AFRICAN DEVELOPMENT FUND Language: English Original: English

KENYA

INSTITUTIONAL SUPPORT FOR GOOD GOVERNANCE (KISGG)

APPRAISAL REPORT

Country Operations Department ONCF North, East and South Region June 2006

TABLE OF CONTENTS

Page No

Table of Contents Abbreviations and Acronyms i Currency Equivalents ii Project Information Sheet iii-iv Executive Summary v-vii Project Result-based Logframe viii 1. INTRODUCTION ....................................................................................................... 1 1.1 Origin and History of the Project .................................................................................. 1 1.2 Past Bank Group Operations in Governance................................................................. 2 2. AN OVERVIEW OF THE STATUS OF GOVERNANCE .................................... 2 2.1 Socio-Economic Context............................................................................................... 2 2.2 Governance Indicators in Kenya ................................................................................... 3 2.3 Implementation of the Governance Agenda.................................................................. 4 3. AREAS OF FOCUS OF THE PROJECT................................................................. 8 3.1 Introduction ................................................................................................................... 8 3.2 Public Procurement Department ................................................................................... 9 3.3 Internal Audit Department (IAD).................................................................................. 9 3.4 Kenya National Audit Office (KENAO)..................................................................... 10 3.5 Kenya Anti-Corruption Commission (KACC) ........................................................... 12 3.6 The External Resources Department (ERD) ............................................................... 13 4. THE PROJECT......................................................................................................... 13 4.1 Project Concept and Rationale .................................................................................... 13 4.2 Strategic Context ......................................................................................................... 14 4.3 Project Objectives ....................................................................................................... 15 4.4 Project Description...................................................................................................... 15 4.5 Project Costs................................................................................................................ 20 4.6 Sources of Financing and Expenditure Schedules ...................................................... 23 5. PROJECT IMPLEMENTATION ........................................................................... 23 5.1 The Executing Agency ................................................................................................ 23 5.2 Institutional Arrangements.......................................................................................... 24 5.3 Implementation Schedule............................................................................................ 25 5.4 Procurement Arrangement .......................................................................................... 25 5.5 Disbursement Arrangements ....................................................................................... 27 5.6 Financial Reporting and Auditing. .............................................................................. 27 5.7 Coordination with Other Donors................................................................................. 27 5.8 Monitoring and Evaluation.......................................................................................... 28 5.9 Publication of the Award of Contract ………………………………………………..29 6. PROJECT SUSTAINABILITY AND RISKS ........................................................ 29 6.1 Project Sustainability................................................................................................... 29 6.2 Risks and Mitigating Factors....................................................................................... 29

7. PROJECT BENEFITS AND IMPACT................................................................... 30 7.1 Project Benefits. .......................................................................................................... 30 7.2 Social Impact............................................................................................................... 31 7.3 Environmental Impact ................................................................................................. 31 7.4 Gender Impact ............................................................................................................. 31 8. CONCLUSIONS AND RECOMMENDATIONS .................................................. 31 8.1 Conclusions ................................................................................................................. 31 8.2 Recommendations ....................................................................................................... 31

List of Tables Table 4.1: Summary of Project Cost Estimates by components Table 4.2: Summary of Project Cost by Category of Expenditure Table 4.3: Sources of Financing Table 4.4: Expenditure Schedules by Component, Source, and by Year. Table 5.1: Project Implementation Table Table 5.2: Summary of Procurement Arrangements Table 5.3: Activities of Major Donors in the Area of Governance in Kenya List of Annexes Annex 1: Kenya Map Annex 2: Matrix on the Improvement of Public Finance Management Annex 3: KACC Objectives Matrix Annex 4: Bank Group Operations

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ACRONYMS AND ABBREVIATIONS

ADB African Development Bank ADF African Development Fund BMD Budget Monitoring Department CAG Controller and Audit General CFAA Country Financial Accountability Assessment CGD Centre for Governance and Democracy EFMAP Enhanced Financial Management Action Plan ERSWEC Economic Recovery Strategy for Wealth & Employment Creation FMA Financial Management Agent GJLOS Governance, Justice, Law and Order Sector GoK Government of Kenya HR Human Resources IAD Internal Audit Department IAG Internal Auditor General IAS International Accounting Standards IASC International Accounting Standards Commission IAOs Integrity Assurance Officers ICPAK Institute of Certified Public Accountants ICCPR International Covenant on Civil and Political Rights ICT Information and Communication Technology IFAC International Federation of Accountants IFMIS Integrated Financial Management Information Systems IMF International Monetary Fund IPSA International Public Sector Accounting Standards ISA International Standards of Auditing IT Information Technology KANU Kenya African National Union KACA Kenya Anti-Corruption Authority KACC Kenya Anti-Corruption Commission KNAC Kenya National Audit Commission KENAO Kenya National Audit Office MTEF Medium Term Expenditure Framework NARC National Rainbow Coalition NDP National Development Plans PAC Public Accounts Committee PER Public Expenditure Review PEM Public Expenditure Management PFMRCU Public Financial Management Reform Coordination Unit PPD Public Procurement Directorate PRSP Poverty Reduction Strategy Paper PERs Public Expenditure Reviews PRSP Poverty Reduction Strategy Paper PSIP Public Service Integrity Program PSR Public Sector Reform RBA Registration of Accountants Board SAP Structural Adjustment Program

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CURRENCY EQUIVALENTS (May 2006)

Currency = Kenya Shilling (Ksh) UA 1.0 = Ksh 103.557 UA 1.0 = US$ 1.46899 US$ 1.0 = Ksh 70.40

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AFRICAN DEVELOPMENT BANK TEMPORARY RELOCATION AGENCY

BP 323, 1002 TUNIS BELVEDERE TUNISIA

Tel. (216) 71.33.35.11 Email: afdb@afdb.org

PROJECT INFORMATION SHEET Date: June 2006

The following information aims to provide some general guidelines to all suppliers, contractors, consultants, and any other person interested in the procurement of goods and services for projects approved by the Board of Directors of the Bank Group. More detailed information can be obtained from the Beneficiary. 1.COUNTRY : Republic of Kenya

2 .TITLE OF PROJECT : Kenya Institutional Support for Good Governance

3. BENEFICIARY : The Republic of Kenya

4. PLACE OF IMPLEMENTATION : National Territory

5. EXECUTING AGENCY :

Ministry of Finance P.O. Box 30007 NAIROBI Kenya

6. PROJECT DESCRIPTION : The goal of the Project is to improve governance in Kenya by strengthening the institutions responsible for it. New techniques are introduced, and resources are provided to expand coverage. Capacity is built to tackle corruption and also to reduce poverty.

7. APPROVAL DATE : July 2006

8. DATE OF EFFECTIVENESS AND DURATION : September 2006 for 36 months

9. TOTAL COST Foreign Cost Local Cost

:::

UA 6.13 million UA 2.75 million UA 3.38 million

10. BANK GROUP FINANCE : ADF Grant in the amount of UA 5.52 million

11. OTHER SOURCES OF FINANCE : Government UA 0.61 million

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12. PROCUREMENT OF GOODS AND SERVICES:

The Grant will be used to purchase goods and consulting services. Procurement of Consulting Services financed by the Grant will be carried out in accordance with the Rules and Procedures for the Use of Consultants by the Bank Group. Goods will be procured according to Bank Rules of Procedures: Equipments and motor vehicles under the project will be procured through National Competitive Bidding (NCB). 13. CONSULTANCY SERVICES

REQUIRED: Short-term consultancy to prepare the following documents:

i. Monitoring and Evaluation Framework ii. Production of Audit Manual iii. The Development of Quarterly Assessment Framework for PPOA iv. The Development of Corruption Campaign Materials for KACC v. Training.

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EXECUTIVE SUMMARY BACKGROUND The Government of Kenya has affirmed its commitment to promoting good governance as one of its major strategies for reform, as contained in its Economic Recovery Strategy for Wealth and Employment Creation (ERSWEC) 2003-2007. This is against the background of poor governance that is characterized by corruption, fraud, embezzlement of public funds, inefficient public sector, weak judiciary and poor legal framework. The lack of financial accountability and transparency has further undermined the efficient allocation of resources and results in a weakening of the Government’s capacity to finance poverty reduction programs. Efforts are now being made by the government and its development partners to create an enabling institutional infrastructure for good governance, which is the aim of the proposed project. The proposed institutional support project aims at supporting fiduciary reforms in Kenya. This includes the procurement system and the auditing system. It also aims at strengthening the Anti-corruption initiative of the government. Kenya has taken many bold steps to promote good governance including the passing of several legislations, setting up of appropriate institutions, and giving them teeth to deal with anti-good governance tendencies. A number of reforms are still necessary to transform these achievements to effective institutions. As of today, there are still many backlogs in both internal and external audits to make their products useful for planning purposes, and to extend the exercise to municipal and district governments with the intention of promoting accountability and transparency at those lower tiers of government. Capacity both in terms of skills, procedures, and structures, is still a major constraint. PURPOSE OF THE GRANT The goal of the project is to contribute to good governance in Kenya by creating the institutional capacity to promote transparency and accountability in governance THE PROJECT The objective of the project is to assist the Government of Kenya to improve public financial management in the areas of procurement, and auditing, and also to intensify the fight against corruption. The project has three main components: Improving the Public Financial Management System, with special emphasis on three departments, namely: Procurement, Internal Audit and the National Audit Office; second, to strengthen the Kenya Anti-Corruption Commission in its fight against corruption; and third, to enhance performance at the ADB desk in Kenya. SOURCES OF FINANCING The project will be jointly financed by the ADF and the Government of Kenya (GOK). The ADF financing will amount to UA 5.52 million, representing 90-% of total project cost. The Government of Kenya will contribute UA 0.61 million, representing 10% of the total cost to meet some of the operating costs of the agencies benefiting from the program.

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Other donors supporting activities to promote good governance in Kenya include, the World Bank, the EU, USAID, DFID, UNDP,CIDA and the embassies of Japan, Norway, Sweden, the United Kingdom, The Netherlands, among others. PROJECT IMPLEMENTATION The Ministry of Finance (MOF) will be the executing agency for the proposed project. The MOF will coordinate the activities of other agencies involved in the implementation of the components of the project. The overall implementation of the project will be carried out under the supervision of the Steering Committee chaired by the Permanent Secretary of the Ministry of Finance, and including the Secretary, Public Sector Reform and Development in the Office of the President; the Permanent Secretary in the Ministry of Planning and National Development, the Managing Director of KACC, Directors from benefiting Departments (Procurement, Internal Audit, and National Audit Office), and nominated members from the civil society included in the World Bank project. The project will use the same Public Financial Management Coordination Unit as used by the World Bank Project. It is located in the Ministry of Finance, and headed by the Director of Internal Audit. To give the Bank’s project more attention, two Procurement Officers (one from the MoF, and the other from KACC), the ADB Desk Officer, and an accountant will be designated to work on the Bank’s project. . DISBURSEMENTS Disbursement will be in accordance with the Bank Group’s rules of Procedure for disbursement. The Executing Agency will open a convertible foreign exchange account with an acceptable Bank to the ADF. The Grant resources required to meet the Bank Group’s share of the grant amount will be deposited in the special account, and will be operated as a revolving fund. The Bank will replenish the special account at the request of the Executing Agency, after sufficient justification for the use of at least 50% of the previous deposit has been made. Direct Payment Method will be used where large disbursements are involved. The Memorandum of Understanding (MOU) between the Ministry of Finance and the Kenya Anti-Corruption Commission will specify the disbursement arrangements for the resources going to KACC. The MOU must be approved by the Bank Group. CONCLUSION The implementation of this project will enhance the operational efficiency of the institutions whose functions relate to maintaining good governance in Kenya, namely Kenya Anti-Corruption Commission (KACC), the Public Procurement Directorate, and the Kenya National Audit Office by beefing up their equipments and supporting structures basic to their functions. It will create institutional capacity through training that will enhance good governance. A strengthened KACC will deal with the perpetrators of corruption, while a strengthened procurement and auditing systems will be preventive. They will also ensure accountability and transparency in management of public funds and enhance the human resource capacity for efficient administration.

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RECOMMENDATIONS It is recommended that the ADF Board approve a grant not exceeding UA 5.52 million for the Government of Kenya to support the Government in creating institutional capacity to promote good governance.

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PROJECT RESULT-BASED LOGFRAME

HIERACHY OF OBJECTIVES EXPECTED RESULTS REACH PERFORMAMCE

INDICATORS INDICATIVE TARGET

AND TIME FRAME ASSUMPTIONS AND RISKS

I. SECTOR GOAL Efficient and incorruptible Financial Management System leading to improved productivity in the economy

GDP growth rate rises from 4.9% in 2005 to 5.5% in 2006

The economy structure capable of withstanding shocks

GDP Growth rate, Human development Index, Transparency International Corruption Index

6% GDP growth rate by 2010

Government reforms remain on track

II. OBJECTIVES A. Procurement Department Transformation of the Procurement system Improved service delivery system to the general public

Greater efficiency in the procurement system. Reduced costs and better quality of life.

