Audit report reveals Sh2.6 billion unapproved over-expenditure at KNH

An Auditor General report has revealed how Kenyatta National Hospital (KNH) lost billions of shillings due to inflated costs and mismanagement of the Linda Mama and National Health Insurance Fund (NHIF) programmes, in the financial year ending June 30, 2023.

The audit report reveals an unapproved over-expenditure of Sh2.6 billion by KNH in the year under review. According to Gathungu, the hospital spent Sh23.7 billion against a budget of Sh21.1 billion.

Auditor General Nancy Gathungu also stated that KNH lost Sh379.1 million as a result of NHIF's failure to fully reimburse it for patient costs. KNH's costs were significantly higher than the rebates provided under the existing medical service contracts with NHIF.

Despite this, Gathungu notes that KNH administrators continued to work with NHIF and the Ministry of Health on these unprofitable contracts from 2016 to 2022, as shown in their correspondence.

The report notes that even though a renegotiated contract effective July 1, 2022, expanded the number of claimable services, the hospital still faced substantial annual losses. The audit warns that unless the reimbursable amounts are reviewed, KNH will continue to bear these high costs, resulting in further financial losses.

“In the circumstances, the hospital has continued to bear the high cost leading to losses if the reimbursable amounts are not reviewed,” Gathungu warns.

Gathungu said the Linda Mama programme, which was meant to provide free maternity services, also resulted in significant losses for KNH, amounting to Sh190.1 million.

She emphasised that the government only reimburses KNH for Sh17,500 for each delivery, which is insufficient for the specialised care the hospital provides, such as renal dialysis, critical care services, and neonatal care. These services can cost over Sh100,000 per patient, leading to further financial strain.

Gathungu reiterated that even though the package was enhanced in July 2017 to allow the hospital to claim an additional Sh4,000 per day on top of the Sh17,500 for delivery complications, this amount still did not cover the losses.

“In the circumstances, the hospital has continued to bear the high cost of free maternity programmes which has negatively impacted on the overall performance,” reads the report.

Furthermore, the hospital increased the cost of establishing the still-unfinished Paediatrics Emergency and Burns Management Centre by a staggering Sh633 million.

Furthermore, the audit showed that 678 patients owe KNH Sh75.6 million, but no records exist to trace these debts, such as inpatient information, invoice numbers, or guarantors.

“In the circumstances, the accuracy and recoverability of secured individual debtors of Sh74,556,613 could not be confirmed,” reads the report.

On rental income, the report raises concerns about KNH's failure to collect Sh11.5 million in rent arrears for over 360 days.

Gathungu states that although most occupants of KNH housing are public servants, the hospital has not initiated rent recovery through the checkoff system, as required by its Housing Management Policy.

She notes that another 16 debtors have a balance of Sh21.1 million, accounting for 58 per cent of total rent receivables.

“In the circumstances, the recoverability of uncollected rental income of Sh36,371,000 could not be confirmed,” Gathungu says.

The audit also discloses that KNH's 968 staff residences have not had their rents assessed since 2001 to comply with market pricing.

If market rates were applied, Gathungu highlights that KNH could collect an estimated Sh318 million annually, compared to the Sh57.2 million it currently receives, leading to a revenue loss of Sh260.9 million.

The revelations come as Evanson Kamuri, KNH's CEO, is being investigated for a corruption issue at the medical centre.

In May, the Ethics and Anti-Corruption Commission (EACC) obtained court orders granting it permission to freeze Sh28 million held in two Housing Finance (HF) accounts, that the KNH boss is suspected to have corruptly acquired from the hospital.

In an affidavit filed at the Milimani Law Courts, EACC wanted to examine and obtain copies of various documents regarding the accounts. These include account opening records, statements, cheques, deposit slips, bankers' books, payment vouchers, or any other pertinent information from January 1, 2019 onwards.

Kamuri's three HFC Bank accounts totalled Sh41 million, with one containing Sh10.5 million, another Sh18 million, and a third Sh12.5 million. His two accounts at National Bank also had Sh1.2 million and Sh1.9 million, while one account at Standard Chartered held Sh4 million.

The EACC is also probing allegations of corruption and economic crimes involving Sh634,465,000.