Covid funds fest at CMST

A forensic audit report on emergency Covid-19 response sanctioned by the Central Medical Stores Trust (CMST) board has revealed that officials at the procuring entity threw caution to the wind on procurement.

The report dated July 12 2021 and addressed to CMST chairperson Josiah Mayani shows that the wanton disregard of the law led to loss of K200 millions of public funds in illegal contracts, questionable payments and possible theft of resources procured.

The report by Graham Carr for the 2020/21 financial year, among others, focused on the procurement of Covid-19 personal protective equipment (PPEs) between March 2020 and April 2021.

In all transactions government lost over K220 million, comprising K168 million CMST paid to a supplier from what the audit report said was overcharging, K29 million worth of 16 580 N95 face masks which could not be traced, and K13 765 500 for face masks which were not supplied out of a consignment of 64 500 face masks.

The audit report lays bare how officials at CMST—the nerve centre of procurement, warehousing and distribution of medical supplies—abused the public finance management laws and took actions that cost the public body and the taxpayer at large millions at a time the country’s public institutions were under enormous financial strain due to the pandemic.

It reveals there was single sourcing in contracting while officials were releasing information to suppliers before being granted contracts. The officials were also issuing local purchase orders before approval by their chief executive officer.

In one incident, a CMST official wrote an internal memorandum for the purchase of PPEs on behalf of Ministry of Health without the Ministry’s authorisation.

On May 29 2020, a CMST officer, wrote an e-mail to a supplier (name withheld) advising him of a further price adjustment of 14 percent following a CMST meeting on May 22 2020 which recommended such.

Another officer called a supplier who was not the lowest bidder for price discounting which was in contravention of the Public Procurement and Disposal (PPDA) Act 2017 which states in Section 44 (4): “Subject to Section 47, no negotiations whatsoever may be held with bidders as to the substance or prices of their bids and Section 47(1)”.

The section states “a procuring and disposing entity may invite the lowest evaluated bidder for negotiations aimed at finalising the award of the contract.”

In yet another contract, a senior official mis-procured 140 000 N95 face masks from (the same firm whose name has been withheld above) “in the name of a repeat order at a supersonic speed,” and at exorbitant prices for the company to deliver the same amount of goods and items.

“On 8th February, (the firm) offered a price of MK470.00 per each N95 face mask just three days after the same company delivered the same type of face masks at MK1 675.80.

Auditors concluded that CMST lost K168 million in the first transaction.

The report says, the procurement number CMST/G/MMS/019/000549 had not been advertised as required by the set provisions but simply sent an e-mail on April 16 2020 and closed the following day using a list of suppliers which the CMST had.

It further says by February 2021 prices of N95 face masks had drastically gone down and failure to open it up to the public to encourage competition made this procurement to be unnecessarily expensive and not to the best interest of the CMST and the public at large.

“Fiduciary duty and responsibility was compromised.”

The report further says: “Additionally, K29 million worth of 16 580 N95 face masks—procured on behalf of Ministry of Health—cannot be traced to respective beneficiaries with CMST officials unable to indicate where such deliveries were made.”

In another incident, CMST gave a supplier (name withheld) a contract to supply 64 500 N95 face masks for CMST warehouses at a price of MK1 995 per mask but audit findings indicate only 57 600 face masks could be traced.

“CMST management must ask warehouse team [of three officers] to account for the missing quantity of 6 900 face masks amounting to MK13 765 500.00,” reads part of the report.

There were no procurement documents or contract for (name withheld) for the supply of 140 000 N95 face masks as provided for in the PPDA Act of 2017 and the Public Procurement Regulations 2020 and the guidance from PPDA dated 15 April 2020 Circular Ref PPDA/01/22.

CMST did not ask for PPDA’s approval of the procurement and effort to rectify the problem did not materialise, says the report.

“This was a complete mis-procurement on the repeat order which is basically a single source type of procurement… as directed by the memo request and e-mail from (another officer). The requirements of the Public Procurements and Disposal of Asset Act of 2017, Public Procurement Regulations 2020 and PPDA/01/22 were not followed (refer Appendix 2.8a.b and c).”

According to the PPDA Act 2017, any contravention of the Act is an offence with a penalty of K5 million or five years of imprisonment.     

In an interview, Centre for Social Accountability and Transparency (CSAT) executive director Willy Kambwandira said authorities should take action against the named officers but bemoaned that previous reports have failed to bring the needed responses from relevant offices.

“We are not surprised at all as this has been the culture now, for us this is an organised scheme that was plotted to defraud government. Why should it take an external audit when there are institutional checks and balances at CMST? 

“This is an indication of wide scale conniving and colluding of public officers. We strongly believe that there are already measures in place, but what we see are tendencies of negligence of duty and intentions to defraud taxpayers. It is a common practice that people in government can do such things and walk away with it.”

Kambwandira asked authorities to take action against individuals and companies that broke the law.

Herbert Chandilanga, CMST spokesperson said management is reviewing the audit findings.

“Management is looking into the report in liaison with the Board.”

. But Minister of Health Khumbize-Chiponda said in an interview yesterday, the ministry will study the report and ensure where necessary disciplinary action is done.

“The report has just reached my table. They will go through the same processes as any other civil servants. They will not be treated differently.   If there is a need for us to recover the money, we will do so,” she said.