The Government, the contractors, and the general public. The general public.

Reduced time spent on procurement. Reduced procurement litigations Higher human development index.

Effective oversight procurement system by reducing time spent by 25 percent in three years Source: Ministry of Finance Department of Statistics reports on education and health. Source: Govt. Statistics

A committed and disciplined government

B. Internal Audit Dept. Strengthened Oversight and good governance Deepened adaptation of Internal Audit standards

Prevention of corruption moves in the society. Enhanced compliance

The General public The Public and the private sector actors.

Reduced number of corruption culprits Periodic reports to parliament

Reduce number by 15 percent by 2009 Source: Office of Statistics Yearly starting from 2007.

Highly placed people getting involved in corruption practices Mitigating Strategy: Improved public enlightenment

C. Kenya National Audit Office a. Effectively Managed Budget system

Probity in the public service

The country at large.

Submission of audited accounts to the

Accounts submission according to the

Availability of resources and government’s commitment to the

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HIERACHY OF OBJECTIVES EXPECTED RESULTS REACH PERFORMAMCE

INDICATORS INDICATIVE TARGET

AND TIME FRAME ASSUMPTIONS AND RISKS

Improved audit links and linkage and access to the entire country

More resources made available to the poor. Elimination of backlogs in the system.

The poor The Auditor General

parliament six months after the closure of accounts. Submission of audited accounts of the lower tiers of government.

constitution dates. Reduced backlogs by 25 percent starting from 2007

reforms The elections in 2007.

D. Kenya Anti-Corruption Commission Build staff competences in specialized fields. Build capacity for community actions against corruption Establish regional anti-corruption outreach clinics E. External Resources Department (ADB Desk) Better Implementation of Bank Projects F. Coordination Office Aid effectiveness and harmonization of procedures and policies

High staff performance in fighting corruption Increased community participation in anti-corruption campaign. enlightened communities, increased awareness High staff performance, and between donors and the government. Greater understanding amongst donors

The Trained staff The communities The communities The government and the Bank The Government, the Bank, and other donors.

The quality of work done by the staff The number of people trained in anti-corruption Reduced delays in project implementation Improved project performance

Corruption Index falling to low levels by 2010 At least 70 % of community Informed and trained by 2010 Project delays reduced by 50 % in 2008 Implementing units. Established by 2007

Availability of resources; and danger of losing trained staff to the private sector. Mitigating strategy: provide better remuneration to staff. Up-coming elections in 2007. Availability of Resources. Crowding out by other donors. Mitigating Strategy: Continuous dialogue with government and other donors in the field. Need for country office.

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Activities Component 1: Improving Public Financial Management System (Resources: UA 3.76 mill ) Sub Component 1.1 The Procurement Department (Resources: UA 1.26 mill)) 1. Furnish the Public Procurement Oversight Authority as an autonomous institution.

20 offices of senior management furnished

Senior Staff of PPOA Furnished Offices Source: PFMR Report, Project supervision report

All offices furnished in the first year of the project

Availability of resources. Donors encouraged to continue to support project financially.

2. Computerization of PPOA’s Offices and installation of ICT facilities

2.1 Network installation completed, 2.3. 55 computers with UPS, 10 printers and 5 laptops installed

All staff of PPOA Installed Network, and Office equipment. Source: Supervision report

2.1.1. Network installation in the first year 2.23.1. Equipment procured over a three year period

Rapid change of technology might render equipment obsolete.

3. Staff Training 3.1 90 staff received short-term training 3.2 30 staff received long-term training

Concerned staff of PPOA

List of staff trained. Source: PFMR report and Supervision reports

3.1.1. 30 staff trained each year. 3.2.1. 10 staff trained each year

Availability of resources Fear of losing staff to the private sector Mitigating Strategy: Enhance staff remuneration.

4. Establish E-procurement system.

E-procurement system installed

The PPOA Department

Installed system Source: PPOA’s report; supervision report

E-procurement system installed the first year

Availability of resources

5. Create public awareness of the new procurement system.

5.1 18 Press adverts 5.2. 6,000 copies of regulations 5.3 15000 copies of magazine produced

The General Public 5.1.1. Evidence from the press 5.2.1. Copies of regulations printed 5.3.1. Copies of magazines produced. Source: PPOA’s Department, supervision reports.

6 advertisements made each year 2000 copies produced each year 5,000 copies produced each year

Availability of resources and staff for the workshops. Availability of resources

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Activities Establish a monitoring and evaluation system

System for M&E developed and applied

PPOA’s Department Developed evaluation system.

The M&E system is developed the first year of the project.

Consultant is hired on time.

Sub Component 1.2: Internal Audit Department(Resources: UA 1.27 mill) 1. Develop and Produce Audit Manuals and Guidelines

1.1 1000 copies of the Audit Manual produced 1.2. 20 copies of IDEA software purchased

All staff of Internal Audit

1.1. 1. Produced copies of the manual 1.2.1. installed IDEA software. Source: Internal Audit Department

1000 copies produced in three years 1.2.1. 20 copies of IDEA software purchased the first year of project.

Availability of resources

2. Develop Quality assessment Framework

Framework for Quality assessment produced

The whole civil service

Developed Quality Assessment framework

Framework developed and installed in the first year.

Delayed recruitment of consultant.

3. Train Internal Auditors 3.1 200 Audit Committee members trained 3.2 415 Auditors trained in report writing

All auditors 3.1.1. List of trained Audit Committee members. 3.2.1 Number of Auditors trained in report writing. Source: Internal Audit Department; Supervision reports.

30% of auditors trained each year

Availability of resources Fear of losing staff to the private sector. Mitigating strategy: Enhance staff remunerations

4. Enhance Operational Efficiency

40 computers with UPS, 40 printers, 20 laptops, and a vehicle purchased

Internal Audit Department

4.1.1 Installed equipment 4.1.2. Purchased vehicles.

50% of computers purchased in the first year, and 50% the following year. The printer, the vehicle, and the laptops procured the first year.

Availability of resources

Sub Component 1.3: The Kenya National Audit Office (KENAO). (Resources UA 1.23mill) 1. Enhance Capacity Building by training staff

22 Auditors trained abroad at the post-graduate level in various aspects of accounting and auditing

22 Auditors trained abroad

List of auditors trained. Source: KENAO

33% trained each year Availability of resources

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Activities 2. Enhance Operational Efficiency through the development of ICT and the supply of computer equipments

2.1. Installed Network software 2.2 50 computers, 20 printers, 10 laptops, and one vehicle purchased

2.1.1 The Kenya National Audit Office 2.1.2 The staff of the Office with the new equipment

Installed Network software. Installed equipment Source: KENAO, and supervision reports

Network is installed in the first year 50% of computers, printers, and laptops procured the first year, and 50% the next year.

Component 2: Strengthen the Kenya Anti-Corruption Commission (Resources; UA 1.96 mill) 1. Develop Staff Competencies 2. Conduct Regional anti-Corruption Outreach and clinics Produce and disseminate IEC materials for regional areas

2.1. 30 districts covered annually Two vehicles for outreach and clinic functions procured. 2.2. 150,000 copies of documents produced

The general public that will participate in the workshops.

2.1.1. List of districts where the clinic is conducted. 2.2.1. Number of document produced Source: KACC, national newspapers, supervision reports.

50% of the 30 regions covered in each of the two years. 75,000 IEC documents produced and distributed in the first 1 year 3 reports: 1 for 2007; 1 for 2008; and 1 for 2008

3. Train community-based Corruption Monitors and Facilitators

3.1 Train 240 corruption monitors and facilitators 3.2. Report of corruption monitors produced annually.

3.1.1. The trained Monitors and Facilitators. 3.2.1 The General public

Number of people trained Number of reports produced

120 trained each year for a period of 2 years.

4 Establish a Monitoring and Evaluation System

System developed and reports prepared annually.

The Government receiving the reports

Improved project implementation Source: M&E Reports

Monitoring system developed the first year of project

Component 3: The External Resources Department Resources UA 0.14 mill) 1. Train Staff of the unit 3 officers of the desk and 2

other accountants trained in Bank procedures.

The trained staff List of trained staff A staff is trained each year

2. Enhance operations by supply of equipment, and provision of transport facilities

2 computers with UPS, 2 laptops, 2 printers, a fax machine and a photocopier installed. A vehicle is

The staff of the desk Installed equipment at the desk Source: ERD

A vehicle, 2 computers, 2 laptops, 2 printers, 2 fax machines, and a photocopier procured

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Activities purchased.

the first year.

Component 4: The Coordination Office (Resources UA 0.24 mill) 1. Develop the monitoring and Evaluation Framework

Monitoring and evaluation framework developed.

The project and the departments benefiting from the project

Framework development completed the first year.

Hiring the consultant on time Mitigating strategy: Set up the PIU on time.

2. Provide Administrative Support to the project

2.1 Materials purchased 2.2.Sitting Allowance for staff of the Coordination Office 2.4. Running expenses. 2.5. Purchase of a computer with UPS, a printer, and a photocopier

The Coordination office

2.1.1. Purchased materials 2.5.1. Installed equipment, and the vehicle purchased

Equipment purchased the first year

Availability of resources Availability of resources

1. INTRODUCTION 1.1 Origin and History of the Project 1.1.1 The reform of the public sector to address chronic issues of governance and corruption that have plagued the economy for a long time started in the last two years of the previous Government of the Kenya African National Union (KANU). By 1999, the Government had reduced the number of ministries from 28 to 15, implemented a staff reduction program with an improved pay scheme, commenced the reform of the legal and judicial system, and promoted greater engagement with civil society. 1.1.2 In 2002, the National Rainbow Coalition (NARC) party won elections that were acclaimed to be free and fair, and took office in December of that year. The main focus of the Government since then has been how to deal with major governance challenges in the country, particularly corruption. It also focused on how to improve the effectiveness of the public sector, address poverty, and create a viable environment for private sector activities. 1.1.3 In the pursuit of its goal, in 2003, the new government prepared and published its Economic Reform Strategy for Wealth and Employment Creation (ERSWEC) with the full participation of the non-governmental organizations, development partners, and other stakeholders. The strategy recognized that poor financial management was the root cause of the country’s economic woes. It therefore proposed a strategy that focused on growth, poverty reduction and good governance. Under governance, it placed great emphasis on financial management and legal and judiciary reforms. Furthermore, the Government encouraged each Department/Unit to prepare its blueprint for the implementation of its program as contained in the ERSWEC. 1.1.4 In addition, the Government made changes to the structure of its administration, and promulgated several laws to enhance effectiveness of the new structures. One of the units that were created was Public Financial Management Reform Coordination Unit (PFMRCU). The Unit prepared the Strategy for the Reform of Public Financial Management in February 2006. The strategy is comprehensive, covering financial sustainability and budgeting, resource mobilization, budget execution, procurement, oversight and evaluation, and cross-cutting issues such as PFM legal framework, academic training, professional accreditation and conditions of service. Total budget for the program over a five year period is US$ 114.5 million, and there are about fifteen components to the program. The government has called on all partners, including the Bank Group, to assist in meeting the demand. 1.1.5 Apart from the Government’s invitation to the Bank to support the program, the Bank had foreseen the need for the project by the time it prepared the Structural Adjustment Program for Kenya in 2000. Also, the Country Governance Profile (CGP) prepared in 2004 identified major governance challenges as weaknesses in: ethics, integrity and anti-corruption; democracy, human rights and the rule of law; justice, law and order; public safety and security; constitutional development; quality of legal services to government and the public; and capacity for effective leadership and management of change, and improved accountability and transparency in management of public resources. Also, the CFAA, jointly produced by the Bank and the World Bank, and the Kenya Country Strategy Paper 2005-2007 (CSP) confirmed the priority for reforms in these areas.

