No money was lost in KKV, Raila insists

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Mr. Speaker,

On October 25, 2011, the Honourable Member for Saboti, Mr Eugene Wamalwa, sought a statement from the Government on Kazi Kwa Vijana (KKV).The Honourable Member specifically requested the following information:

(a) How much money has been committed to KKV from inception to date;
(b) How much money has been lost through alleged corruption with respect to KKV;
(c) Who is responsible for the alleged loss of funds, and
(d) Whether the Prime Minister would be prepared in the circumstances to take political responsibility.

Honourable Wamalwa canvassed the same issues in this House on October 26, 2011, and the Honourable Speaker directed that a Government statement be issued today. The Honourable Member for Konoin, Dr Julius Kones also alluded to a Report by the Controller and Auditor-General on KKV.

Mr. Speaker,

As noted in my statement here last week, poverty in Kenya unfortunately has a predominantly young face, with one in every three poor Kenyans being a youth. This means youth have a higher-than-national-average poverty rate, at 51 per cent.

Youth suffer under-employment and experience the highest rate of unemployment at 21 percent, double the national average. Thirty-eight percent of our youth are neither in school nor in work.

How to turn our young people into engines of growth is probably the greatest challenge of our time.

Mr. Speaker,

As far as KKV is concerned, allow me to inform the House that this is a project being implemented in two phases.

The first phase, KKVI, began in March 2009, and went on for just over a year. It must be clearly understood that this was an emergency intervention to respond to the results of a severe drought.

KKV I was a wholly Government of Kenya-funded project, and the jobs involved were short-term manual labour – for example, clearing clogged dams and water ways, building ponds, planting of trees, manual construction of roads etc, to help ease the impact of the drought.

While the project was not without a hitch, overall it was a success. The International Labour Organisation made an independent assessment of KKV I for the period through September 2009, at the request of the World Bank.

Let me quote some of the findings of the ILO, as reported in the Project Appraisal Document of the World Bank.

I quote: “KKV made commendable progress in youth employment creation by achieving 112 percent of the planned target. …

“…… by mid-September 2009, a total of 296,080 youths had been directly employed under the programme. …

“……KKV appears to be a viable method of completing stalled projects or rehabilitating existing ones which require only small inputs of construction materials and labour.” End of quote.

The ILO review recognised some problems in implementation. It reported that erratic disbursement of funds, coupled with the low funds-absorption capacity in some implementing agencies “in some cases, resulted in situations where funds were not put to the best use, and implementing agency staff were hassled into paying for work that was not prioritised and could not be validated.”

But overall, as can clearly be seen by the positive assessment made by the ILO, the project was successful and provided the basis for the World Bank to proceed to KKVII.

(Allow me to table the World Bank’s Project Appraisal Document dated March 3, 2010)

Mr. Speaker,

As I have said, and as I now emphasise, KKV I was an emergency stimulus intervention, designed to provide a social safety net for young Kenyans at risk of hunger and starvation. The programme was implemented by six ministries namely: Roads, Environment & Mineral Resources, Water & Irrigation, Forestry & Wildlife, Regional Development Authorities and Youth Affairs & Sports. The Office of the Prime Minister provided overall supervision of the programme while Office of the President, and Ministries of Finance and Planning provided support services on the monitoring and coordination aspects.

As the ILO pointed out, the number of youth engaged under KKVI actually exceeded the original target by more than 10 per cent.

All in all, the Government contributed Sh2.8bn to KKV I in the financial year 2008/2009, and Sh4.3bn in the financial year 2009/2010.

Sixty-eight percent of the funding was paid out to the youth as wages, 21 percent was used to purchase tools, equipment, seedlings and so on, and 11 per cent covered administration costs. However, being a project that was conceived in a hurry in order to respond to the urgent needs of the time, certain weaknesses became apparent which prompted my office to ask for an audit of the entire project.

A Value-for-Money Audit of KKV I was carried out by the internal audit department of the Office of the Deputy Prime Minister and the Ministry of Finance.

Dated July 2010, the audit report indicated that, during the 2008/2009 and 2009/2010 financial years, a total of Sh7,552,523,587 was disbursed to 11 ministries for projects under KKV I, on a ‘first come, first served’ basis.

Of this amount, Sh308,016,547, being 4.08 percent of the total disbursements, was confirmed by the audit to be ineligible expenditure.

The various categories of ineligible expenditure were:
” Sh85,022,079 not related to the objectives of KKV;
” Sh110,249,123 without supporting documents;
” Sh22,040,918 with integrity issues such as fraudulently altered entries;
” Sh26,352,120 in expenditure on normal recurrent ministerial operations;
” Sh64,352,307 in expenditure on activities whose procurement was not competitive.

(I table the Value-for-Money Audit Report).

I emphasise that expenditures considered ineligible amounted to 4.08 percent of total disbursements.

Of this 4.08 percent, those with integrity or procurement issues amounted to Sh107,026,997, that is, 1.35 per cent of total disbursements. These questionable expenditures were incurred by the implementing line ministries. The audit raised no queries touching on the Office of the Prime Minister in regard to the project.

