjan, Casablanca, Paris and London

The fund has, on numerous occasions, been flagged for fraud and abuse of office, which have hampered the provision of quality services. These bottlenecks and other organisational weaknesses have undermined its efficacy.

Previous scandals have dented the image of the fund with its previous chief executives charged in court over the loss of public funds.

In 2013, former CEO Richard Kerich was dragged before the courts on charges of conspiracy to defraud the fund of Sh117 million. In 2021, the High Court ruled that Mr Kerich has a case to answer. The case is ongoing.

In 2018, Mr Kerich’s successor, Mr Geoffrey Mwangi, alongside several others, were charged in court over the loss of Sh1.5 billion at the fund. The case is yet to be determined.

In February this year, a petitioner went to court to have the current CEO, Mr Peter Kamunyo, who replaced Mr Mwangi, fired on allegations of promoting corruption and other irregularities.

The charges facing Mr Kamunyo include embezzling public funds, backdating of salaries and making irregular appointments and transfers of staff members without following the procedure. The case, which is before the Employment and Labour Relations Court, is yet to be determined.

About the author

Karecha Kamaris

Karecha Kamaris is the space between earth and heaven, the gap between ice and fire, the elementary molecule that justifies unending peace in the sea of turmoil. An 'appetite for adventure over the love of ease'.

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