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1.2 Past Bank Group Operations in Governance 1.2.1 The Tax Modernization Programs I and II (TMP I and TMP II) that became effective in September 1991, and May, 1995 respectively, are the only two completed institutional support programs of the Bank in Kenya. The objective of TMP was to strengthen and render more efficient the country’s tax system. It introduced modern technical, administrative and operational systems and procedures in three departments, namely, the Customs and Excise Departments, the Value Added Tax Department, and the Income Tax Department. According to the PCR, these systems and procedures are now in place, and are working as expected. 1.2.2 TMP II aimed at the sustainability and the expansion of the systems. It focused on training and institution building as well as further computerization. Both the treasury and the three revenue departments benefited from it. Its objectives have also been achieved. 1.2.3 A lesson learned from the two projects is that it is important to work closely with other donors particularly in areas of common interest. All institutions involved jointly monitored the projects. This allowed for harmonization of some of the procedures and cost reduction. 1.2.4 A third Bank Group’s operation of relevance is the just completed Structural Adjustment Program in the amount of UA 28.2 million. It was approved in November 2000, and became effective in March 2001. The objective of the loan was to support government’s efforts in the area of governance to enhance accountability and transparency. It also targeted reforms in the civil service and also budgeting and expenditure management so as to be able to re-direct resources towards core poverty reduction program in agriculture and health. The preparation of the PCR is planned for later this year. 2. AN OVERVIEW OF THE STATUS OF GOVERNANCE 2.1 Socio-Economic Context 2.1.1 After experiencing significant gains in economic and social development in the first two decades of independence, Kenya’s economic performance deteriorated markedly in the 1980s and 1990s. The failure to generate adequate economic growth worsened poverty. Per capita income was estimated to be US$ 423 in 2004, which was lower than the sub Saharan Africa average of US$ 560. As a result, poverty incidence rose from 49 percent to 56 percent over the same period. The infant mortality (per 1000 births) went up from 63 in 1990 to 78 in 2002, and life expectancy declined from 57 to 46 years, largely due to near collapse in public health services delivery system coupled with reduced family incomes and the HIV/AIDS epidemic. Other human development and social indicators also declined during the same period. As a result, Kenya now ranks 1541 of 177 countries in the UNDP Human Development Index for 2003. 2.1.2 As detailed in the Country Strategy Paper 2005-2007 (ADB/BD/WP/2005/97), a large number of factors have constrained sustainable economic growth and poverty reduction in Kenya. These are (i) poor governance and corruption; (ii) macroeconomic constraints; (iii) dilapidated infrastructure; and (iv) low and declining productivity of human capital.

1 HDR 2005, UNDP

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2.2 Governance Indicators in Kenya 2.2.1 The Kenya Country Governance Profile (CGP), which was completed in November 2004, provides a comprehensive analysis of the major governance issues regarding accountability, transparency, stakeholder participation, legal and judicial systems, and anti-corruption programs. The issues of governance and corruption in particular were also the major focus of the Consultative Group Meeting of April 2005. Furthermore, recent allegations of emerging corruption among some top Government officials are worrying developments, which if not addressed could adversely affect Kenya’s relationship with its key donors and divert attention from the implementation of much needed improvements in the public expenditure management system.

2.2.2 In particular, Kenya’s socio-economic performance has been undermined by poor governance and corruption. As shown in Chart 1, Kenya ranks low, both in absolute terms and relative to the regional average, on key indicators of governance including control of corruption, rule of law, regulatory quality, and government effectiveness.

2.2.3 The economy was characterized by open impunity of public officials, open corruption incidences, poor governance, insecurity, lack of access to justice and lack of transparency and accountability. Corruption constrained the government to enforce contracts, provide protection of person and property rights, and perform its regulatory role effectively. This led to soaring costs of doing business and loss of economic competitiveness, which in turn reduced investments and the growth potential of the Kenyan economy.

Chart 1: Selected Governance Indicators

0 10 20 30 40 50

Voice and Accountability

Polit ical Stability

Government Effectiveness

Regulatory Quality

Rule of Law

Control of Corruption

Country's Percent ile Rank

Kenya SSA

Source: World Bank 2004.

2.2.4 Corruption and Poor Governance have adversely affected investments in the country and have led to declining economic growth and increasing poverty. Both the demand and supply sides of corruption need to be tackled. Corruption and poor governance, tainted with patronage have undermined the effectiveness of the legal, regulatory and institutional framework of private sector development, to the point of creating, for instance, widespread mistrust of the courts and public administration. Poor governance has also taken the form of occasional intervention of the Government in the working of regulatory bodies or even private firms. The supply side of corruption (from the one receiving the service) is often overlooked.

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2.2.5 The private sector also has been tainted with issues of governance, for example irregular participation in public procurement, bribes to get business licensing are common (Transparency International, Kenya Bribery Index, 2004). This needs to be addressed. Nearly 75 percent of those interviewed for the World Bank Investment Climate Assessment Study (ICA, November 2004) saw corruption as a severe constraint to doing business in Kenya. In addition, governance issues include opaqueness in procurement, the persistence of the old confrontational approach in public/private relations and the spirit of competition for resources that prevail among various state departments during the national budget planning process. Steadfast implementation, including enforcement, will be key to the success of the fight against corruption 2.3 Implementation of the Governance Agenda

2.3.1 To address the deteriorating socio-economic performance and the underlying factors including poor governance, the Government, which came into power in 2002, prepared the Investment Program for the Economic Recovery Strategy for Wealth and Employment (IP-ERS). The IP-ERS covered the period from 2003-2007, which served as Kenya’s version of the poverty reduction strategy paper, was launched in June 2003 and completed in March 2004. The IP-ERS was prepared with the full participation of non-governmental organizations, development partners, and other stakeholders.

2.3.2 The Strategy was built on three interlinked pillars of economic growth, enhancing equity and poverty reduction, and improving governance, each of which is essential to improving the livelihood of the Kenyan people. The main objectives of the strategy (see Box. 1) are to restore the economy to an accelerated and sustainable growth path. In recent years, several initiatives have been undertaken to promote good governance through reforms in public financial management, civil service, privatization of public enterprises, and anti-corruption. The progress on this broad governance reform agenda is summarized here. 2.3.3 The Governance, Justice, Law and Order Sector (GJLOS) Reform Program was a government initiative which laid out a five year plan for the reform of public sector institutions in the legal sector. The thrust of the program is the reversal of the system of Government that was characterized by institutionalized corruption, authoritarian government, abuse and lack of respect for human rights and systematic weakening of the institutions of state and government. The governance agenda proposed a far-reaching reform of the judiciary, strengthening of the rule of law and security and implementing reforms in public administration systems that are critical to improving transparency and accountability. 2.3.4 Through the Government’s commitment to eradicating corruption, investor confidence has been boosted and donor aid has resumed. Development partners have pledged to support Government’s programs. Over fifteen donors are involved in addressing good governance in Kenya2. Despite the laudable efforts, and the positive responses, the task is still daunting as these reforms started only few years back. Institutions and structures put in place are not yet fully operational. Capacity is still a major problem as well as institutional reforms. What is encouraging though is the political will at high levels of government to deal with corruption, and the transparency with which it is done.

2 Some of these donors are: the World Bank, the IMF, DFID, SIDA, EU, CIDA, GTZ, USAID, UNDP, and NORAD.

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PILLARS

PILLAR I ECONOMIC GROWTH

PILLAR II EQUITY & POVERTY

REDUCTION

PILLAR III GOVERNANCE

Macroeconomic stability &

Financial sector reform

Infrastructure

Productive sectors

Human development:Education, health &

AIDS/HIV

Human development:

Labor

Agriculture and

environment

Poverty targeted programs

Public safety, law and order

Public administration

Monitoring & Evaluation &

statistics

Box 1: Investment program for the economic recovery strategy Source: Economic Recovery Strategy for Wealth and Employment Creation 2003-2007

2.3.5 Public Financial Management. The current strategy of the Government of Kenya for the reform of the Public Financial Management system was arrived at after an extensive diagnostic analysis and wide consultation within Government and other stakeholders. The Strategy aimed at attaining sustainability and balance in the public economy, restructuring and reallocations for growth and poverty reduction, and improved public sector performance leading to improved service delivery and results (Annex II). 2.3.6 A number of important reforms have since been initiated in the budget process, automation of payroll and financial management systems, legal reforms of financial management, ethics and procurement, improved audit techniques, and the clearing of audit backlogs. The government is also implementing a consolidated action plan for public expenditure management reform that is bringing together the recommendations of the Country Financial Accountability Assessment (CFAA) and the recently concluded Public Expenditure Management Assessment and Action Plan. This action plan sets up the agenda for reform in the areas of public accountability and financial management in the medium-term. Implementation of the Integrated Financial Management Information System has now commenced after previous delays and being rolled out to line ministries and districts. The Government has also taken positive steps to reform the procurement system, including issuing procurement regulations; establishing an oversight body, the Directorate of Public Procurement; and establishing an appeals body to deal with complaints. Despite these actions, more needs to be done to improve the efficiency, accountability, and, especially, the transparency of the procurement system. 2.3.7 Public Procurement and Disposal of Assets Bill. The Bill was promulgated in 2003 to address some of the weaknesses in public procurement. In line with international practices, the Bill provided for the separation of duties (between the final users and the person placing the orders). It also put emphasis on personal as opposed to group responsibility. The objectives were to maximize efficiency; promote competition and ensure that competitors are treated fairly; and promote integrity, transparency and public confidence in those procedures. The Bill established various bodies to be involved in the regulation of public procurement as follows:

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• The Public Procurement Oversight Authority (PPOA) Its functions are to ensure that the procurement procedures established under the Act are complied with, to monitor the public procurement system and report on the overall functioning to the Minister, to assist in the implementation and operation of the public procurement system.

• Public Procurement Oversight Advisory Board is an unincorporated body comprising

of five members appointed by the Minister from persons nominated by prescribed organizations. The functions of the Advisory Board will be to advise the authority generally on the exercise of its powers and the performance of its functions, to approve estimates of the revenue and expenditures of the authority and to recommend the appointment or termination of the Director.

• Public Procurement Administrative Review Board is a continuation of the Public

Procurement Review, Complaints and Appeal Board which was established under the Exchequer and Audit (Public Procurement) Regulations, 2001. The Authority will provide administrative support to the Review Board.

2.3.8 Under the Public Sector Management, the Government has reduced the backlog in audit reports, strengthened the civil service wage policy, established the remuneration board and various other frameworks, including the Public Sector Reform and development Secretariat to oversee the reforms of the public sector It has also established a Monitoring and Evaluation Department within the Ministry of Planning and National development. To improve management and quality of public service delivery, performance contracts have been introduced for all Permanent Secretaries and Accounting Officers in all Government ministries and departments. These performance contracts are tied to the ministerial or departmental strategic plans and require that they report their performance and resource utilization in the delivery of services to the people through parliament and other communication channels. All chief executive officers and board of directors of all state-owned corporations are also expected to sign these performance contracts. Kenya is one of the first countries in Africa to subject itself to NEPAD’s Peer Review. 2.3.9 Civil Service Reform: The Government’s public sector reform faces three key challenges. First is the bloated public service. The number of ministries, which had been reduced to 15 by the end of the 1990s, increased to 23 in 2003 and to 29 by the beginning of 2005. This reversed the trend set at the end of the 1990s and shows policy inconsistency in public service reform. The downsizing of the public service through voluntary early retirement system, national attrition, and selective freeze of employment has not resulted in the improvement in service delivery. The decline in the number of civil servants from about 272,000 in 1991 to approximately 194,000 in 2004 has more or less been nullified by additional number of teachers, health workers, and internal security personnel considered crucial to the implementation of the IP-ERS. Poor management and bad governance have rendered public service unable to deliver many required services at a reasonable standard. Second is the high level of expenditures on wages and salaries. The expenditures on wages and salaries still constitutes a high share of GDP amounting to about 9 percent in Kenya, compared to an average of 6 per cent for most Sub-Saharan African countries. This points to a need to address overstaffing in non-priority sectors to accommodate these changes. 2.3.10 Third, there is a weak link between the strategic plans of ministries, IP-ERS priorities and the budget constraints implied by the Medium Term Expenditure Framework (MTEF). Fourth, the public sector reform is still burdened by the legacy of weak leadership, lack of

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coordination, and inadequate capacity and resources. The Government is taking steps to strengthen leadership and coordination of the program, which should support development capacity and mobilization of resources through the recruitment of skilled professionals to the public service and by giving high priority to Public Service Reform within the IP-ERS and the MTEF. In this connection, the Government is also taking steps to institutionalize a results-based management system to support an integrated leadership capacity building program, aimed at transforming public service values, ethics, governance and strategic direction and performance. Recently, the Government created a new Public Service Reform and Development Secretariat within the Office of the President that focuses on the implementation of a system of performance management, linking compensation with attaining annual targets. The main focus of these initiatives is to improve service delivery through Results-based Performance implementation of programs. If fully implemented, it will provide a powerful incentive to set realistic targets and to focus on achieving them. However, the results-based management system will have to be buttressed by appropriate reforms in public financial management to succeed. 2.3.11 Public Enterprise Reform and Privatization Program: Progress in public enterprise reform has been extremely slow. The adoption of the new Privatization Bill and strategy needs to be given priority in order to speed up the pace of transactions. The Kenya Railways Corporation is to be privatized through a joint concession with the Uganda Railways. Although the Government has made commitment to concession the container terminal and to convert the Kenya Ports Authority to a landlord authority, by June 2004, the options are still under study. For the Kenya Electricity Generating Company, the Government has not met its intention to offload 30 percent of its equity to the private sector by December 2005. The Kenya Power and Lighting Corporation has yet to reduce the 51 percent of the Government shareholding. In Telkom Kenya, mobile private operators have led reform, and the situation of the third mobile operator still remains unresolved. In the financial sector, the slow progress on the restructuring of state-influenced banks leaves the sector weighed down with large non-performing loans, requiring continuous fiscal injections in order to prevent a banking crisis from developing. Such injections constitute major leakages in the Government’s financial resources. 2.3.12 The Government noted first, that the capacity-building program of the Ministry of Finance would facilitate the production, on a timely basis, of more comprehensive and better articulated annual and medium-term budgets and hence, a more transparent budget-management process. Second, the on going strengthening of public sector accounts audited by the Auditor General within nine months of the end of the fiscal year would greatly facilitate parliamentary scrutiny of public operations. Moreover, the Auditor General’s report will be a key reference point for the investigative work of the Kenya Anti-Corruption Commission (KACC). Third, the recent restructuring of the Auditor General’s office had enabled to begin to conduct more timely audits of the account of state bodies, including parastatals and local Governments, and to play a more proactive role in investigations of potential misuse of the improper contracting by Government officials of commercial debt. These steps with other measures would represent important progress toward closing the remaining governance gaps. 2.3.13 The Government states that their anticorruption strategy emphasized the building of sound governance institutions. In this context, at the political level, the draft constitution includes many provisions designed to enhance inclusiveness and transparency in the conduct of public business, including devolving more authority to local Governments. The draft

