Kenya’s Treasury Stole $12 Million From Poverty Eradication UN Project

Kenya’s anti-graft agency alleges more than $12 million was siphoned from the UN-backed Rural Outreach of Financial Innovations and Technologies (PROFIT) programme after its closure in 2019, with court filings claiming officials diverted $10.6 million from the National Treasury, transferred $4.5 million to various entities and withdrew $6.2 million in cash. The programme, which received $30.89 million in funding from the International Fund for Agricultural Development (IFAD) and the Kenyan government, was designed to expand access to finance for small-scale farmers before ending in December 2019. 

Kenya’s anti-corruption agency has moved to seize assets including buildings and bank accounts belonging to senior National Treasury officials and their associates after investigations alleged the embezzlement of more than $12 million from a United Nations-backed rural financial inclusion programme.

The Ethics and Anti-Corruption Commission (EACC), according to the Business Daily paper, said in court filings that officials exploited weak management systems to divert funds from the Program for Rural Outreach of Financial Innovations and Technologies (PROFIT) programme, which was jointly funded by the Kenyan government and the International Fund for Agricultural Development (IFAD).

The allegations are contained in court documents filed by the EACC, and the accused parties have not filed responses to the claims.

IFAD, a specialised United Nations agency focused on addressing poverty and hunger in rural areas of developing countries, supported the programme, which aimed to improve access to finance for small-scale farmers.

An EACC investigation report filed at the High Court alleged that funds were misappropriated through a series of transactions, including transfers to personal accounts and a $6.2 million cash withdrawal by an official who served as the PROFIT programme accountant.

The EACC alleges that the funds ended up in individuals’ accounts and were partly used to purchase residential and commercial properties in Nairobi, Machakos and Uasin Gishu counties.

The High Court has allowed the agency to preserve the assets and barred the Treasury officials and their associates from transferring, withdrawing or dealing with the funds and properties pending the hearing and determination of a recovery case.

Those named in the court documents include former PROFIT programme accountant Billy Otieno Obango; Gladys Julliet Chepkarat; National Treasury senior accountants John Maina Muriithi and Nemwel Moturi Mutonya; John Ngure Kabutha; and Lilian Wanjiku Dishon, a senior deputy accountant general at the Treasury.

Others listed include George Kihara, head of the Accounting Unit at the National Treasury; Susan Warukira, principal accountant at the Treasury; Sylvia Awino Obango; Philip Sigo Chepkarat; 020 Investments Limited, which the EACC claims in court documents is linked to Chepkarat’s children; and Jarods Agency Limited.

The PROFIT programme, launched on Dec. 22, 2010, operated under the Treasury’s Directorate of Budget, Fiscal and Economic Affairs and was designed to expand access to credit for small-scale farmers through credit guarantees, lending through microfinance institutions and capacity-building initiatives.

Court documents show the programme received total funding of $30.89 million, including $30.33 million from IFAD and $561,000 from the Kenyan government.

The programme ended on Dec. 31, 2019. However, the EACC alleges that after its closure, officials fraudulently processed and authorised the release of $12 million from the National Treasury under the guise of programme funding.

The commission claims the funds were illegally drawn by Obango and Chepkarat and channelled to various entities, with some of the money allegedly used to acquire residential properties in Nairobi, Athi River and Eldoret.

The EACC has filed a suit seeking recovery or forfeiture of $12 million linked to the PROFIT programme, which it says represents proceeds of corruption.

Court records show investigators found that officials maintained an operations account for the programme at Co-operative Bank of Kenya after the initiative had ended.

The documents state that in March and May 2023, residual funds of about $1.6 million were transferred from the PROFIT account to an account belonging to the Rural Kenya Financial Inclusion Facility (RK-FINFA) at Housing Finance Bank.

The EACC alleges that after PROFIT’s closure, an additional $10.6 million was fraudulently released from the National Treasury into the programme’s Co-operative Bank account.

Of that amount, about $4.5 million was allegedly transferred to various entities, while $6.2 million was withdrawn in cash by Obango.

The commission further alleges that between November 2019 and June 2022, three signatories to the PROFIT programme account colluded to transfer about $629,000 to 020 Investments Limited, which investigators describe in court documents as a proxy company linked to Chepkarat.

The agency also alleges that in October 2022, Obango and Chepkarat fraudulently opened a KCB Bank Kenya account in the name of PROFIT using false documents after the programme had ended.

According to the EACC, about $1.35 million was later disbursed from the Treasury into the account. Of this, approximately $1.2 million was paid to various entities through cheques supported by allegedly forged documents.

The commission claims Obango withdrew about $6,900 in cash on one occasion, while Chepkarat withdrew about $124,000, bringing the total amount allegedly embezzled through the KCB account to about $1.35 million.

Investigators said the alleged fraud was facilitated through fake payment vouchers purporting to seek funding for PROFIT activities.

The documents were allegedly supported by requests for funds purportedly originating from IFAD, despite the donor having stopped funding the programme after its closure in 2019.

EACC told the court that genuine PROFIT payment vouchers required a two-stage approval process, including certification by an Authority to Incur Expenditure (AIE) holder and authorisation by the accounting officer. An AIE is a financial document used primarily in public sector and grant management to authorise officials to spend up to a defined budget limit.

“The false payment vouchers purportedly prepared in the name of PROFIT only had one-step authorisation by an accounting officer,” the Commission stated in court filings.

The anti-graft agency further alleges that Obango used proceeds of corruption to acquire a residential flat in Stoni Athi, Mavoko, from the National Housing Corporation for about $68,000 and spent about $140,000 to purchase four housing units in Kamulu’s Avana Garden Estate.

Chepkarat and Philip Chapkarat are accused of using part of the funds to develop a four-storey building known as Skyline Hotel in Eldoret.

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