World Bank questions Sh362m expenditure

By PETER OPIYO

The World Bank has raised questions over Sh362 million suspected fraudulent expenditures in a drought mitigation project the bank funds in arid and semi arid areas.

In a forensic audit report covering two financial years, the bank’s Integrity Vice Presidency picked out the suspected fraud after analysis of 28,000 transactions in seven of the 28 districts under the Sh12 billion project and also at the headquarters in the Arid Lands Resource Management Project - Phase II.

The suspected fraudulent expenditures were detected in allowances, training, and manipulation of cash and bank transactions.

The bank suspects there was a motive to under-report bank balances since unutilised funds are returned to the exchequer. The report covered 2006/07 and 2007/08 financial years. Districts audited were Garissa, Isiolo, Samburu, Tana River, Wajir, Nyeri and Kajiado.

The project is aimed at enhancing food security and reducing vulnerability in drought-prone and marginalised communities.

Alleged financial anomalies were also detected in income generating activities, restocking activities, and infrastructure including buildings that were never certified or used in the project.

Another highlight is the variation of salaries of staff with incorrect classification of allowances and backdated salary adjustments.

Further, the report points at an increase of Sh46.6 million in payroll costs owing to the addition of six new districts into the project, but only Sh18 million is accounted for.

Imprest accounts

The audit, however, does not prove any embezzlement but points that opportunities for embezzlement existed, especially through the use of imprest accounts and encashing of cheques payable to suppliers and Commissioner of Valued Added Tax.

"There is a clear disconnect between the audited vouchers and the financial monitoring report expenditures reported. Insufficient vouchers were provided to substantiate the expenditures," states the report. Financial monitoring reports are the basis of withdrawal of funds from donors.

The Government, though appreciative of the audit, pointed out that it was inconclusive. Finance PS Joseph Kinyua stated in a letter to World Bank Country Director Johannes Zutt that in some cases, the report was based on misunderstanding of Government policy.

The Ministry of State for Development of Northern Kenya and Other Arid Lands is responsible for implementing the project.