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constitution also enshrines the independence of the judiciary and the public prosecution office. The Government is taking steps to address weaknesses in the prosecution branch by hiring more and better-qualified staff. With regard to the Anglo-Leasing scandal, the authorities explained that the actions they had taken to address the issues raised by the scandal were consistent with the law and, in their view, considerably stronger than the recent responses of many other African countries to similar events. In this regard, all senior officers involved in the scandal have been suspended; the KACC was asked to initiate detailed investigations, which are still underway and a parliamentary inquiry was also conducted. While the Government argued that their efforts were securing important further progress on governance, they were concerned that, as with other priority programs, the difficult budgetary situation constrained their ability to fund key anticorruption agencies adequately. 2.3.14 Other legislations and actions taken by the Government to deal with corruption include: the establishment of a monitoring and evaluation department, the introduction of performance contracts, actions taken to end land grabbing and state sponsored Harambees, passing into Law the Public Officer Ethics Act in 2003, the Anti-Corruption and Economic Crimes Act of 2003 that established the Kenya Anti-Corruption Commission (KACC), the Privatization Act of 2005, and many others. 2.3.15 To enhance accountability, both the department of Internal Audit and that of the Controller and Auditor General have been reformed. New legislations have been passed, and new structures have been put in place to enhance efficiency and improve oversight functions on these institutions.3 3. AREAS OF FOCUS OF THE PROJECT 3.1 Introduction This project aims at focusing on two main areas of governance in the economy, namely: the public financial management system, and the fight against corruption. Within the Public Financial Management System of the country, the project focuses on three institutions, namely: Public Procurement Department, Internal Audit Department, and the Kenya National Audit Office. In the fight against corruption, it will focus on the Kenya Anti-Corruption Commission (KACC). The project will also provide some resources to the ADB’s desk to improve its operations. ERSWEC contains the background for the various reforms on-going in the country. Also, each ministry/department has produced its blueprint. What is lacking are resources for the implementation of identified projects. Although several donors are present in Kenya, there are still gaps in the financial requirements of the country’s governance program.

3 Section 3 discusses the reforms in these institutions in greater details

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3.2 Public Procurement Department 3.2.1 Up to March 2001, the procurement system was fragmented. It consisted of the Central Government system, the Local Authorities system, the State Corporations system, and the Procurement of Consultants Services for Civil Works. The systems were contained in the Supplies Manual of 1978, and supplemented by circulars from the treasury. The Director of Government Supplies was responsible for ensuring the proper observance of the provisions of the Manual. The Manual created various tender boards including the Central Tender Board, Ministerial Tender Board, and District tender Board. 3.2.2 A review of the country’s public procurement system undertaken in 1999 revealed many shortcomings of the system including non-uniformity of the system, absence of sanctions or penalties against violators (apart from internal disciplinary action), non-inclusion of directives on the procurement of works, and inadequate provision for the settlement of disputes. In addition, there were institutional weaknesses leading to poor coordination, and teamwork among ministries. Another review of the country’s procurement system under donor-funded projects also pointed to other weaknesses such as lack of project procurement plans, poor capacity, and insufficient transparency in bid opening. 3.2.3 In view of the weaknesses, the government has instituted important reforms. One of such reforms was the Public Procurement Regulations (Legal Notice No. 51) which came into force in March, 2001. That regulation created the Public Procurement Directorate (PPD) and the Public Procurement Appeals Board (PPAB). It also unified all circulars that had previously governed procurement. This was Kenya’s first attempt to create a uniform, clear and consistent procurement system for the entire public sector. 3.2.4 In the year 2005, the country went a step higher when the Public Procurement and Disposal Act became law in October the same year. That Act established the Public Procurement Oversight Authority (PPOA) with two bodies, namely, the Advisory Board and the Review Board. In a way, it guaranteed its autonomy as it is not directly under the Ministry of Finance. 3.2.5 Despite the legal, administrative reforms in procurement, the department will not be effective without appropriate structures and facilities. It is for this reason that the Government has requested assistance in five main areas namely, the establishment of the Procurement Oversight Authority, staff training, awareness creation, the development of e-procurement, and monitoring and evaluation facilities. 3.3 Internal Audit Department (IAD) 3.3.1 In 1995, the Internal Audit Department which was in operation prior to independence was re-organized and renamed ‘Audit Inspectorate’. The auditors were detached from the management and clustered in units from where they used to conduct audit inspections. However, the new approach was found to be expensive and ineffective. There was need to strengthen financial management to improve economic efficiency, effectiveness and accountability in the use of public resources. Due to this need in 1977, the Internal Audit function was restructured and decentralized to become an integral part of management. 3.3.2 Today internal auditing functions are generally geared towards assessing and advising on risk management, control and governance processes in ministries, department and districts. Its objective is to provide quality assurance and consulting services designed to add value to Government operations.

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3.3.3 Internal audit functions are governed by the Government Financial Management Act 2004 Section 9(1) (c) as a service to all level of management. The authority and responsibility of internal audit is derived from sub-section 2 and 3 of Section 4 of the Exchequer and Audit Act Cap 412, Sub section 2 and 3 of Section 4. The functions are as listed below: According to Government Financial Management Act 2004 (Section 29) required

Treasury to prepare two reports on budgetary performance, one half yearly, and the other annually to be laid before the National Assembly.

According to Treasury Circular No. AG/CONF/3/119/01 Vol. IV (28) dated 6th February

20006, Internal Auditors in line ministries are required to review/audit budget performance reports before submission to Treasury. This review provides critical alignment with national strategic objective of ERSWEC.

The mandate of Internal Audit also requires internal auditors to audit revenue throughout

Government ministries and also verify expenditure. They therefore have a stake in revenue mobilization efforts of GoK, and quality of expenditure management. Improvement in these areas will ultimately impact on the objectives of economic growth and poverty reduction.

3.3.4 Internal Audit Department had funding for training and capacity building under PSMTAP of the World Bank which ended in December 2004. While the project was on, the Department managed to sponsor some members of staff in CPA II and III, and CIA I and II. The department also acquired (12) twelve vehicles and one hundred desk top computers for use in the provinces and districts. 3.3.5 The Department has recently recruited one hundred and fifty (150) new staff who require training in RBAA, IT, value for money, report writing etc. The staff also required furniture and other office equipment. Also, it requires laptop computers and four wheel drive vehicles for field work. 3.4 Kenya National Audit Office (KENAO)

3.4.1 The Office of the Controller and Auditor General (C&AG) was created as an office in the public service through the constitution of Kenya as at the time of the country’s independence in 1963. The Office is governed by three statutes: The Kenya Constitution, The Exchequer and the Audit Act, CAP 412, and the Public Audit Act of 2002. The Act turned the Office of the Controller and Auditor General into the Kenya National Audit Office (KENAO), and also created the Kenya National Audit Commission to consider and approve the estimates of KENAO, and determine the remuneration and other terms of appointment of staff. 3.4.2 The mandate of the Office is to carry out audits within statutory set deadlines, and to assess the economy, efficiency and effectiveness of the central government, courts, local authorities, national assembly, statutory bodies/states corporations, commissions, and submit reports to the Parliament. It plays a major role in promoting accountability and good governance in the utilization of the national resources.

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3.4.3 Previously, KENAO had assistance on training on modern audit methods from the National Audit Offices of the United Kingdom, Office of the Auditor General of Canada, through the Canadian Comprehensive Auditing Foundation, General Accounting Office of the USA, and Office of the Comptroller and Auditor General of India, amongst others. This assistance has ended. More recently, it benefited from the Public Sector Management Technical Assistance Project (PSMTAP) of the World Bank. The Project terminated in December 2004. During its implementation resources were made available for staff training. KENAO sponsored a number of its staff for the CPA II and CPA III. A limited number also attended post-graduate courses, mainly in auditing and information systems, and recently some attained masters in business administration. 3.4.4 The component’s performance indicator was to have 75 percent of the professional positions filled with staff trained to post-graduate level or a minimum of Part II of Certified Public Accounts of Kenya (CPA-K) standards by June 2004. While this was almost achieved in the former office of the Controller and Auditor General, the same was not true in KENAO. This was as a result of the merger of the office of the Controller and Auditor General with that of the Auditor General (Corporations) in June 2002. Consequently, KENAO carried on board 217 professional staff (auditors) who required training at the CPA (K) and post graduate levels. 3.4.5 In terms of performance, KENAO has been able to clear the entire accumulated audit backlog of the annual Appropriation Accounts, and it is in a position to detect any financial mismanagement early enough for appropriate action. The training activities carried out by PSMTAP has led to improvements of quality and timely Audit Reports. 3.4.6 For the Office to continue to perform, it is important that resources be made available for training at the professional level, and also for the development of competencies in computer assisted audit techniques, audit command language, and certified information system auditing. Also, KENAO proposal to go into Forensic Auditing will assist the Government in achieving its goal of zero tolerance for corruption. It will also provide the Office with emerging opportunities to offer specialized audits through use of Information Technology, Value for Money and Environmental Audits 3.4.7 The Government has recognized ICT as an engine of development and economic growth for the whole country. In order to meet the challenges and take advantage of the recent advances in ICT, the Government is developing an IT Strategy to support; timeless and accuracy of information; consolidate Government service by developing systems that enhance integration and improve performance and service delivery to the public. 3.4.8 The KENAO due to its mandate deals with huge amounts of information that must be readily accessible to more than one person or location. The Office has only five (5) fax machines and would like to buy five additional ones to improve communication capacity. There is also only one LCD Projector which is used intensively in training. In consequence only one training event can be held at the time. With availability of funding, the Office would buy one (1) more LCD projector which would increase KENAO’s internal training capacity. 3.4.9 The KENAO does not have adequate and reliable means of transportation particularly to project sites in remote areas accessible only through terrains. The Office has requested for assistance to acquire additional vehicles and replace those that are not economically viable. Also, it has requested that the Bank fund consultancy services for restructuring, the establishment of a quality assurance unit, the implementation of value for money audits, and speeding up automation and computerized auditing.

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3.5 Kenya Anti-Corruption Commission (KACC) 3.5.1 Kenya had legislated against corruption as far back as 1956 when it enacted the Prevention of Corruption Act (Cap 65). Nevertheless, the legislation was not enforced, thereby allowing corruption to eat deep into the fabric of the society. By year 2002, it was widely known that without a war against corruption, Kenya would never attain its goal of growth with poverty reduction. Corruption was increasingly seen as a serious crime with devastating consequences such as wasteful spending, bigger budgetary deficits, greater economic inequalities, and disincentive to investments. 3.5.2 In May 2003, the new Government of the National Rainbow Coalition promulgated the Anti-Corruption and Economic Crimes Act which established the Kenya Anti-Corruption Commission (KACC). The objectives of the Act were: (i) investigating corruption and economic crime; (ii) preventing corruption; and (iii) educating the public on corruption. KACC went into operation on 10 September 2004 after the appointment of the Directors and Assistant Directors. In just one year, KACC has received many complaints. Between July 2004 and June 2005, it received about 3,234 complaints of suspected and alleged corruption of which 384 were found to merit further investigation. 3.5.3 KACC has since its inception experienced challenges, largely in the areas of institutional capacity and particularly the operations and service delivery, which needed to be addressed in order to develop a robust and decentralized program on administrative infrastructure for corruption prevention in Kenya. 3.5.4 To address some of these institutional capacity challenges, the Commission has developed a strategic plan to focus its medium-term operations to start cultivating a culture of zero-tolerance to corruption in Kenya. The implementation of the Commission’s strategic plan is expected to impact positively on Kenya’s development outcomes by, among others: (i) improving governance, transparency and accountability and efficiency in public affairs management; (ii) improving service delivery by public sector through implementation of anti-corruption reforms; and (iii) mobilizing the public support to collectively fight corruption and participate in public affairs. 3.5.5 As part of building its institutional capacity in order to effectively enforce the anti-corruption law and prevent corruption in Kenya, the Commission has proposed specific measures and activities aimed at: (i) developing specialized competencies among staff; (ii) providing regional anti-corruption mobile outreach and clinics to make Commission services more accessible to the people of Kenya; and (iii) training community-based anti-corruption monitors and facilitators to monitor and report corruption and create anti-corruption awareness at the local level. 3.5.6 The implementation of these measures is expected to produce measurable improvement in the fight against corruption both at the local and national level by, among other things: (i) improving the competency and productivity of the Commission staff; (ii) decentralizing the Commission’s service delivery through mobile regional outreach and clinic program; and (iii) building the Commission’s capacity to detect and punish corruption at the local level; and (iv) provide relevant feedback on the on-going anti-corruption measures and to use such reports to refine the anti-corruption operational strategies in the public and private sectors.

