Revealed: NHIF Officials Stole Sh21B

A parliamentary committee has unearthed a scandal in which corrupt National Health Insurance Fund (NHIF) officials stole a whopping Sh21 billion in just 12 months by purporting to settle non-existent debts.

To steal the funds, the officials opened a “creative account” during the financial year ending June 2022, opened liability accounts from which the billions were deposited, purportedly to settle the “debts.”

The billions which were channeled to the accounts were drawn from civil servants’ schemes (Sh2.9 billion), Eduafya Scheme (Sh4.1 billion), county schemes (Sh525.3 million), parastatals (Sh780.7 million), retirees schemes (Sh 191 million) and Linda Mama (Sh2.3 billion), according to the Public Petitions committee of the National Assembly.

No money to pay

“The mandarins opened liability accounts knowing very well that they had no money to pay and went on to spend money held on behalf of other state agencies to pay without informing the members,” said committee member, Ernest Kagesi.

“This is hot. Sh21 billion was stolen just by paying non-existing liabilities. We will get to the bottom of it,” Kagesi who chaired the meeting said.

The petition by Bernard Muchere, a Fraud Risk Management consultant states that NHIF was deprived of the money through fictitious ineligible Incurred But Not Reported (IBNR) claims created in the financial year ending June 30, 2022.

He argues that since there is no evidence of a sinking fund bank account wherein the retained earnings were supposed to be deposited, it follows that the retained earnings were only book entries.

“It therefore means that IBNR claims reserves were created from book entries and that no liquid money was set aside,” Muchere said.

Fictitious claims

He says that offsetting of fictitious unbudgeted IBNR claims of approximately Sh21 billion with the members’ scheme contributions created a huge shortfall of NHIF funds causing serious financial difficulties that were experienced in the latter part of 2022 and up to date to the extent it drastically scaled down the patient benefits and failed to cover adequately comprehensive benefits, thus, putting most Kenyans in a serious health quagmire.

According to the petitioner, an Incurred but not Reported (IBNR) is a type of reserve account used in the insurance industry as a provision for claims and/or events that have transpired but have not yet been reported to an insurance company.

“IBNR is used by insurance companies, particularly along the eastern Gulf Coast of the United States where Hurricanes and other natural disasters are common. After a storm hits, an actuary estimates potential damage to infrastructure and the claims that may be anticipated. Based on this analysis, money is then set aside in a reserve to pay for claims,” the petitioner explains.

“This is the reason why during the period NHIF members were being told that their cards were invalid, simply because the money had been siphoned and the coffers were empty,” Muchere said.

Asked by Kuria East MP Maisori Marwa why he did not report the matter to the investigative agencies like the DCI or the Ethics and Anti-Corruption Commission (EACC) considering its magnitude, Muchere said he opted the parliament way owing to the past experiences over such scandals.

The petitioner avers that upon undertaking a fraud examination on financial statements in respect of the NHIF for the year