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Statement on Foresic Audit Report for Ministry of Education and Ministry of Medical Services

Statement on Foresic Audit Report for Ministry of Education and Ministry of Medical Services

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Treasury this morning released a forensic audit report for the for Ministry of Education and Ministry of Medical Services
Treasury this morning released a forensic audit report for the for Ministry of Education and Ministry of Medical Services

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Published by: H.E. President Uhuru Kenyatta on Jun 13, 2011
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06/13/2011

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1
OFFICEOFTHEDEPUTYPRIMEMINISTER&MINISTRYOFFINANCE

PRESSSTATEMENTONTHEFINALAUDITREPORTADDRESSINGTHEGOVERNANCECHALLENGESINTHEKENYAEDUCATIONSECTORSUPPORTPROGRAMME(KESSP)UNDERTHEMINISTRYOFEDUCATION;ANDTHEPENDINGBILLSAUDITOFTHEMINISTRYOFMEDICALSERVICESMembersofthePressLadiesandGentlemen
 
ThepurposeofthisbriefingistoupdateKenyansandindeedourdevelopmentpartnersonthe(i)progresswehavemadesinceOctober2009inaddressinggovernancechallengesintheeducationsector,morespecificallytheKenyaEducationSectorSupportProgramme(KESSP)undertheMinistryofEducation,and,(ii)theauditforSeptember2008onthePendingBillsforMinistryofMedicalServices.
I.
 
THEKESSPFORENSICAUDITBackgroundofKESSPAudit
 
Asyouwillrecalllastyearonthe15
th
ofDecember,2010,IinformedKenyansontheprogressmadeinundertakingfurtherinvestigationsandverificationofsuspectedcasesoffraudandmisappropriationoffundsintheKenyaEducationSectorSupportProgramme(KESSP).Thepreliminaryforensicaudit,undertakenbytheTreasury,indicatedthatwhiletheeducationsectorhasbeenlargelywellmanaged,certaincasesoffraudhadbeenfound.
 
AsaGovernment,wemovedswiftlyandtookfirmmeasures.TheofficerswhowereinvolvedinthemisappropriationofthesefundsweresuspendedtogivewayforfurtherinvestigationbytheKenyaAnti-corruptionCommission.Further,followingtheinvestigationsbytheKenyaAnti-corruptionCommissiontheseofficerswerepromptlycommittedtocourt,andtheprosecutionoftheircasesisongoing.
 
Inthesaidpressstatement,IindicatedthatwewillbeupdatingKenyansoncetheoutcomeofthefinalauditworkbytheInternalAuditDepartment(IAD)wasconcluded.ThisprocessinvolvedtheverificationofadditionaldocumentssubmittedbytheMinistryofEducation,aswellasonsiteorphysicalvisitsto512primaryschoolsoutof26,000schoolsandinstitutionsreceivingsupportundertheKESSP.The512
 