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3.6 The External Resources Department (ERD) 3.6.1 The External Resources Department is situated within the Ministry of Finance. ERD is mandated to mobilize external resources for Government projects and programs. The department performs the above mandate under the provisions of the External Loans and Credits Act, Cap 422 of the laws of Kenya. ERD has a number of Units, including the ADB desk, in-charge of specific donor or group of donors. 3.6.2 The ERD is critical for the harmonization of external aid procedures and policies with those of the countries. The ADB desk within the ERD facilitates the smooth administration and management of ADB projects and programmes in the country. Its functions include: the coordination of negotiations between the Government and the ADB, assistance to line Ministries in the preparation of projects to be funded by the Bank, monitoring and evaluation of projects, facilitation the disbursement of project funds, facilitation of missions, attendance at Project Steering Committee Meetings, and serving as the liaison between line ministries and the Bank. 3.6.3 ERD’s staff is limited and some of the staff lacks the necessary skills to accomplish effectively their role. Hence, the ERD should be better staffed and more specifically, existing staff require training to acquire the skills necessary to monitor and ensure that Bank projects are efficiently implemented. A follow-up and tracking system of projects ought to be developed to ensure that line Ministries and all Project Coordination Units (PCU) submit required audit and implementation reports. In consequence, the ERD and in particular the ADB desk require improved computer facilities. Furthermore, and in particular the ADB desk, lack facilities such as vehicles and adequate budgetary allocation to perform its duties satisfactorily. In this regard, the ERD and especially the ADB desk will carry out its supervision and monitoring duties including periodic as well unannounced visits to PCUs to verify physical and financial implementation of projects which will contribute greatly in enhancing its role in fighting corruption

4. THE PROJECT 4.1 Project Concept and Rationale 4.1.1 The proposed institutional support project aims at supporting fiduciary reforms in Kenya. This includes the procurement system and the auditing system. It also aims at strengthening the Anti-corruption initiative of the government. Kenya has taken many bold steps to promote good governance including the passing of several legislations, setting up of appropriate institutions, and giving them teeth to deal with anti-good governance tendencies. A number of reforms are still necessary to transform these achievements to effective institutions. As of today, there are still many backlogs in both internal and external audits to make their products useful for planning purposes, and to extend the exercise to municipal and district governments with the intention of promoting accountability and transparency at those lower tiers of government. Capacity both in terms of skills, procedures, and structures, is still a major constraint. 4.1.2 The focus of the proposed institutional support project is to help the Government to streamline the procurement system, strengthen the internal and external auditing systems to remove all backlogs and extend service to provinces, and also help to build adequate capacity at the Kenya Anti-Corruption Commission. As said in para. 2.3.3, the GJLOS program is on-going, and donors have endorsed the PFMR, a home grown document, prepared with full participation of all stakeholders.

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4.1.3 Within the PFMR, the project will support procurement which falls under the responsibility of the Department of Procurement, the Internal Audit, the National Audit Office, and the KACC, an independent commission. The funds will be used to build capacity in these departments, promote public awareness, and enhance productivity. The selection of areas to support was guided by the priorities as set by the Government, the need to gradually raise standards to internationally accepted levels in these institutions, as well as meeting the Bank’s standards. 4.2 Strategic Context 4.2.1 Poor public sector management in Kenya has had several negative effects on the growth and the development of the economy. It has increased the cost of doing business as corruption mounted to discourage private investors. Poverty has also increased as resources meant for development have been diverted to private pockets. Key governance problems include: lack of efficient, transparent, and accountable decision-making and management in the country’s public sector, existence of high level corruption, weak economic and financial management, weak rule of law, and inefficient service delivery. 4.2.2. The promotion of good governance is the third pillar of the ERSWEC. The strategy identifies reform of the Governance, Justice, Law and Order Sector (GJLOS) as one of the top priorities for action in order to create wealth and employment, and reduce poverty on a sustainable basis. The strategy represents the main frame of reference for the definition and implementation of actions regarding the promotion of good governance and capacity building. During the period 2003/2004, the Government continued to implement a broad based strategy to enhance governance amid an intensive debate on some important gaps in the anticorruption agenda. In its time-bound action plan on governance released in April 2005, the Government acknowledged that more steps were needed to address corruption and considered ongoing reforms to produce, disseminate, and audit public accounts to be critical in this regard. 4.2.3. In 2005, a special CG meeting on Kenya was devoted to the theme of Governance. The Government, donors and other stakeholders reviewed the actions and reforms being implemented; the key challenges ahead; and proposed an Action Plan for monitoring progress on governance related issues, particularly on anti-corruption. Donors were very receptive to the Action Plan. They encouraged the Government to implement the Action Plan effectively. The Government reiterated its commitment to the anti-corruption agenda and assured the CG meeting that its action plan will be fully implemented. It also called upon development partners to assist the government in its anti-corruption efforts by swiftly prosecuting firms and individuals accused of corruption in Kenya, and by assisting the government to repatriate stolen resources being held abroad. 4.2.4. In addition to the ERSWEC, the Bank’s Country Strategy Paper under ADF IX (ADF/BD/WP/2003) had identified poor governance as a major constraint to economic development and poverty reduction. By this time, the Government had not come up with its own strategy to tackle poverty and worsening economic situation. More light was shed on the state of governance of the country by the Country Governance Profile (CGP) prepared by the Bank Group in November 2004. The CGP identified the judiciary system, public procurement system, and the financial management system as major constraints to growth with poverty reduction. Other documents that shed light on the state of the economy included the Country Financial Accountability Assessment (CFAA) that pointed to the weaknesses in the financial management system of the country.

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4.2.5. A key strategic document of the Bank was the Bank Group’s policy on good Governance produced in year 2000. The document was based on accountability, transparency, participation, the rule of law, and combating corruption. In 2005, the Bank produced the guidelines for the Policy Based Loans for good governance, which emphasized the institutional support component, as a way of helping the countries build appropriate institutions that are sustainable, and capable of fighting corruption. 4.2.6. Despite the gloomy situation, a major public sector reform for economic and financial management came with the coming into power of the National Rainbow Coalition (NRC) government in 2002. Therefore, the 2005-2007 CSP, did not find it difficult to recommend Bank’s support for the ERSWEC whose objectives and goals were in line with the Bank’s strategy and the ADF X lending policy, all focusing on improving the enabling environment for the private sector-led growth, and reducing poverty. In all of these, improvements in the fiscal system (good governance) and in the fight against corruption are important to attain the goals. 4.3 Project Objectives The objective of the project is to assist the Government of Kenya to improve public financial management in the areas of procurement, and auditing, and also to intensify the fight against corruption. It also aims at improving capacity in the major areas of focus of the project. 4.4 Project Description 4.4.1 The project has three main components: Improving the Public Financial Management System, with special emphasis on three departments, namely: Procurement, Internal Audit and the National Audit Office; second, to strengthen the Kenya Anti-Corruption Commission in its fight against corruption; and third, to enhance performance at the ADB desk in Kenya. It will also recruit a consultant to work with the PFM Coordination Unit to develop the monitoring and evaluation framework, and also defray its administrative expenses. Component 1: Improving Public Financial Management System. Sub-Component 1: The Public Procurement Department (PPD) 4.4.2 In line with the recommendation of the CGP, and the CSP for Kenya, as stated in para. 1.1.5, the Bank will support the transition of the Procurement Department from being part of the Treasury Department to the Public Procurement Oversight Authority (PPOA), as envisaged in the Procurement Act. PPD has identified furnishing of PPAO offices, computerization of PPD’s offices, improving the data base, training, installation of e-procurement system, and monitoring and evaluation as main activities under the component requiring support from the Bank:

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Activity 1: Furnishing the Public Procurement Oversight Authority (PPOA), as an autonomous institution, under the new Procurement Act; 4.4.3 The Authority is described in para.3.2.4. It will have new staff, and therefore, will have to provide office space and furnishing for about 16 staff positions, including the office of the director of PPOA. The office space will be taken care of under the Government’s component of the project, while the Bank will be required to provide furniture. Activity 2: Computerization of PPD’s Offices and provision of ICT facilities 4.4.4 To enhance operational efficiency, it is estimated that the Department will require about 55 computers, 55 UPSs, 10 Printers, 5 Laptops, a Network design, Anti-Viruses and 2 firewall devices. The Bank has been asked to provide resources for these items. Activity 3: Staff Training 4.4.5 PPOA intends to improve its staff performance through both short-term and long term training. About 90 professional staff is listed for training on short-term courses between 2006 and 2008, and another 30 on long-term courses leading to diploma certificates and masters degrees over the same period. Activity 4: Establish E-Procurement System 4.4.6 At the moment, PPOA does have an electronic procurement system, therefore, it cannot post on the web the procurement notices. To improve the transparency and accountability of its operations and promote efficiency, the software for e-procurement will be purchased and consultants will be hired to install it. Staff will also be trained in the use of the system. Activity 5. Creation of Public Awareness of the New Procurement System 4.4.7 To create Public awareness, PPOA intends to make press advertisements from time to time. About 6 of such advertisement will be made each year for a total of 18 in three years. Also about 2000 copies of its regulations will be produced each year, and 5000 magazines will be distributed each year. Through these means, the general public will be informed, thus making the procurement system more transparent. Activity 6: Establish a monitoring and evaluation system. 4.4.8 To ensure that the proposal is effectively implemented, it is essential that a monitoring and evaluation (M&E) system will be developed that provides timely information to both the Government and external stakeholders on the reforms within the procurement system. To enhance verification of outcomes, the independent non-government professional actors will be empowered to play a stronger role in M&E by facilitating their access to necessary information on relevant websites. Sub-Component 2: Internal Audit Department 4.4.9 The aim of the project is to support the Internal Audit component of PFM Reform Program by providing support to enhance oversight, good governance and risk management

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through audit committees; strengthen compliance and enforcement of internal audit findings and recommendations; institutionalize quality assessment of internal audit activities, enhance monitoring of budgetary performance; and build capacity for IT audit and other modern internal audit techniques such as “value for money” audit, and contracts audit. When the project is implemented, it will strengthen compliance and enforcement of internal audit findings and recommendations Activity 1: Develop and Produce audit Guidelines and Manual 4.4.10 The project will fund a consultant to develop audit Guidelines and Manuals. About 400 copies of the Manual will be produced. It will enhance compliance with standards. Activity 2: Develop quality Assessment framework 4.4.11 With the adoption of internal audit standards and best practices, there is need to conduct quality control assessment in internal audit work in all Ministries and Departments and in all Districts. To achieve this objective, Internal Audit will develop a quality assessment instrument, conduct internal and external assessments, and disseminate the results. Activity 3: Train internal auditors 4.4.12 There are about 415 auditors in the department, and all of them will be trained in report writing and taking audit minutes. Also, the 200 audit committee members will be trained. All internal auditors will be trained in report writing and taking of minutes. They will also be trained in budget performance. This is critical for auditors in line ministries as they are now required to review and audit half yearly, and yearly, annual budgetary performance reports to be tabled in parliament. Core staff will be trained in IT audit, and some 20 IDEA software, will be procured. The project will also build capacity for audit new techniques such as VFM, RBAA, IT audit, etc. Activity 4: Enhancement of Operations 4.4.13 To enhance its operations, the Internal Audit department will get through this project, 40 computers, 40 UPS, 40 printers and 20 laptops. It will also supply 3 vehicles to facilitate mobility to the remote areas. In addition, it will provide office equipment to the newly created audit committees. Sub-Component 3: The Kenya National Audit Department 4.4.14 As discussed in section 3.3, the merger of the offices of the Accountant General and that of the Auditor General in 2004, led to an enlarged structure, with many of the staff untrained at the requisite level. In addition, the work load was expanded to ensure accountability and transparency at all tiers of government. Although the WB project had taken care of the training needs of KENAO, the merger has called for additional training. In addition, to enhance operational efficiency, KENAO needs to build up its Information and Communication Technology, and also to acquire vehicles to audit accounts at the municipal and district levels. The project under KENAO will focus on training, ICT development, and transportation equipment.

