From a $7,500 payment to an administrative officer to boost her morale, to a $10,000 honorarium to an executive and $100,000 paid to members of staff for unauthorised travel and training — these are some of the financial irregularities revealed by an audit on the Kenya Medical Research Institute (Kemri), the country’s premier research institution, whose programmes now hang in the balance over funds mismanagement.

The special audit was conducted by the Auditor-General in the wake of reports that Kemri had depleted funds for major programmes five months before the expiry of a contract with its major funder, America’s Centres for Disease Control (CDC).

Following the premature depletion of funds and the furore it caused, Kemri suspended several senior managers including the director of the Centre for Global Health Research at Kemri, John Vulule, under whose docket the programmes fall. The CDC also launched an investigation.

The EastAfrican has learnt that the CDC investigation has shown that “millions of dollars” were either misappropriated or remain unaccounted for.

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A source said that some of the money had been spent on personnel who were not on the payroll.

The audit revelations and the results of the CDC investigation could spell doom for Kemri’s programmes, which include research on malaria and a treatment plan for people living with HIV and Aids.

Already, the CDC is demanding the refund of misappropriated funds once its investigation is complete.

US ambassador to Kenya Robert Godec told The EastAfrican that despite the matter being under investigation, an initial review showed that a significant amount, “running into millions of dollars, is either missing or unaccounted for.”

“The US embassy and CDC take seriously the responsibility to ensure that US government funds are fully accounted for. Any funds that are determined to have been lost must be paid back to CDC, and those found guilty of misuse, theft or mismanagement held accountable,” said Mr Godec.

Questionable bookkeeping

The special audit found a number of irregularities in the management of the affairs of the Kemrl/CDC Programme that could have led to the loss of the funds in the year five (2014-2015) budgets.

The audit report brings Kemri’s bookkeeping into question, observing that the organisation allowed commingling of funds between research and non-research co-operative agreements (CoAgs); it did not keep inventory controls for drugs, and ignored procurement regulations, leading to loss of funds.

The audit also found that Kemri paid $44.8 million to suppliers who were not on the prequalified list with a further payment of $87,000 to 9 members of staff who did not have secondment letters.

The auditors queried how an administration officer was allowed to pocket $7,500 “to boost her morale.”

“On query, the executive said that the money was meant to boost her morale in line with the duties that she and other human resource officials were performing,” the report states.

CDC country director Kevin De Cock said that commingling of funds was not allowed and the millions of dollars in CDC funds missing was of concern to the organisation.

In response to the audit queries, the chairperson of Kemri’s board, Lilian Apadet Osamong, in a letter to Cabinet Secretary James Macharia, said there was no evidence of loss of CDC funds advanced to Kemri.

“We wish to emphasise that from our analysis of the special audit report from the Auditor-General, there was no loss of funds advanced to Kemri by CDC. The main issues seems to point towards systemic challenges, which the board is seriously taking up,” said Dr Osamong.

On the cash paid to staff, she said, “The board recommends that the monies paid out to members of staff be recovered from the affected staff and refunded to CDC because they are not provided for in the current Kemri/CDC agreements.”

Kemri’s bookkeeping is also being questioned after it emerged that the enterprise resource planning (ERP) report provided to the auditors may not be reliable as double positing of payment vouchers could have been done in the ERP system.

“Based on analysis of third party projects’ expenditure reports, the ERP system shows an expenditure of $40 million against receipts of $34 million showing an apparent over-expenditure of $9.6 million,” said the audit report.

The auditors also question the use of documents not defined in its system to justify expense items like transport, payroll and airtime amounting to $19 million. There are more than 12,000 payments amounting to $38 million in the system that were not posted in the ledger, making the spending suspect.

In May, the CDC contracted a US firm to audit the Kemri CoAg accounts. Earlier this month, CDC Atlanta sent a team to investigate the scandal further. The team met with Kemri’s board on September 9 to discuss the fraud and among other things demand repayment of the missing amounts.

“It is true that the team met Kemri’s board and discussed the financial scandal among other issues. They are here to further investigate the reasons behind the financial shortfalls,” said Dr De Cock.

Kemri has been receiving funding from CDC for the past 15 years through CoAg at an average of $21 million a year.

It has also emerged that Kemri was given a high-risk status by CDC three years ago after problems were found in the management of the CoAg. It was however removed in August 2014, the time when the last five year-long agreement started.

Last week, members of the Kisumu centre demonstrated over salaries unpaid for the past three months even as it emerged that Kemri has not adhered to controls set up by CDC to receive the additional $6 million three-month funding till November 16 this year.

Kemri director Solomon Mpoke said that they are aware of the current unrest in Kisumu due to a delay in execution of a new contract from CDC.

“Although the Kemri board is grateful for this award, it noted certain concerns, which it is currently discussing with the CDC. The terms and conditions stipulated in the award could imply monthly contracts for highly skilled research scientists. This can in turn present serious logistical challenges given that no meaningful research can be conducted within short periods,” said Mr Mpoke.