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schoolswereselectedonthebasisofriskassessmentwhichrevealedthattheseschoolsrepresented75%oftheissuesthatrequireddetailedinvestigation.Theauditscopecoveredaperiodoffour(4)financialyearsrunningfromJuly2005toJune2009oftheprogramme’simplementation.TheforensicaudititselfwascarriedoutbetweenAprilandSeptember,2010andinvolvedtheMinistryofFinanceInternalAuditDepartment(IAD)withtechnicalsupportfromDFID.Thisauditisnowcomplete.
OutcomeoftheFinalKESSPAuditInvestigation
LadiesandGentlemenTheadditionalauditworkdonebyIADsincethefirstdraftreportwasissuedhasconfirmedthatineligibleexpenditurefromtheKESSPfinalauditis
Kshs.4.2billion
,havingreducedfromtheoriginalfigureofKshs.8.2billion.Outoftheineligibleexpendituresof
Kshs.4.2billion
,alargepercentagrelatedtophysicalinfrastructure.Physicalvisitstotheschoolsduringtheauditconfirmedthat
Kshs.1.9billion
didnotreachtheschools.Additionalthirdpartyevidenceobtainedfromthedispatchingbankdisclosedthatthefundshadeitherbeenpaidtoinstitutionswhichwerenotregistered,or,theschoolbankaccountsintowhichdisbursementsweremadewerenotthegenuinebankaccounts.Theforensictrailwasabletodeterminetheindividualaccountnumbersanddetailstowhichthereturnedfundsweredepositedandlaterwithdrawn.Inaddition,someofthefundstotaling
Kshs.3.1million
weredepositedinbankaccountsforschoolswhichdidnothaveTSCcodesimplyingthattheschoolswerenotofficiallyrecognized.Themoneywassubsequentlywithdrawnbyindividualswhoseparticularsareavailable.Casesconcerningimprestsamountingto
Kshs.8.2million
couldnotbeaccountedfor.Theauditdiscoveredadiscrepancyrelatingtofinancialmonitoringreports(FMRs)amountingto
Kshs.2.27billion
whichamountwasnotreconcilablewiththeMinistry’scashbooksorbankaccountbalances.Theforensictrailrevealedanattempttocoverupthediscrepancythroughmanipulationofthecashbooks.Thedetailsofhowithappenedandtheindividualsinvolvedareavailable.Insummary,theIADreportcontainsspecificinformationon:Thespecificbankaccountdetailswherefundswerewronglyorirregularlypaidinto;Detailsofsignatoriesofsomeofthebankaccounts;Thedetailsofamountsdisbursedintothewrongaccounts;
 
3
ThedetailsofconfirmationfromtheschoolsthatweretoreceivethefundsastabulatedbytheMinistryofEducationbutdidnotreceivethefundsasreflectedinthebankpaymentschedules;Detailedreconciliationofthefinancialmonitoringreports(FMRs)occasioningtheKshs.2.3billiondifference;
 
ThereconcileddetailsoffundsreceivedfrombothGovernmentandDevelopmentPartners.
ConclusiononKESSPAuditReport
 
Despitetheintegrityissuesflaggedherein,IwishtoreiteratethatitisimportantthatwearecognizantofthesignificantsuccessesthatKESSPhassecuredinenhancingoureducationgoalsfortheperiodithasbeenunderimplementation.Thisisdemonstratedbyoverallimprovedschoolsinfrastructurethatfacilitatesconducivelearning,increaseintheschool’senrollmentrate,improvedschoolretentionrate,improvedtransitionratefromprimarytosecondaryschools,and,tremendousimprovementandenrollmentinnon-formalschoolsincludinginprisonsandslumareasetc
 
TheembezzledamountsIhavereferredtointhisstatementamounttoabout1%ofthetotalamountofKshs.489billionallocatedtoKESSPfrom2005to2009.
 
Whereasthisisnotmeanttojustifynorsupportthemisappropriationtabledinthisfinalauditstatement,anyinterpretationsofthereportmustbemadeagainstthecommitmentandresolveoftheGovernment,andparticularlytheTreasury,insustaininggovernanceandanticorruptioninterventionsinallspheres,especiallywithinitscoreinvestmentsectors.
 
Further,remedialmeasureshavealsobeeninstitutedtoenhancethecontrolenvironmentintheMinistryofEducation.TreasurywillcontinuetomonitortheimplementationoftheAccountabilityActionPlanagreedonbetweendevelopmentpartnersandMinistryofEducationofficialsonaregularandconsistentbasis.
ActionstakenandWayForwardonKESSPAudit
 
AcopyoftheKESSPreporthasbeensharedwithHeadofPublicService&andthePermanentSecretary,MinistryofEducationtoinitiateadministrativeactioninlinewiththeCodeofRegulations,andfurtherreinforceadhearancetotheGovernmentFinancialManagementActandRegulations.
 
Iwishtoherebyinformthepublicthattheauditreport,togetherwiththenamesofindividualsbothingovernmentandnoncivilservantswhowereinvolvedinthe

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