World Bank sending team over lost funds

• Officials arrive next week to discuss differing audits on cash missing from key arid lands programme

The Treasury is headed for a face-off with the World Bank after government auditors massively scaled down the extent of corruption allegations in a Sh10 billion economic stimulus programme.

The draft report by the Internal Audit Department (IAD) slashed the money suspected to have been lost through corruption under the World Bank-funded Arid Lands Natural Resource Management Project from Sh362 million to Sh48 million.

This represented 86 per cent reduction from the initial figure in the investigation by World Bank forensic auditors. The disparity is understood to have angered the World Bank whose officials are expected in the country next week to discuss the two reports.

Development of Northern Kenya and other Arid Lands minister Mohammed Elmi on Monday confirmed the team was scheduled to arrive in the country on October 17.

Mr Elmi backed the government audit, saying it reflected the true position regarding the likely fraud in the project.

“We expect the amount lost to fraud to reduce even further when the teams meet to come up with a final report next week,” he said in an interview.

The minister defended the project, saying it was a “massive success” in improving livelihoods in the districts covered.

The project, suspended last year over the corruption allegations, provided communities in 28 arid and semi-arid districts with assistance to manage drought and improve their livelihoods.

In August, Prime Minister Raila Odinga announced that the government was initiating a thorough review of the project to establish the extent of financial irregularities.

Mr Odinga warned that any fraud noted in the review would be referred to the Kenya Anti-Corruption Commission for investigation.

KACC, led by lawyer PLO Lumumba, has since been disbanded and is being reconstituted as the Ethics and Anti-Corruption Commission.

The World Bank audit covered expenditure in seven districts in the 2006/07 and 2007/08 financial years and established that the government could have lost Sh300 million ($4 million), according to the statement released by Mr Odinga at the time.

In a letter to the Development of Northern Kenya and other Arid Lands permanent secretary Lawrence Lenayapa, Finance permanent secretary Joseph Kinyua said a key outcome of the audit review was the confirmation that the total ineligible expenditure amounted to about Sh48 million.

Spent fraudulently

This is a great reduction from the forensic audit by the World Bank’s Institutional Integrity Department’s (INT) in April 2009, which put the amount of money suspected to have been spent fraudulently at Sh362 million.

“Expenditures amounting to Sh165 million have been categorised as requiring investigations due to various integrity issues, including lack of supporting documentation,” Mr Kinyua said.

The August 16 letter was copied to Public Service head Francis Muthaura, Office of the Prime Minister permanent secretary Mohamed Isahakia and World Bank country director Johannes Zutt.

The second phase of the project came to an end on December 31, last year, following a joint decision by the government and the World Bank to suspend disbursements.