Mr. Speaker,

The Treasury directed the various ministries to initiate appropriate action to recover expenditures with accountability and integrity issues, as listed in the Value-for-Money Audit Report.

My office concurred with the Treasury and further suggested that the Treasury issue a circular on these issues to the ministries concerned.

(I table a copy of a letter from the Permanent Secretary to the Treasury under Ref. MOF/IAG/KKV/308(34) dated November 8, 2010 and a letter from the Permanent Secretary, Office of the Prime Minister).

Mr.Speaker,

The lessons learned on KKV I have helped shaped the formulation of KKV II.

With the benefit of adequate time for preparation, together with expert advice from the World Bank and the International Labour Organisation, the Government has rolled out KKV II with a much stronger governance structure.

The project has been expanded to target youth who have completed tertiary-level education and have vocational skills.

KKV II, also known as the Kenya Youth Empowerment Project, is supported by credit from the World Bank to the tune of US$60 million.

It has three components:
1) labour-intensive works, funded at US$43 million and implemented directly by line ministries;
2) private-sector internships and training, funded at US$15.5 million and implemented by the Kenya Private Sector Alliance (KEPSA);
3) capacity building and policy development, funded at US$1.5 million and implemented by the ministry of youth affairs and sports.

The Office of the Prime Minister provides co-ordination, oversight, monitoring and evaluation services to the project, under a grant of US$400,000 from the World Bank.

Mr. Speaker,

Regarding alleged misuse of KKV funds by the Office of the Prime Minister, I am pleased to report to you that the World Bank has completed its Financial Management Review.

In forwarding the result of the review, the World Bank wrote to the Government on October 31, 2011, emphasising that the article in the Sunday Nation under the headline ‘Kazi Kwa Vijana: PM’s office on the spot’ was based on a working draft, not even a preliminary paper, and that the phrase “ineligible expenditures” meant ONLY that those expenditures were not to be paid with World Bank funds.

The World Bank acknowledged that the working draft on which the Nation article was based appeared to have been leaked by Bank staff.

The Bank is concerned that an internal working document was shared with a member of the media without authorisation, contrary to World Bank staff rules.

The World Bank informed the Government that it had initiated an internal review to determine what had occurred in this instance, and whether disciplinary action was warranted.

Mr. Speaker,

When it came to the final result of the review, of the 14 expenditure items earlier suspected to be ineligible, nine were in fact no longer questioned.

The review found that:
(a) expenditures totalling Sh1,350,266 initially considered ineligible were actually eligible for World Bank financing;
(b) expenditures totalling Sh577,564.45 had been erroneously posted to the World Bank project account and were subsequently correctly reposted to Government accounts;
(c) expenditure of Sh5,510,495 was wrongly recorded as financed by Bank funds, in the working draft of the Financial Management Review.

The World Bank’s final review showed that five items remained ineligible. Of these, four items at Sh19,402,60 were ineligible for World Bank funding because they were not in the procurement plan or the work programme that had been agreed with the World Bank.

The World Bank has, however, confirmed that the relevant supporting original documentation for these expenditures was provided to the World Bank and these expenditures appear to be related to the youth empowerment activities. As these expenditures were not included in the procurement plan approved by the World Bank, they should have been financed from government funds.

Finally, a payment of Sh1,221,000 was made as a top-up allowance to a civil servant in active service and on the Government’s payroll. This occurred as the officer concerned was in transition from the civil service to Project Co-ordinator. The funds will be recovered from the officer concerned as appropriate, to avoid double payment.

(I table the letter from the World Bank dated October 31, 2011, together with the attachment on Financial Management Review).

Mr. Speaker,

I have been asked by some Members of Parliament to take political responsibility.

I wish to stress that the World Bank review makes no finding that the funds in question were lost or stolen. Its findings are that the relevant expenditures should not have been paid out of the World Bank project funds. Nowhere in its press statement dated October 24th or in the documents that I have tabled today, does the World Bank state that it found fraud or corruption in the project.

Mr. Speaker,

You may also be aware that when the World Bank does find suspected fraud or corruption in its work, it does not hesitate to say so.

From the foregoing, it is crystal clear that those Members of Parliament had no basis for raising this issue in the first place.

It has been alleged that the Sh4.3b or US$43 million for Component I of the KKV II Kenya Youth Empowerment Programme was lost because the project was cancelled.

The Sh4.3b has not been lost. The programme will be restructured to reorient the Sh4.3b to other activities for youth empowerment. The project is alive and will continue to be implemented.

We shall correct any weaknesses that might remain, and we will move resolutely forward with our plans to empower young Kenyans.

In fact, we as Kenyans should also be proud that the Kenyan KKV is now being replicated in nine African countries.

Let me end with a quote from John F. Kennedy; ” A man does what he must, in spite of personal consequences, in spite of obstacles and dangers and pressures, and that is the basis of all human morality.”

The Rt. Hon. Raila A. Odinga, EGH, MP
PRIME MINISTER Wednesday, November 2, 2011

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