Shocking account of Sh4 billion racket to deny children education

A government audit has called for the removal of all finance, accounting and procurement staff at the Education ministry following the loss of Sh4.6 billion free learning cash.

It further says former Education permanent secretary Karega Mutahi should take overall responsibility for the loss of the billions under his watch.

“The PS should accept overall accountability for the correct expenditure of Kenya Education Sector Support Programme (KESSP) funds which he shall be allowed to delegate responsibility for day to day operational control to education secretary or director of administration. This delegation, in no way detracts from the PS’s accountability.

“This replacement should take place once the new systems have been agreed,” the Kessp report tabled in Parliament by Prime Minister Raila Odinga on Wednesday says.

For five years since July 2005, the audit shows that his officers engaged in a brazen embezzlement of free education funds by diverting colossal amounts of money meant for schools and doctoring documents to justify non-existent expenses.

An estimated Sh8.2 billion could not be accounted for when auditors from Treasury assisted by a UK financial consultant first embarked on the review of the Kessp between 2005 and 2009, the document says. “However, this figure came down to Sh4.6 billion after audit review of some of the documents that had not been submitted earlier,” it says.

Prof Mutahi served as the PS during the entire period when the loss of the money occurred, before he was transferred to the Ministry of Local Government last year soon after a fiduciary audit had indicated the entire Kessp was in trouble.

“In order to have a clear picture of the magnitude of risks facing the Kessp, an extended forensic audit covering the entire period since July 2005 was undertaken,” it says.

Ineligible expenses amounting to Sh102 million under investigations by the Kenya Anti Corruption Commission (KACC) were excluded from the extended audit “because they are currently a subject of judicial process.”

The audit shows that Sh1.9 billion did not reach schools as top officials in the ministry of Education diverted the funds to private accounts. In other instances money was withdrawn from school accounts and banked in private accounts.

Beneficiary schools did not have Teachers Service Commission codes meaning they were not in the official government support list.
The payments where the transactions were done from the Standard Chartered Bank in Nairobi represented an approximately 60 per cent of the money lost and took place between 2008 and 2009.

“Disbursement schedules were often missing or the final version and figures approved by the PS were noted to have changed,” said the report, adding that schools audit unit noted numerous duplicate payments to schools even for funding that did not relate to Kessp.
The money was also diverted through similar beneficiary account number but different schools meaning officers would later ask the schools to return the money in a perceived error.

“Failure by the officials to respond to specific payments relating to the Standard Chartered Bank, and failure to produce evidence for the entire amount was an indication that record keeping was wanting.”

The report also notes that the officer in charge of imprests should be sacked, and that the imprest system be reviewed by internal audit for the next two years until it improves.

“Imprests documents should be kept away from the accounts office for security and safety.”
It adds: “Documents relating to imprests valued at Sh283 million were not provided, and of those reviewed, amounts totalling more than Sh8 million were ineligible expenses.”

A key recommendation is that electronic transactions should be at the heart of ministry operations and paper trail should be discarded to guard against doctoring of documents.

“All schools should be registered by the ministry electronically and given a unique identifying number held on a central data base.”

The report recommends that the ministry should review current financial reporting procedures and develop sound strategies. It further says accountants or any other officer should at no time determine expenditure and that regular monthly internal audit reviews of all investment programmes be conducted.

It also said officers raising local purchase orders should also not be the ones processing payments.
District Education Officers, it added, should intensity monitoring of schools especially the number of pupils in classrooms.

Headteachers handing over and taking over, it said, should do so within five days and DEOs ensure books of account are given to the new head.

The report says all imprests and expense claims and disbursements should be electronically coded to ensure the ministry accounting is in liaison with that of Treasury.

The report lists Education Secretary George Godia as one of the senior civil servants who received questionable payments in the scandal. Prof Godia is listed as to have requested imprests totalling Sh200,000.

Development partners to Kenya’s education sector have asked the government to act swiftly and hand over the names of all Ministry of Education staff implicated in the loss of funds to the KACC.

World Bank, UK’s DfID, Unicef and the Canadian International Development Agency commended the Ministry of Finance for investigating allegations of fraud in the education sector, which were first revealed in September 2009.