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Arid Lands project under review over fraud

NAIROBI, Kenya Jun 16 – The Government has announced that it is initiating a thorough review of phase two of the Arid Lands Natural Resource Management project (ALRMP2).

This follows the Government\’s receipt of the preliminary results of a World Bank forensic audit that found possible fraud in a significant number of project expenditures.

The audit, which was completed by the World Bank\’s Integrity Vice Presidency (INT), covered expenditures in seven districts over FY06-07 and FY07-08 and involved reviewing and analyzing about 28,000 documents.  The review to date found suspected fraudulent expenditures in up to 29 percent of those sampled in the audit, totalling more than $4 million. The project was suspended in July 2010, when INT\’s preliminary findings were received by World Bank management.
Going forward, the Government, working with the World Bank, will:
 *        Review the INT report and conduct a risk-based in-depth review of the project\’s financial management, using the INT report as a road map and focusing on the areas of highest risk.  This work will also aim to understand any implications that these findings may have for possible future work in Kenya\’s arid and semi-arid lands.  To this end, the Government and the World Bank have constituted a joint technical team to conduct the requisite review.

*        Refer any allegations of fraud or corruption found in the course of its review to the Kenya Anti-Corruption Commission (KACC) for investigation, and to prosecute any individuals or firms implicated.

*       Continue to work with INT and other parts of the World Bank to identify systemic challenges in project design and execution-within both the Government of Kenya and the World Bank-and devise robust methods to address them, drawing on best practices in Kenya and abroad.

The World Bank is also undertaking a systemic audit of its own activities under this and similar projects, in order to ensure that problems are detected rapidly and that corrective action is duly taken.
"I appreciate our long-standing partnership with the World Bank in bringing critical services to pastoral communities in the arid regions of Kenya." said  Prime Minister Raila Odinga.  "I am concerned that INT has found allegations of financial mismanagement in the project.  If those allegations are substantiated, the Government will take corrective action as quickly as possible, so that we can maximize our assistance to pastoral Kenyans."
The Government of Kenya and the World Bank have been working together closely to tighten oversight of the entire Bank-financed portfolio in Kenya, which includes 24 national and five regional projects, with a total commitment amount of US$2.6 billion, since the Bank initiated a series of portfolio audits in 2009.
All new Bank-supported projects in Kenya which involve highly-decentralized expenditures at the local level have been or are being strengthened with the introduction of additional measures, such as independent external monitoring agencies to review agency-level procurement, financial management, compliance and performance in real time.  In this way, issues will be identified and managed as they arise.
"We have had constructive discussions and will work closely with the Government to resolve these issues comprehensively and in a timely manner," said Obiageli Ezekwesili, the World Bank Vice President for Africa Region, following consultations today in Nairobi with the Government of Kenya.

Commenting on the opportunities that the new constitution is providing for Kenya\’s development, she said: "We are also encouraged by the actions that Kenyan citizens are themselves taking to demand accountability."
"The problems in ALRMP2 require purposeful and convincing actions by the Government of Kenya," said Leonard McCarthy, the World Bank Vice President for Integrity.  "A rapid response in such situations is vital to making meaningful progress strengthening integrity."
The Government of Kenya\’s ALRMP provided food-insecure pastoral communities living in the country\’s arid regions with assistance to manage droughts and improve their livelihoods.  Of the twenty poorest constituencies in Kenya, eighteen are in the arid north, where absolute poverty levels have risen despite falling levels in the rest of the country. 
ALRMP2 was initiated in June 2003 to assist food-insecure pastoral communities living in the country\’s arid regions to manage droughts and improve their livelihoods.  The project reached over one million beneficiaries through capacity-building programs and more than 4,000 micro-projects, including support for health clinics, schools, water-related investments, and livestock and agriculture-related investments.

The project also increased drought preparedness by improving access to water, livestock feed, and more drought-resilient agricultural practices as well as by providing early warning bulletins and rapid food security assessments.   As a result, participating districts experienced less need for food aid, more rapid response times, better child nutritional status, and better access to social services, than in non-participating districts.
The World Bank\’s support to ALRMP2 consisted of a first credit of US$60 million that was approved in June 2003 and a second credit of US$60 million that was approved in August 2006.  The project closed in December 2010, as scheduled.
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