The Auditor General Nancy Gathungu has raised serious concerns over the government’s Sh104.8 billion Social Health Authority (SHA) project, revealing that the State neither owns nor controls the system despite heavy public investment.
In her latest report, Gathungu highlighted ownership, procurement, and financial irregularities that could expose public funds to significant risks.
According to the findings, the system remains in the hands of a private consortium, effectively limiting government oversight and authority.
“The ownership of the system, system components, and all intellectual property rights shall remain in the ownership of the consortium,” Gathungu noted, warning that this arrangement undermines government control.
Contributions made to SHA and claims processed by health facilities will fund a system that the State does not own, raising questions about long-term sustainability and financial accountability.
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The report also uncovered that the procurement process bypassed competitive bidding and instead used a Specially Permitted Procurement Procedure, which violates Article 227(1) of the Constitution.
“This process was contrary to Article 227(1) of the Constitution, which requires a fair, equitable, transparent, competitive and cost-effective way of acquiring goods and services,” Gathungu stated.
Further scrutiny revealed that the project was not included in the procurement plan or the medium-term budgetary expenditure framework, contravening Section 53(7) of the Public Procurement and Asset Disposal Act of 2015.
Financially, the project is expected to generate Sh111 billion over a decade through SHA member contributions, health facility claims, and track and trace solution charges.
However, the Auditor General pointed out that these projections lack a baseline survey, making it unclear whether the revenue model is viable.
“The projected revenues include 5 per cent to be deducted from claims made by health facilities, which has the effect of increasing healthcare costs indicative of a service charge of 5 per cent to citizens every time they access healthcare services,” Gathungu observed.
Further concerns were raised over the contract’s financial arrangements, which require daily or weekly revenue transfers to an escrow account without disclosing the signatories, raising transparency and accountability issues.
Additionally, the contract includes a clause prohibiting the government from developing a competing system, limiting Kenya’s ability to innovate or adapt to future technological advancements.
“The procuring entity shall ensure neither the procuring entity nor the Government health agencies shall access any part of the system to build a competing product or service,” the report states.
Gathungu warned that such restrictions could hinder the government’s ability to respond to emerging healthcare needs.
The report also revealed that any disputes related to the contract will be resolved by the London Court of International Arbitration, effectively sidelining Kenya’s legal framework.
Beyond procurement and financial concerns, Gathungu flagged broader management failures, including noncompliance with employment laws and insufficient staffing of people with disabilities.
“Review of the payroll indicated that three hundred and eighty-six employees earned a net salary of less than a third of their basic salary, contrary to Section 19(3) of the Employment Act, 2007,” she disclosed.
Gathungu noted that the project did not meet public service disability staffing requirements. “Only 2.3 per cent of the staff are people with disabilities, far below the 5 per cent mandated by public service policies,” she added.
With these revelations, the SHA project now faces growing scrutiny over its ownership structure, procurement integrity, financial feasibility, and regulatory compliance.
The findings are likely to fuel public debate over government accountability in managing large-scale projects and safeguarding taxpayer funds.
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