World Bank cancels funding for Kazi Kwa Vijana over graft

A multi-billion shilling World Bank project intended to boost the Kazi Kwa Vijana (jobs for youth) programme has been cancelled after an audit review revealed officials at the Office of the Prime Minister had misappropriated millions of shillings.

The World Bank now wants a refund of the money spent so far and taxpayers will be expected to foot the bill once the full extent of the losses is revealed. (READ: World Bank’s Sh12bn boost for jobs)

The bank had offered a grant of Sh4.3 billion (US$43 million) to support the Kazi Kwa Vijana scheme which aims to reduce the vulnerability of unemployed youth by offering a line of income for participation in infrastructure projects.

About 190,000 youths were supposed to have benefited from the latest phase of the initiative which was expected to have been significantly expanded due to the financing from international aid agencies. (READ: Why World Bank is pumping billions for youth jobs)

But a World Bank financial management review found that millions of shillings meant for young Kenyans had instead been paid to a number of senior officials in the PM’s office in contravention of the agreement between the bank and the government and in breach of procurement procedures.

The review identified a number of officials in the PM’s office who had spent up to Sh37.5 million on seminars which never took place, illegal allowances and payments to companies for services which do not appear to have been rendered.

One official, a deputy permanent secretary who is related to a Member of Parliament from Nyanza, was found to have received a monthly allowance of US$5,000 (Sh500,000) for 13 months for her work on the project while concurrently drawing a civil service salary.

Administration secretary at the PM’s office Abdul Mwasserah has now written to Treasury PS Joseph Kinyua informing him that Treasury should coordinate with the PM’s office to refund the Sh972 million (US$9,712,500) which had already been disbursed by the World Bank.

Talks going on

Contacted on Friday, Mr Kinyua confirmed talks were going on to decide what to do with the funds the World Bank had set aside to support Kazi Kwa Vijana.

“I have received the letter (from the PM’s office) and the programme will be cancelled because the World Bank says the project cannot continue unless the concerns they raised are clarified.

“We are discussing with the World Bank to reallocate the money to other projects it is financing within the country so that all the money is not lost.”

Mr Kinyua said an audit would be conducted to establish individuals responsible for the loss of money to protect taxpayers in the event of a refund.

The Kenya Youth Empowerment Project was to be implemented by six line ministries and was seen as one of the strategies to empower the youths by offering them a modest income.

This was seen as one way of preventing them from falling into a life of crime or being vulnerable to politicians who exploit them to commit acts of violence around election time.

But a World Bank report obtained by the Sunday Nation uncovered glaring errors in the management of the fund which resulted in the loss of millions of shillings.

The review was compiled by the financial management team of the bank between June and July.

Although the government had allocated Sh80 million to the PM’s office for the management of the fund, the World Bank review found that the funds it offered for payment to the youths were diverted to pay senior officials.

“The preliminary findings of the review appear to indicate weaknesses in the project management unit and proper payment procedures appear not to have been followed in some transactions,” the review reads in part.

Bank policies

“A number of transactions appear to have been executed without regard to laid down bank policies and procedures.

“The review has found some transactions that, on face value, seem irregular and in certain cases potentially ineligible (payments were) made out of the proceeds of the (bank) credit.”

The World Bank says the review is only a draft report and that a review of the funds in the six line ministries implementing the project would eventually be done meaning more financial losses could yet be uncovered.

The project management unit in charge of the initiative in the Prime Minister’s office issued a statement to the Sunday Nation blaming the problems uncovered on the design of the project.

“The project was rated high risk from inception due to its design. Component 1 of the project was covering six line ministries in eight pilot counties.

“Based on the implementation experience to date, it became apparent that it will be difficult to strengthen systems sufficiently to ensure an effective span of control over all the 406 sub-project activities.”

The statement said no money had been lost and said the World Bank review was conducted jointly with the PM’s office.

“No funds could have been misappropriated at this stage given that the initial disbursements had just been released and implementation had just started. There was a delay in release of funds from Treasury.”

That statement is contradicted by the report seen by the Sunday Nation which chronicles extensive abuses and concluded that at least Sh37.5 million was spent on projects that have nothing to do with the youth empowerment project.

It also runs counter to the letter from the PM’s office to the Treasury which says that money dedicated for the project should be returned to the World Bank.

“The Office of the Prime Minister intends to refund all of the World Bank financing that has been disbursed to this component to date, including both the credit and associated grant,” the October 11 letter reads in part.

“The office of the Prime Minister will work with the implementing line ministries and Treasury to enable this repayment as soon as possible.”

The audit team questioned how the policy director in charge of the project was picked and why she received up to Sh6.5 million for 13 months as “top up allowance” in addition to her salary.

Travelling to Paris

Another official who advises the PM on climate change issues received Sh1.3 million for travelling to Paris for a meeting between Kenyan government officials and France on clean energy.

The report notes that the trip “does not seem to be a project-related event and the project does not seem to have obtained the Bank ‘no objection’ as required”.

A further Sh1 million is listed as having been paid for a National Youth Conference in Nairobi which the auditors say never took place.

The Permanent Secretary in the office of the Prime Minister Dr Mohamed Isahakia is faulted for authorising the payment of two meal allowances for 35 ministry staff that worked on the project.

The payment of Sh1.4 million for this is criticised by the review team which notes that the project officers received payment while at their work stations in Nairobi.

“Also payment of money equivalent to two lunch allowances per day appears irregular and unjustified.”

A firm called Copy Cat Ltd received Sh408,000 for a “media engagement and inception conference of the national communications strategy” something which the review concludes had “nothing to do with the project”.

The audit listed numerous other irregularities especially those that involve the hiring and compensation of staff working on the project.