The acting chief executive officer and finance director of the Youth Enterprise Development Fund (YEDF) have been sent on 14-day compulsory leave to pave way for investigations.
The two officials are said to have abused the mandate of their office, leading to an undisclosed amount of money being transferred from the fund's official bank accounts.
This happened without the knowledge of the board, which is chaired by Bruce Odhiambo.
The funds are said to have been moved by one signatory board member as was unearthed during an internal audit.
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"It is our audit committee that raised the red flag over some funds that had been moved from our banking institutions without the knowledge or direction from the board," said Mr Odhiambo at a press conference in his office Monday.
Odhiambo, however, failed to ascertain the amount of money transferred. "We have contracted the anti-banking fraud unit which will give us a full report on the unaccounted funds," he said.
In October, it had been reported that YEDF acting CEO Catherine Namuye had been suspended by the board on advice from Devolution Permanent Secretary Peter Mangiti.
This was over Sh200 million that had been transferred from the youth fund's account using fake documents to a local bank account reportedly belonging to Quondum Limited.
Ms Namuye was one of the public officers under probe for alleged malpractice by the Ethics and Anti-Corruption Commission (EACC) having featured in President Uhuru Kenyatta's file tabled in Parliament early in the year.
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Contrary to other public officials, Namuye did not leave office to give room for investigations.
Monday, Odhiambo admitted that upon taking office in 2014, he found it entrenched in accusations of massive malpractice with the then workforce pressing for change.
By 2013, the fund had disbursed about Sh7 billion to youth-owned enterprises, with Sh6 billion being loaned through financial institutions.