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Activity 1: Enhance capacity building by training and retraining existing staff in new audit methodologies, report writing, and management and communication skills 4.4.15 There are two categories of professional staff in the audit department, namely, the technical staff referred to as Audit Examiners, and the professional staff referred to as Auditors. Staff in these categories will be trained using short-term courses, workshops and seminars, and short term attachments both locally and abroad. About 22 professional staff of KENAO will be trained in various aspects of auditing. Activity 2: Enhance operational efficiency through the development of ICT Infrastructure, and the supply of computer equipment. 4.4.16 Information technology can bring about greater efficiency in the auditing process. This is even more so in the case of KENAO where there is need to link accounts at different locations. This project will enable KENAO install a network framework linking various offices together, and linking KENAO to the data base of its clients. It will also be accessible in the hinter land. With the merger, KENAO needs to provide computer facilities for those who currently don’t have, and for the laboratory. The project will provide about 50 computers (of which 30 will be for the laboratory), 20 printers, 10 UPS, and 10 laptops. Component 2: Strengthening the Anti-Corruption Commission 4.4.17 As described in para 3.5, KACC is one of the major Government’s responses to the serious problems of corruption in the country. Even though the Commission has been in existence since 2003, its operations are still largely limited to Nairobi. The need to cover the whole country was identified in the financial management review of the WB, and both the CGP and the CSP for Kenya suggested that the commission be assisted to have a wider coverage of the country. Under this program, the Commission has proposed a number of activities to be executed over the next 24 months. They include the development of staff competencies, Setting up of Regional Anti-Corruption Outreach and Clinics, Training Community-Based Corruption Monitors and Facilitators and establishing a Monitoring and Evaluation system. The various activities involved are specified below: Activity 1: Develop Staff Competencies 4.4.18 To develop staff competencies, the commission will train 60 Commission staff on forensic audits and investigation techniques, 40 officers will get on-the-job training and 20 will participate in exchange programs in partnership with leading anti-corruption agencies; 20 will go on study tour of jurisdictions with best practices; and 60 will receive training on policy and operational review techniques. One staff will receive training on microfilm for documentation.

Activity 2: Provide Regional Anti-Corruption Outreach and Clinics

4.4.19 To extend services to the regions, the Commission will (i) produce and disseminate educational and awareness materials to them. About 60,000 copies of documents will be produced; (ii) conduct regular regional outreach and corruption reporting clinics to improve access by the public; and (iii) produce and air various action- oriented anti-corruption radio and drama-based awareness programs

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Activity 3: Train Community-Based Corruption Monitors and Facilitators

4.4.20 This activity will focus on the training of selected Kenyans to (i) disseminate appropriate anti-corruption empowerment campaign materials for the regions; (ii) identify and train community-based corruption monitors and institution-based facilitators in each district; (iii) educate and conduct anti-corruption awareness; (iii) conduct grass-root corruption surveys and information gathering; and (iv) monitor and report on all corruption cases. Activity 4: Establish a Monitoring and Evaluation System

4.4.21 To ensure that these proposals are effectively implemented, a monitoring and evaluation (M&E) and reporting framework will be developed to provide timely information to the Commission. Component 3: The External Resources Department 4.4.22 The External Resources Department is responsible for mobilizing external resources to support the Government program and projects. Mobilization and harmonization of external resources is one of the major tasks of ERD. The ADB’s desk within the department is responsible for the coordination of Bank projects, and also involved n project supervision. At the moment, the Bank Group portfolio in Kenya is about UA 637 net of cancellations, covering 37 projects, and five lines of credit, and four policy-based loans. It will be essential that a country office be established in Kenya as soon as possible. Meanwhile, the desk needs additional computers, printers, photocopier, and means of moving round the country to supervise Bank projects. The following activities are proposed for the ERD: Activity 1: Staff training 4.4.23 The staff of the Department working on Bank projects, such as accountants, and staff of the Desk, need to be exposed to the Bank’s procedures for greater productivity. This project will provide the exposure by training them on Bank procedures, and also for skills development.

Activity 2: Provide computer facilities and enhance transportation facilities 4.4.24 At the moment, there are about five officers (including the Director of ERD, two desk officers, and two accountants), and two secretaries working on the ADB projects in the country. To equip the Desk to supervise Bank projects all over the country, and provide support to the implementation units, the project will provide a vehicle to the team, and also provide two computers, two printers, two UPSs, and two lap-tops to enhance operations. Component 4: Project Coordination Office 4.4.25 The management of this project will be housed within the Public Financial Management Reform Coordination Unit that is also the coordinating unit for the World Bank project. For this reason, there will not be a full fledged PFMRCU. Using the same Coordination Office with the World Bank will reduce cost and also promote harmonization in the spirit of the Paris Declaration. Resources that will be made available to the Office will be limited to those required for hiring a consultant to develop the monitoring and evaluation system, and also to provide administrative support, including the procurement of a computer with its UPS, a laptop, a photocopier, and a printer.

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Activity 1: Consultancy for the development of the Monitoring and Evaluation Framework 4.4.26 Monitoring and evaluation is critical to the success of the project. The consultant will be required to develop the framework for monitoring and evaluation. He/she will be expected to work with the benefiting institutions in setting out their monitoring and evaluation systems. Activity 2: Provide resources for administrative support 4.4.27 The Coordination Office would require a computer, a printer, a photocopier, and a laptop to implement its tasks. In addition, the project will make available resources for the daily running of the project, for purchase of materials, as well as sitting allowances. 4.5 Project Costs 4.5.1 The total Project cost is estimated at UA 6.13 million including contingencies and excluding taxes. The foreign exchange component is UA 3.38 million, representing 55.20 percent of the total cost, while local cost is UA 2.75 million, or 44.80 percent of the total cost. Summaries of cost estimates by components and by category of expenditure are in Tables 4.1 and 4.2 respectively.

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Table 4.1 : Summary of Project Cost by Components

Kenya Shillings (millions) UA (000) Foreign Local Total Foreign Local Total Procurement Department Computers with UPS 9.4 0.0 9.4 90.3 0.0 90.3 Other Office Equipment 17.9 0.0 17.9 172.8 0.0 172.8 Network System 13.0 0.0 13.0 125.5 0.0 125.5 Office furnishing 0.0 6.0 6.0 58.2 0.0 58.2 Training 15.4 38.4 53.7 247.1 370.7 617.8 Workshops 2.2 3.3 5.6 21.4 32.2 53.6 Other Costs 0.0 3.0 3.0 0.0 29.0 29.0 Sub-total 57.8 50.7 108.6 715.4 431.8 1147.2 Internal Audit Department Computers with UPS 6.8 0.0 6.8 65.7 0.0 65.7 Other Office Equipment 4.0 0.0 4.0 38.6 0.0 38.6 Network System 5.6 0.0 5.6 54.1 0.0 54.1 Vehicle 5.0 0.0 5.0 48.3 0.0 48.3 Office furnishing 5.0 5.0 10.0 96.6 0.0 96.6 Training 34.4 51.6 85.9 331.9 497.8 829.7 Other Costs 0.0 2.5 2.5 0.0 24.3 24.3 Sub-total 60.8 59.1 119.8 635.1 522.1 1157.2 KENAO Computers with UPS 7.9 0.0 7.9 76.3 0.0 76.3 Other Office Equipment 3.0 0.0 3.0 29.0 0.0 29.0 Network System 65.4 0.0 65.4 632.0 0.0 632.0 Vehicle 5.0 0.0 5.0 48.3 0.0 48.3 Training 34.9 0.0 34.9 337.3 337.3 Sub-total 116.3 0.0 116.3 785.5 337.3 1122.8 KACC Vehicle 10.0 0.0 10.0 96.6 0.0 96.6 Training 12.2 30.4 42.6 195.8 293.7 489.5 Workshops 0.0 112.1 112.1 0.0 1082.4 1082.4 Other Costs 0.0 11.5 11.5 0.0 111.2 111.2 Sub-total 22.2 154.0 176.2 292.4 1487.3 1779.7 ERD Computers with UPS 0.3 0.0 0.3 3.3 0.0 3.3 Other Office Equipment 1.0 0.0 1.0 9.4 0.0 9.4 Vehicle 5.0 0.0 5.0 48.3 0.0 48.3 Training 4.1 2.8 6.9 0.0 66.7 66.7 Sub-total 10.5 2.8 13.2 60.9 66.7 127.6 Coordination Office Computers with UPS 0.2 0.0 0.2 1.6 0.0 1.6 Other Office Equipment 0.8 0.0 0.8 6.5 0.0 6.5 Monitoring and Evaluation Framework 0 11.3 11.3 0 109.3 109.3 Sitting in allowance 0 7.8 7.8 0 75.2 75.2 Miscellaneous 0 4.8 4.8 0 48 48 Sub-total 1.0 23.9 24.9 8.1 231.8 239.9 Contingency 26.8 29.0 55.9 249.7 307.7 557.4 Total Cost 295.3 319.5 614.9 2747.1 3384.7 6131.8

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4.5.2 Detailed cost estimates by category of expenditure, is given in Table 4.2. They are based on the submissions of the beneficiaries themselves adjusted for price and physical contingencies.

Table 4.2: Summary of Project Cost by Category of Expenditure Kenya Shillings (mill) UA (000’s) Foreign Local Total Foreign Local Total Procurement Department Goods 40.2 6.0 46.3 446.8 0.0 446.8 Training 15.4 38.4 53.7 247.1 370.7 617.8 Other services 2.2 6.3 8.6 21.4 61.1 82.6 Total Base Cost 57.8 50.7 108.6 715.4 431.8 1,147.2 Contingency 5.8 5.1 10.9 71.5 43.2 114.7 Sub-Total 63.6 55.8 119.4 786.9 475.0 1,261.9 Internal Audit Department Goods 26.4 5.0 31.4 303.2 0.0 303.2 Training 34.4 51.6 85.9 331.9 497.8 829.7 Other Services 0.0 2.5 2.5 0.0 24.3 24.3 Base Cost 60.8 59.1 119.8 635.1 522.1 1,157.2 Contingency 6.1 5.9 12.0 63.5 52.2 115.7 Sub-Total 66.8 65.0 131.8 698.6 574.4 1,273.0 KENAO Goods 81.3 0.0 81.3 785.5 0.0 785.5 Training 34.9 0.0 34.9 0.0 337.3 337.3 Base Cost 116.3 0.0 116.3 785.5 337.3 1,122.8 Contingency 11.6 0.0 11.6 78.6 33.7 112.3 Sub-Total 127.9 0.0 127.9 864.1 371.0 1,235.1 KACC Goods 10.0 0.0 10.0 96.6 0.0 96.6 Training 12.2 30.4 42.6 195.8 293.7 489.5 Other Services 0.0 123.6 123.6 0.0 1,193.6 1,193.6 Base Cost 22.2 154.0 176.2 292.4 1,487.3 1,779.7 Contingency 2.2 15.4 17.6 29.2 148.7 178.0 Sub-Total 24.4 169.4 193.8 321.6 1,636.1 1,957.6 ERD Goods 6.3 0.0 6.3 60.9 0.0 60.9 Training 4.1 2.8 6.9 0.0 66.7 66.7 Base Cost 10.5 2.8 13.2 60.9 66.7 127.6 Contingency 1.0 0.3 1.3 6.1 6.7 12.8 Sub-Total 11.5 3.0 14.5 67.0 73.3 140.4 COORD.UNIT Goods 1.0 0.0 1.0 8.1 0.0 8.1 Operating expenses 0.0 23.9 23.9 0.0 231.8 231.8 Base Cost 1.0 23.9 24.9 8.1 231.8 239.9 Contingency 0.1 2.4 2.5 0.8 23.2 24.0 Sub-Total 1.1 26.3 27.4 8.9 254.9 263.9 Total Base Cost 268.5 290.5 559.0 2,497.4 3,077.0 5,574.4 Total Contingencies 26.8 29.0 55.9 249.7 307.7 557.4 Total Cost 295.3 319.5 614.9 2,747.1 3,384.7 6,131.8

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4.6 Sources of Financing and Expenditure Schedules The project will be co-financed by the grant resources of ADF-X and the Government of Tanzania as indicated in Table 4.3. Total contribution of ADF will be UA5.98 million, while the Government will contribute UA 0.31 million.

