By Macharia Kamau

NAIROBI,KENYA:  A government agency established six years ago to support youth in business may have all along been fleecing first-time entrepreneurs instead of offering the much-needed financial help.

The Youth Enterprise Development Fund last year alone lost hundreds of millions of shillings to irregular dealings, with its management and board at the centre of the grand money siphoning controversy.

The Fund’s chief executive Juma Mwatata Mwangala is currently serving suspension over claims of overstepping his mandate and procurement irregularities.

This is not the first time the Sh3.8 billion fund, which now seems to have turned into a cash cow for political appointees is dogged by financial irregularities.  Umuro Wario, the predecessor to Mwangala and the first Youth Fund CEO was in 2009 suspended over irregularities in financial, recruitment and procurement procedures in the institution.

It later emerged that Wario fell out with the board on issues related to the directors’ interference in the day-to-day management of the fund. Defending himself, Wario, who said he did his best to safeguard the money in his organisation, but paid a heavy price when the board edged him out. He survived the suspension, but his term was not renewed.

And Mwangala in just two years into the job is now suspended by the board over financial and procurement irregularities, an accusation he denies strongly and instead accuses the board of undue interference in management decisions that he reckons has stunt the fund’s growth.

However, multiple audit reports on the Fund done by different Government agencies – including one by the Efficiency Monitoring Unit and another by the Youth Ministry – blames both the board and the management for massive mismanagement of resources.

Payments

The reports single out the board for failing to provide policy guidelines and oversight, while the management led by Mwangala are accused of failing to adhere to laid down procedures to allow mishandling of imprest funds, irregularities in the procurement of motorcycles and on disciplinary matters.

The report cites gross disregard of procurement laws by Mwangala, who was suspended on March 15. He has further been accused of venturing into major projects and risking huge amounts of money without approval from the Fund’s board of directors.

A hatchery project where Mwangala bought 1,050 egg incubators at a cost of Sh208 million is among the projects singled out by the report. The incubators were meant for onward lending to youth in agri-businesses.

“The price of the equipment turned out to be highly inflated and the project was without approval by the board as well as outside the CEO’s mandate in managing the Youth Fund revolving kitty,” indicated a damning audit report availed to The Standard on Sunday.

In another instance, the chief executive, according to the report, procured 210 motorcycles in the course of 2012 where the Fund lost Sh13 million. He is also reported to have approved a larger than usual travel allowance for his top management for a trip to Slovakia where the Fund spent Sh20 million.

According to the audit reports, Mwangala flouted procurement laws and even getting the Fund involved in activities that are way out of its mandate. However, the CEO dismisses the claims citing that he followed the laid down procurement procedures through an open tender which the board approved. He challenged anyone to give evidence that the equipment was overpriced adding that the price factored training component and transport of the incubators to beneficiaries. 

“The supplier who won the tender was properly evaluated and met the terms, conditions and specifications stipulated in the bidding documents, which was approved by the board and minutes to these to the approvals are available,” explained Mwatata.

“If any Kenyan knows of any corrupt dealings by me, let him pass it on to the relevant authorities… and if they have anything touching on me, I’m willing to step aside,” he said. “I have been at the forefront in the fight against irregular dealings at the Fund. This war will not be won by tarnishing my character and name but by focusing on real issues,” he added. He, however, maintains that the board was privy to all projects and proper procedures were followed.

Fund chairman Evans Gor Semelang’o said he was determined to clean the mess and ensure deserving youth get what is due to them.

“When I joined the Fund early this year I inherited several pending financial misappropriation cases, which I intend to clean up,” he explained.

 “The board... discovered the chief executive had entered into a contract for the purchase of 1,050 incubators at a cost of Sh208.5 million purportedly for onward lending to the youth in disregard of the Fund’s mandate and without the board’s approval,” reads a letter by Semlang’o, chairman Youth Fund to the PS Youth Affairs and Sports dated May 2.

“The CEO unilaterally entered into a new contract for the purchase of motorcycles without the approval of the ministry tender committee. This resulted in the YEDF incurring an additional cost of Sh13.3 million not originally budgeted for,” adds the letter. But Mwangala strongly denies the claim arguing that no money was lost and the Fund can account for the motorcycles and wonders what’s all the fuse about.

While the Board has even asked the Ethics and Anti-Corruption Commission to investigate the economic crimes committed by Mwangala, questions abound, as to its failure to take action or intervene.

The youth businesses that bought into the idea and took the incubators on credit will pay Sh208,000 per incubator – including a Sh10,000 one-off administration fee.

Twelve companies made bids to supply the incubators in the tender that the board now says was irregular. Few of these are companies in agriculture business, with most of them, including the one that was paid Sh208 million for the delivery of the incubators are technology companies, mostly supplying ICT equipment.

According to the board chairman, the Youth Fund is also not mandated to undertake such projects. The Fund’s mandate is managing the revolving kitty that currently is capitalised to the tune of Sh3.8 billion. However, Mwangala differs with a suggestion that the Fund has no mandate to transact on behalf of the youth.

“The Fund is authorized to procure on behalf of the youth and advance youth businesses through all means,” he explained.