Auditor General Uncovers Ownership and Procurement Controversies
In a striking revelation, the Auditor General’s recent report highlights how the Kenyan government has invested a staggering Ksh.104.8 billion in a healthcare system it neither owns nor controls. The Social Health Authority (SHA) system, designed to streamline and digitize healthcare services, was expected to be a game-changer for Universal Health Coverage (UHC). Instead, it’s mired in procurement irregularities, questionable contractual clauses, and a lack of transparency.
Understanding the SHA System
The SHA system was envisioned as a pivotal element of Kenya’s healthcare reform. Its primary objectives included:
- Digitizing Healthcare Records: Enhancing efficiency and accessibility of patient data.
- Streamlining Service Delivery: Simplifying processes for healthcare providers and patients.
- Reducing Healthcare Costs: Improving financial management within the healthcare sector.
Despite these noble goals, the Auditor General’s report exposes glaring deficiencies in the system’s implementation and management.
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Key Findings of the Auditor General’s Report
1. Ownership and Control Issues
One of the most alarming revelations is that the government does not own the SHA system. According to the contract, “The ownership of the system, system components, and all intellectual property rights shall remain with the consortium.” This arrangement effectively places a critical national infrastructure in the hands of private entities, limiting the government’s authority.
2. Procurement Irregularities
The procurement process bypassed competitive bidding, opting instead for a Specially Permitted Procurement Procedure. This violates Article 227(1) of the Constitution, which demands fair, transparent, and cost-effective procurement practices. Additionally, the project was not included in the national procurement plan or medium-term budgetary framework, contravening Section 53(7) of the Public Procurement and Asset Disposal Act, 2015.
3. Financial Model Concerns
The financing model projects Ksh.111 billion in revenues over ten years, sourced from member contributions, health facility claims, and track-and-trace solution charges. However, the lack of a baseline survey raises questions about its viability. The model also includes a 5% deduction from health facility claims, potentially increasing costs for citizens accessing healthcare services.
4. Transparency Gaps
Clause 12.4 of the contract’s general conditions mandates that revenues be transferred to an escrow account daily or weekly. However, the contract does not specify the signatories to the escrow account, raising significant transparency concerns.
5. Dispute Resolution Mechanism
Disputes related to the SHA system are to be resolved by the London Court of International Arbitration. This clause bypasses Kenya’s local legal framework, raising questions about sovereignty and accessibility to justice.
Broader Management Failures
Beyond the procurement and contractual issues, the Auditor General’s report highlights broader management failures, including:
- Noncompliance with Employment Laws: Over 386 employees earned less than a third of their basic salary, violating Section 19(3) of the Employment Act, 2007.
- Inadequate Inclusivity: Only 2.3% of employees are persons with disabilities, falling short of the 5% threshold mandated by public service policies.
Implications for Kenya’s Healthcare System
The findings have far-reaching implications for the healthcare sector and public confidence:
- Erosion of Trust: Mismanagement of public funds undermines trust in government institutions.
- Increased Healthcare Costs: Additional charges on health facilities may translate to higher costs for citizens.
- Data Security Risks: Ownership by a private consortium raises concerns about the security and sovereignty of healthcare data.
- Hindered Innovation: Contractual clauses preventing the government from developing competing systems limit technological advancements.
Public and Government Reactions
The report has sparked public outcry and calls for accountability. Civil society organizations and political leaders have urged the government to:
- Renegotiate the SHA system contract.
- Ensure transparency in future procurements.
- Strengthen oversight mechanisms.
In response, government officials have promised reforms but face immense pressure to act swiftly and decisively.
Lessons from Global Best Practices
Kenya can draw valuable lessons from other countries that have successfully implemented healthcare digitization projects:
- Estonia: A transparent e-health system owned and managed by the government ensures data security and efficiency.
- India: The Ayushman Bharat Digital Mission integrates private and public healthcare providers while maintaining government control.
Recommendations for Reform
To address the issues highlighted in the Auditor General’s report, the following steps are crucial:
- Renegotiate Ownership Terms: The government must secure ownership and control of the SHA system.
- Ensure Competitive Procurement: Adherence to constitutional and legal procurement standards is non-negotiable.
- Enhance Transparency: Clearly define escrow account signatories and improve financial oversight.
- Empower Local Arbitration: Incorporate dispute resolution mechanisms within Kenya’s legal framework.
- Promote Inclusivity: Ensure compliance with employment laws and public service policies.
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Conclusion
The Auditor General’s findings on the SHA system serve as a wake-up call for Kenya’s healthcare sector. The mismanagement of Ksh.104.8 billion underscores the urgent need for systemic reforms to safeguard public funds, enhance transparency, and restore trust. By learning from global best practices and implementing robust oversight mechanisms, Kenya can turn this crisis into an opportunity to build a more efficient and equitable healthcare system.
