How grafting into aid steals debt from our borrowed future


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Ideas and debate

How grafting into aid steals debt from our borrowed future


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National Treasury Building. FILE PHOTO | NMG

Since the 1970s, conservationists have repeated the claim, “We don’t inherit the Earth from our ancestors, we borrow it from our children.” If we replaced the word “earth” with the word “economy,” the phrase would sound just as true.


According to the Kenya National Bureau of Statistics Quarterly Labor Force Report from Q4 2019, two-thirds of the workforce in Kenya must be under 40, and Kenya’s economy must sustain a substantial, youthful population. Another 20 million Kenyans will join the workforce in the not-too-distant future, and all of these young people will also “borrow” the economy from future generations.

A sustainable, growing economy requires investment for the future, and Kenya continues to look for external sources of capital in the form of debt, subsidies and aid.

These funds play an important role in providing technical assistance and financing development programs, in responding to and recovering from emergencies and disasters and generally improving the quality of life in Kenya.

In the Budget Statement for 2021, the National Treasury estimated that Kenya would borrow Sh426 billion from foreign sources and receive grants from Sh49 billion.

These figures exclude foreign aid provided directly through line ministries or provincial governments to support specific programs or funds that flow directly into development partner or NGO programs.

According to the NGO Co-ordination Board’s annual NGO sector report 2018/19, 3,028 NGOs reported receiving Sh166 billion in 2018/19 and 88 percent of these funds were raised from sources outside Kenya.

Kenya’s ability to raise external financing and the cost of the funds (i.e. the interest charged on the debt or administrative costs on donor money) depend on two main factors: Kenya’s ability to repay, especially in the case of debts, and secondly, the extent to which the country is considered able to use the funds transparently and for the intended purpose.

Regarding the second factor, fraud and corruption are serious obstacles.

Fraud aimed at donor money and aid is unfortunately endemic and takes many forms.

Procurement fraud occurs when executing agencies purchase non-existent goods from non-existent suppliers at a high cost. Misuse of daily allowances and subsistence allowances is also common, false attendance records and hotel receipts are used to support nonexistent conferences or to exaggerate attendance. Capital projects using significant development funds may be too costly and / or the funds may be targeted for unjustified deviations from stated specifications.

Equally worrying are the numerous cases where funds have been transferred from one project to another, or from one budget line to another.

This practice not only creates a channel for the theft of funds, but also results in the transfer of money from its intended use, such as funding development or humanitarian projects, to items that have a more direct personal benefit, such as salaries and allowances of personnel. .

From a human resources point of view, nepotism in the recruitment process and payments to ghost workers are also common.

It is imperative to protect all our assets from fraud, whether the source of those assets is external or internal. However, as far as external funds are concerned, there is an increased need as those funds must in many cases be repaid with interest and their theft affects Kenya’s international reputation and our ability to obtain additional funds and the cost of future funds.

We all have a role to play in protecting these funds from fraud.

For example, NGOs and donor agencies can get their funding from individuals or the government treasury. Either way, they promise to use the money for development and making the world a better place.

While implementing partners can track the results of their projects, many fraudsters are familiar with traditional project audits and monitoring and evaluation methods. Therefore, accountability must be monitored and implemented in innovative ways.

Fraud analysis can help identify anomalies and raise the alarm, even in cases where reports and supporting documents are submitted.

Issues such as pooling of funds and duplication of reporting could be partially addressed by conducting joint audits, especially when more than one party is funding a project.

The entities responsible for overseeing the funds, be it government agencies or donors, must also send a clear message that they will not tolerate misuse of funds.

When used and accounted for properly, foreign funds can support economic growth and development. Ultimately, Kenya could become less dependent on these funds and leave a more sustainable economy to future generations, with growth funded internally, responsibly and transparently.

Now is the time to proactively anticipate fraud risks and take steps to mitigate these practices.

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