Table 4.3 : Sources of Financing (UA 000’s) Source Foreign Exchange Local Cost Total % of Total

ADF 2747.1 2771.6 5518.7 90.0% Govt. 0 613.1 613.1 10.0% Total 2747.1 3384.7 6131.8 100.0%

Table 4.4: Expenditure Schedule by Component, Source and Year (UA 000’s)

Year 1 Year 2 Year 3 Component ADF GoK ADF GoK ADF GoK

Total

Procurement Department Goods 374.8 0.0 116.7 0.0 0.0 0.0 491.5 Services 263.8 44.3 197.9 33.2 197.9 33.2 770.4 Total 638.6 44.3 314.6 33.2 197.9 33.2 1261.9 Internal Audit Department Goods 215.8 0.0 117.7 0.0 0.0 0.0 333.5 Services 323.2 58.0 237.0 42.1 237.0 42.1 939.4 Total 539.0 58.0 354.7 42.1 237.0 42.1 1273.0 KENAO Goods 597.6 0.0 266.4 0.0 0.0 0.0 864.1 Services 148.4 0.0 111.3 0.0 111.3 0.0 371.0 Total 746.0 0.0 377.8 0.0 111.3 0.0 1235.1 KACC Goods 106.2 0.0 0.0 0.0 0.0 0.0 106.2 Services 616.2 124.3 462.2 93.3 462.2 93.3 1851.4 Total 722.5 124.3 462.2 93.3 462.2 93.3 1957.6 ERD Goods 67.0 0.0 0.0 0.0 0.0 0.0 67.0 Services 24.9 4.4 18.7 3.3 18.7 3.3 73.3 Total 92.0 4.4 18.7 3.3 18.7 3.3 140.4 Executing Agency Goods 8.9 0.0 0.0 0.0 0.0 0.0 8.9 Services 86.7 15.3 65.0 11.5 65.0 11.5 254.9 Total 95.6 15.3 65.0 11.5 65.0 11.5 263.9 TOTAL 2833.7 246.3 1592.9 183.4 1092.1 183.4 6131.8

5. PROJECT IMPLEMENTATION 5.1 The Executing Agency In view of harmonizing ADB’s interventions with other development partners, this project will use the existing structure, Public Financial Management Reform Coordination Unit (PFMRCU), used for the implementation of the World Bank project (Institutional Reform and Capacity Building Technical Assistance Project). Because of the difference in the focus of that project and that of the Bank, subgroups constituted by directors from beneficiary departments will be formed to give attention to the specific aspects of the ADB project. Also, a consultant only to work on the ADB project will be hired. As with the World Bank Project, the Ministry of Finance will be the Executing Agency.

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5.2 Institutional Arrangements 5.2.1. The overall implementation of the project will be carried out under the supervision of the Steering Committee chaired by the Permanent Secretary of the Ministry of Finance, and including the Secretary, Public Sector Reform and Development in the Office of the President; the Permanent Secretary in the Ministry of Planning and National Development, the Managing Director of KACC, Directors from benefiting Departments (Procurement, Internal Audit, and National Audit Office), and nominated members from the civil society included in the World Bank project. The Committee will oversee the implementation of the project, provide guidelines, and assume risk management responsibilities of the project. 5.2.2 The Permanent Secretary of Finance will be the Accounting Officer for the project, and will assume the responsibilities and obligations as set out in Chapter 5 of the Government Financial Regulations and Procedures, and will be accountable to the ADF and the Parliament. 5.2.3 The project will use the same Public Financial Management Coordination Unit as used by the World Bank Project. It is located in the Ministry of Finance, and headed by the Director of Internal Audit. To give the Bank’s project more attention, two Procurement Officers (one from the MoF, and the other from KACC), the ADB Desk Officer, and an accountant will be designated to work on the Bank’s project. The Coordination Unit is allocated 4.3 % for administrative expenses, and for hiring a consultant to prepare the framework for monitoring and evaluation. 5.2.4 The Project Coordinator will report to the Steering Committee headed by the PS of the Ministry of Finance. Because the KACC is independent of the Ministry of Finance, the PS, MoF will develop a Memorandum of Understanding (MOU) detailing the arrangements between the two for implementing the project.

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5.3 Implementation Schedule The project will be implemented in no more than 36 months, starting immediately after its effectiveness in November 2006. The implementation schedule is as detailed below:

Table 5.1: Project Implementation Table Activity Target Date Board Presentation July, 2006 Publication of the General Procurement Notice September 2006 Signing of Grant Protocol September, 2006 Establishment of PFMRCU October, 2006 Grant Effectiveness/Launching November, 2006 Project Supervision June, 2007 Mid-Term Review March, 2008 Submission of First Audit Report April , 2008 Submission of PCR February 2010 Preparation of Bank’s PCR September 2010-

5.4 Procurement Arrangements 5.4.1 Procurement arrangements are summarized in Table 5.2 below. All procurement of goods, works and acquisition of consulting services financed by the Bank will be in accordance with the Bank's Rules of Procedure for Procurement of Goods and Works or, as appropriate, Rules of Procedure for the Use of Consultants, using the relevant Bank Standard Bidding Documents. 5.4.2 Goods: Procurement of computers, other office equipment, network systems, office furnishing and vehicles, all valued at UA 1.88 million, will be through National Competitive Bidding (NCB). The NCB mode of procurement has been chosen because in consequence of the relative small size of each market the advantages of international competitive bidding would be neutralized by the administrative and financial burden involved and because there are local suppliers sufficiently qualified and in a number sufficient to ensure competitive bidding. 5.4.3 Consulting Services: Procurement of consulting services, valued in aggregate at UA 4.26 million, will be undertaken on the basis of shortlists (SL) in accordance with the Bank Group’s Rules of Procedures for the Use of Consultants. Short-term consultancy will be required to: (i) elaborate a Monitoring and Evaluation Framework; (ii) elaborate an Audit Manual; (iii) the Development of Quarterly Assessment Framework for PPOA; (iv) the Development of Corruption Campaign Materials for KACC; and (v) for Training. In cases where the amount of the consultancy contract does not exceed UA 100,000, the Government may limit he publication of the invitation to bid national or regional newspapers. However, any eligible individual consultant, whether regional or not, may express desire to be short-listed and this desire will be respected.

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Table 5.2 : Summary Procurement Arrangements (UA 000’s)

Project Categories National

Competitive Bidding

Short List Other* Total

1. Goods

1.1 Computers with UPS 259.28 (259.28) 259.28

(259.28)

1.2 Other Office Equipment 275.45 (275.45) 275.45

(275.45)

1.3 Network System 892.75 (892.75) 892.75

(892.75)

1.4 Office furnishing 170.23 (170.23) 170.23

(170.23)

1.5 Vehicles 265.55 (265.55) 265.55

(265.55)

2. Consultancy Services

2.1 Short-term Consultancy Services and Training 2755.10

(2376.82) 2755.10 (2376.82)

2.2 Workshops 1249.59 (1010.67) 1249.59

(1010.67)

3. Miscellaneous

3.1 Operating Expenses 120.25 (120.25)

143.63 (139.77)

263.88 (139.77)

Total 1871.27 (1871.21)

4031.57 (3507.74)

229.00 (139.77)

6131.83 (5518.72)

5.4.4 For project auditing, the services of an auditing firm will be procured through a short list. The selection will be based on the comparability of technical proposals and selection of the lowest financial offer. 5.4.5 Short-Term and Long-Term Training: Procurement of various local and foreign training, as well as local seminars and workshops will be contracted to appropriate institutions, trainers, organizers, service providers acceptable to the Bank through short lists. The selection will be based on the comparability of technical proposals and selection of the lowest financial offer. 5.4.6 National Procedures and Regulations: Kenya’s national procurement laws and regulations have been reviewed and determined to be acceptable. 5.4.7 Executing agency: PFMRCU will be responsible for the procurement of goods and consulting services/training services. The resources, capacity, expertise and experience of this institution are adequate to carry out the procurement. 5.4.8. General Procurement Notice: The text of the General Procurement Notice (GPN) will be agreed to with the Government and be issued in the United Nations Development Business upon approval by the Board of Directors.

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5.4.9 Review Procedures: The Executing Agency will be required to submit all documents on procurement for the Bank Group’s review and approval before promulgation. The following documents will be subject to such review: (i) Specific Procurement Notices; (ii) Tender Documents for Goods and Works; (iii) Tender Evaluation Reports or Reports of Evaluation of Consultants’ Proposals, including recommendations for contract award; (iv) Draft Contracts for Goods, Works, and Consulting Services as well as amendments to contracts. 5.5 Disbursement Arrangements Disbursement will be in accordance with the Bank Group’s rules of Procedure for disbursement. The Executing Agency will open a convertible foreign exchange account with an acceptable Bank to the ADF. The Grant resources required to meet the Bank Group’s share of the grant amount will be deposited in the special account, and will be operated as a revolving fund. The Bank will replenish the special account at the request of the Executing Agency, after sufficient justification for the use of at least 50% of the previous deposit has been made. Direct Payment Method will be used where large disbursements are involved. The MOU between the Ministry of Finance and the Kenya Anti-Corruption Commission will specify the disbursement arrangements for the resources going to KACC. The MOU must be approved by the Bank Group. 5.6 Financial Reporting and Auditing. The Project Coordinator will keep accounts for the project in accordance with sound and acceptable accounting practices. Most of these procedures are already harmonized amongst MDBs. The fact that the same Department implementing the World Bank’s US$ 25 million Institutional Support Project, and the ADF grant project, will enhance financial management. The harmonized procedures will allow for the identification of expenditures by component, category, and source of finance as required by the Bank. The Executing Agency will be required to submit to the Fund annually throughout the period of implementation of the project, an external audit report covering the project’s operations in the previous year. An independent external auditor acceptable to the Bank will carry out the audit. The selected auditor will also be guided by the Bank Group’s Guidelines for Auditing Projects. The annual audit report and accompanying financial statement, including bank statements and statements of expenditure, will be submitted to the Bank for review no later than six months after the closure of the financial year. 5.7 Coordination with Other Donors 5.7.1 As said in para. 2.3.4, several donors are harmonizing their support in the area of good governance in Kenya (See Box 5.1).

Box 5.1 Development Partners in Kenya

A number of Development Partners have offered to provide assistance to support the Government implement various governance activities, including support to the justice and law and order sector, based on the Government demonstrating its strong leadership in the effort to eradicate corruption and pursue reforms. For example, the Governance, Justice, Law and Order Sector Reform Program (GJLOS-RP), which is supported by at least fifteen Development Partners is a Government-led initiative which lays out a five-year plan on a sector-wide, coordinated and coherent approach to reform of public sector institutions in the legal sector to be able to execute their mandate effectively.

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The World Bank together with DFID, SIDA, EU, CIDA and NORAD are pooling funds around single design projects in the area of financial management. Non-pooling donors in the same area of financial management include USAID, GTZ, and UNDP. There are also regular meetings of donors and the Government. In this context, the establishment of an ADB Country Office in Kenya will enhance police dialogue with the Government and other stakeholders, and also will provide effective liaison with other development partners on the ground. The various sectors in which the donors are involved are specified below:

Table 5.3 Activities of Major Donors in the Area of Governance in Kenya Sector Donors Involved

Legal Sector Reform World Bank, DFID, SIDA, EU, CIDA, Norway, USAID Public Financial Management World Bank, EU, DFID, SIDA, Norway, USAID, GTZ Public Service Reform DFID, SIDA, EU, UNDP, Netherlands, CIDA Parliament CIDA, USAID, WBI

5.7.2 This project will provide parallel financing, and will not be pooled together with resources of the other development partners. Nevertheless, it will use harmonized procedures in terms of procurement, reporting and monitoring of the project. Joint supervision missions will also be undertaken. 5.8 Monitoring and Evaluation 5.8.1 The PFMRCU will develop a framework for regular reporting to the Bank and the Government on the input and output targets, and progress of implementation. Output indicators will also be monitored bi-annually. An M&E consultant will be hired to develop the framework. It will lay the basis for monitoring the inputs, outputs and outcomes, and assess the efficacy of project management systems. The consultant will assist various departments and the commission in establishing reporting schedules, identification of data and drawing conclusions from studies.

Box 5.1 (continued) Development Partners in Kenya

The key outcomes of the program include a safe and secure environment, a fair humane and expeditious justice delivery system, and a more democratic state that respects human rights and the rule of law. The Government has also entered into partnership with Development Partners to plan and implement the Public Financial Management Reform Program with the aim of enhancing financial governance in the public sector for effective and efficient resource utilization for economic growth and poverty reduction. The United Nations Development Program (UNDP) is also supporting the government through a program to alleviate poverty through strengthening capacity and participation of governance institutions and civil society organizations including NGO's and Community Based Organizations on public governance. This program aims to promote participatory development planning by involving grassroots communities and all parties concerned in public policy debates to build consensus, eliminate corruption, enhance transparency and accountability, and institutionalize integrity systems and other programs and regulations that impact poverty eradication. The UNDP is also coordinating support from bi-lateral donors to the Public Sector Reform and Development Secretariat (PSRDS), in the Cabinet Office, Office of the President on improving public sector management, coordination and networking. The long-term objective of this support is to improve public sector management for more efficient, transparent, and accountable delivery of public services. Additionally, Kenya is one of the first four African countries (others are Rwanda, Ghana, and Mauritius) to be scrutinized by the African Peer Review Mechanism by volunteering to be reviewed on good governance, democratic standards and economic policy. The New Partnership for Africa's Development (NEPAD) peer review is seen as a vital part of the African economic recovery plan and sixteen African governments already have signed up to the review mechanism, which is to assess

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5.8.2 The project will be launched as soon as it is declared effective so as to avoid delays. It will be supervised regularly, and a mid-term review shall be launched in 2008 to ensure that execution is on course. At the end of the project in 2009, the PFMRCU will produce a Project Completion Report (PCR) to document the lessons learned while executing the project. 5.9 Publication of the Award of Contract Within two weeks of receiving the Bank’s “no objection” to the recommendation of contract award, the Executing Agency shall publish, in the same media as bid announcement, the results identifying the bid and lot numbers and the following information: (a) name of each bidder who submitted a bid; (b) bid prices as read out at bid opening; (c) name and evaluated prices of each bid that was evaluated; (d) name of bidders whose bids were rejected and the reasons for their rejection; and (e) name of the winning bidder, and the price it offered, as well as the duration and summary scope of the contract awarded. 6. PROJECT SUSTAINABILITY AND RISKS 6.1 Project Sustainability This project will be sustainable for the following reasons:

• More than ever before, the Government of Kenya is committed to good governance. The far reaching decisions that have been made through legal reforms and institution building clearly demonstrate that the government is not going back on its Economic Reform Strategy for Wealth and Employment Creation.

