Contents

Acronyms and Abbreviations ........................................................................................................... 4

Executive Summary.......................................................................................................................... 5
Background ...................................................................................................................................... 8
Allegations and INT’s initial assessment ........................................................................................ 10
Scope .............................................................................................................................................. 12
Suspected Fraudulent Expenditures (SFEs)............................................................................ 13
Questionable Expenditure (Q) ............................................................................................... 13
Methodology.................................................................................................................................. 15
Other audit work and procedures ............................................................................................. 17
PART I – Overview of Transactions Reviewed and Findings .......................................................... 19
Detailed findings by project categories ..................................................................................... 24
PART II – Non-Transactional Issues and Findings........................................................................... 26
Bank and Cash Issues ................................................................................................................. 26
Use of AIEs in the project ....................................................................................................... 26
Balances of project bank accounts as at 30 June 2007.......................................................... 28
Funds flow .............................................................................................................................. 31
Unpresented cheques ............................................................................................................ 31
Cheques banked not appearing in cashbook or supported by payment vouchers ............... 33
Use of Cash Cheques .............................................................................................................. 33
Some Other Behaviors Observed in Reviewing Cleared Cheques ......................................... 35
ATM Withdrawals related to Commissioner of VAT cheques ............................................... 36
Bank charges .......................................................................................................................... 37
Integrity of Bank Statements records .................................................................................... 37
Delay in recording cash withdrawals in Isiolo’s cashbook ..................................................... 40
Tana River District Bank Reconciliation ................................................................................. 41
Payroll/HR issues........................................................................................................................ 42
Other earnings to staff – adjustments June 2008.................................................................. 47
March Quarter 2008 FMR and Payroll schedule variance (Ksh2,265,501.50) ....................... 48
Noncurrent Assets ..................................................................................................................... 50
Project accounting records for noncurrent assets................................................................. 50
IDA requirements on project asset disposals ........................................................................ 51
Boarding of vehicles ............................................................................................................... 52
Financial Management Report (FMR) issues ............................................................................. 53
Reporting obligations of the project ...................................................................................... 54

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