• The institutions supported by this project are those that have been identified by previous studies such as the CFAA, the CGP, and the CSP as key areas of reform if Kenya were to embark on good financial management to lift its population away from poverty.

• Already there are many donors in Kenya supporting good governance. The commitment of the donors coupled with the steadfastness of the government in fighting corruption give confidence for the sustainability of the project.

• The reform program (ERSWEC) of which the project is part, has in place a good monitoring system. So also is the World Bank Project—the Institutional Reform and Capacity Building Technical Assistance Project—which shares the same PIU with this project in the Ministry of Finance.

6.2 Risks and Mitigating Factors

6.2.1 There are two classes of risks to this project: first are the risks associated to the reform program to which this project is attached, and second, are the risks to the project itself. 6.2.2 Comprehensive as the reform program is, one of the risks it faces is the fragile nature of governance in Kenya. If the political leaders succumb to pressures, and fall into corrupt practices, the whole reform agenda might be derailed. To deal with this problem, the executive, legislative and judiciary arms of government must internalize the program and continue to show commitment to its implementation. Through the proposed project the ADB will play a key role in strengthening policy dialogue on governance with the Government and other stakeholders.

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6.2.3 Another risk at this level is the volume of reforms taking place at the same time. This may pose the danger of inadequate capacity. To deal with this problem, the Government must continue to intensify training, and at the initial stage, rely on its development partners for technical assistance to cover the gaps. 6.2.4 A risk at the project level is the present important capacity gaps in the institutions to be supported by the project. New ideas, and new technologies are to be introduced, and many of the existing staff need to be retrained in modern system of doing things. Although the project is going to emphasize training, filling the capacity gap will not be fast. Therefore, in the short term, the project will use the services of consultants to fill the gap. 6.2.5 Another risk is the possibility of inadequate flow of resources, particularly those funds that should come from the government, for the implementation of the project. To mitigate this danger, provisions for such funds should be included in the budget. For the Bank’s component, causes of delays will be avoided by regular supervision, and consultation with the implementing agency. 6.2.6 Another danger is that the project, in large part, is geared towards going outside the big towns into the districts and rural areas, and affecting the way people there handle governance. Since these people are not used to the system, there are likely to be resistance to change. To deal with this problem, the project has in-built resources for awareness creation. Also it provided for mobility to enable the implementers move to supervise the project. 6.2.7 Another risk to the project is staff retention. It is not unlikely that some of the staff after training might find greener pastures outside the civil service. It should be expected that it might not be possible to retain trained staff one hundred percent. Nevertheless, staff will be encouraged to remain on the job through improved remuneration, and transparency with which other benefits such as promotions are handled. 7. PROJECT BENEFITS AND IMPACT 7.1 Project Benefits. 7.1.1 The Government of Kenya has demonstrated strong commitment to implementing the reform program and has made substantial progress an enabling legal and institutional capacity for improved governance and reduced corruption. These reforms are necessary for successful implementation of the Government’s Economic Recovery Strategy for Wealth and Employment Creation that is geared towards reducing the level of poverty in Kenya. Poor governance and corruption, especially as they related to the management of public funds are major constraints to the poverty reduction efforts. This project will assist the Government to institutionalize transparency and accountability in fiscal management, and provide strong institutions to fight corruption in Kenya. 7.1.2 The Bank Group policy on good governance embraces five major elements: accountability, transparency, combating corruption, stakeholder participation, and an enabling legal/judicial framework. This project is situated within the Bank Group’s effort to contribute to institutionalization of good governance in the RMCs and this project will operationalize the policy in the areas of fighting corruption, introducing accountability and transparency in management of public funds, creating an efficient and effective public procurement process, creating enabling legal framework for fighting crimes (terrorism, drug trafficking, and money laundering), and enhancing the human resource capacity for the law enforcement. These activities of the project will lead to an improved investment climate in Kenya.

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7.2 Social Impact The project will help the government to implement its poverty reduction strategy as it relates to fiscal transparency and accountability. In the area of financing social services, the project will lead to reduction of waste of public resources arising from mis-procurement, thereby enhancing resources available for provision of social services. The decentralization of the operations of the anti-corruption agency will help to raise the awareness of the entire citizenry on the need for mass participation in the fight against corruption in Kenya. 7.3 Environmental Impact This project is not expected to have any adverse effect on the environment. It has been classified in category III in the Bank’s environmental classification of projects.

7.4 Gender Impact Given that women in Kenya constitute a larger section of the poor, with little access to social services, this project is expected to have positive impact on them through its impact on social service delivery and the fight against corruption. As this project provides training, it is expected that all of the women in professional positions in these institutions will benefit from the project. The public procurement reform component will identify and eliminate gender discriminatory clauses in public procurement laws and guidelines and will therefore enhance the competitiveness of women in public procurement. 8. CONCLUSIONS AND RECOMMENDATIONS 8.1 Conclusions 8.1.1 The implementation of this project will enhance the operational efficiency of the institutions whose functions relate to maintaining good governance in Kenya, namely Kenya Anti-Corruption Commission, the Public Procurement Directorate, and the Kenya National Audit Office by beefing up their equipments and supporting structures basic to their functions. It will create institutional capacity through training that will enhance good governance. A strengthened KACC will deal with the perpetrators of corruption, while a strengthened procurement and auditing systems will be preventive. They will also ensure accountability and transparency in management of public funds and enhance the human resource capacity for efficient administration. It will also help the ADB desk to become more efficient in its activities. 8.1.2 The implementation of the project will enhance the fiscal capacity to implement poverty reduction programs as resource waste through corruption (particularly procurement mismanagement) will be reduced. 8.2 Recommendations 8.2.1 It is recommended that the ADF Board approve a grant not exceeding UA 5.52 million for the Government of Kenya to support the Government in creating institutional capacity to promote good governance. The proposed grant shall be subject to the following conditions:

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Conditions Precedent to Entry into Force of the Grant Protocol 8.2.2 The entry into force of the Grant Protocol shall inter into force on its signature. Conditions Precedent to Disbursement of the Grant Resources 8.2.3 Prior to the disbursement of the Grant Resources, the Recipient shall have:

• Constituted Directors of the Project Steering Committee (PSC) including Permanent Secretary of the Ministry of Finance as chairman, the secretary Public Sector Reform and Development in the Office of the President, the permanent secretary in the Ministry of Planning and National Development, the managing director of KACC, directors from benefiting departments (procurement, internal audit and national audit office) and nominated members from the civil society included in the World Bank Projects. (see para. 5.2.1);

• Prepared a Memorandum of understanding between the Ministry of Finance and the KACC (see para 5.2.4);

• Designated the Project Coordinator for the World Bank project as the Project Coordinator for the Bank’s project (see para 5.2.4);

• Designated the Procurement Officer from the Ministry of Finance to work in the PFMRCU (see para. 5.2.3);

• Designated the Procurement Officer from KACC to work in the PFMRCU (see para. 5.2.3);

• Designated the ADB Desk Officer to work in the PFMRCU (see para. 5.2.3); and • Designated an Accountant from the Ministry of Finance as the Accountant to work in

the PFMRCU (see para 5.2.3);

Annex I KENYA MAP

This map was provided by the African Development Bank exclusively for the use of the readers of the report to which it is attached. The names used and the borders shown do not imply on the part of the Bank and its members any judgment concerning the legal status of a territory nor any approval or acceptance of these borders.

MATRIX ON THE IMPROVEMENT OF PUBLIC FINANCE MANAGEMENT ANNEX II, Page 1 of 6

Broader Objective to which Component Contributes Improvement of Public finance Management Component Title : 1.1 Reform Public Procurement

Overall goal of component : To institute a transparent, accountable and efficient public procurement system in Kenya Reform Component Purpose : To facilate a cost efficient translation of policy formulation into actual budgetary achievements.

OBJECTIVE ATIVITIES OUTPUT INPUT INDICATORS RISKS/ASSUMPTIONS 1 To reform the legal and regulatory

framework 1. Remove ambiguity and improve

clarity of the law and regulations. 2. Promote transparency within the

law and regulations, standard bidding documents and the procurement manuals.

3. Develop disclosure requirements

for bid evaluation and contract awards.

4. Introduce the procurement

threshold matrix as the basic mechanism for selection of appropriate procurement method and implementation of appropriate authorising body for each step in the procurement cycle.

5. Review clauses on contract

variation to achieve both practical and effective control.

6. More closely integrate the

procurement process with the budget preparation as well the budget execution process.

7. Revise the vote book mechanism to

improve its effectiveness in commitment control.

8. Separate authorization of main

procurement steps to achieve effective checks and balances.

9. Include inventory management

guidelines and procedues within the regulations.

Develop best operating pratice in the procrement system.

1. A revised procurement Bill.

2. Revised. Regulations.

3. Revised Procurement

Manual.

4. Revised standard Bidding Documents.

5. Revised Vote Book design and procedures.

6. More ready establishment of audit standards.

7. Improved expenditure controls.

8. greater transparency.

9. Closer links between the

budget preparation and procurement planning process.

10. The utilization of procurement plans within the budget execution process.

11. Clear and widely disseminated inventory management procedures.

1. International Local Consultancy for the design of Inventory management procedures and controls. 2. Local

Consultancy for the design of the Vote Book procedures.

3. Training

workshops on new procurement regulations and procedures.

4. Training

workshops on procurement planning.

5. Training

worshops on the revised vote Book.

Reviewable milestones 1. Completion of layman’s

draft of the Procurement Bill.

2. Enactment of Procurement

bill. 3. Completion of draft revised

regulations, draft revised procurement manual, draft standard Biddinf Documents, Inventory Management procedures.

4. Issuance of regulations

procurement manuals and standard bidding.

5. Initiation of sensitization

workshop on new regulations.

6. Number of spending

agencies that have received trainning.

Procurement Indicators 1. Quality of Procurement and expenditure management results. 2. Reduction in pending bills. 3. Reduction in the abuse of

contract variations as indicated in external audit reports.

The Public Procurement and Disposal Bill 2005 will be encated The Public Procurement and Disposal Regulations 2005 will be gazetted Quality of procurement and expenditure management measures are to be based on periodic CPAP/IRPs Regulations will be gazetted-Circular will be issued. Funding will be available to run training workshops in all spending agencies at the headquarters and throughout all the districts. Funding will be available for the engagement of international procurement experts to assist with the development of the procurement regulatory framework.

MATRIX ON THE IMPROVEMENT OF PUBLIC FINANCE MANAGEMENT ANNEX II, Page 2 of 6

OBJECTIVE ATIVITIES OUTPUT INPUT INDICATORS RISKS/ASSUMPTIONS

2 To establish and make operational the Public Procurement Oversight Authority

1. Form an interim board upon the gazettment of the new law and regulations.

2. studdy tours to benchmark during setting up of the PPOA organizational structure.

3. Establish appropriate organizational structures and staffing. 4. Establish terms and conditions of service. 5. Set office standars. 6. Source office facilities / purchase of vehicles, operations amd

maintenance. 7. Furnish the offices.

Operating Public Procurement Oversight Authority-An existing Regulatory Authority in Public Procurement

1. International Consultancy to assist

with the setting up of the PPOA.

Reviewable Milestones 1. Formation of the Public

Procurement Oversight Board.

-The Public Procurement and Disposal Bill 2006 will be enacted. -Regulation will be Gazetted.

3 To Undertake an e-procurement initiative to promote transparency.

1. Establish an update website for PPD E- Procurement Develop and Operationalize the website. 2. Introduce relevant e- products to harmonize reporting and information on procurement reporting and information on procurement activities from Ministries. 3. Implement IEC policy. 4. Sensitize and operationlize linkages to Ministry of Finance website. 5. Train staff on the updating and use of the PPD website. 6. Adopt e-Procurement best pratice

-implement e-Procurement . -purchasing cards. -e-Actions -e-Sourcing –e-tendering -e-evaluation -e-collaboration

-e-contract management.

1. A working procurement website which reports on procurement activities in the different ministries and the posts procurement awards and opportunities.

2. Effective publicity.

3. An e-procurement

system.

1. A local contract to develop the website subject to PPD specifications and requirements. 2. Catalogues bulletin and other media materials. 3.Scenario analysis. 4. Application software and hardware.

Reviewable Milestones 1. Increased transparency and

awareness measured through the percentage of contract awards and procurement opportunities above a certain threshold that are listed on the website.

2. Reduced costs measured

through average cost per transcation.

1. Procurement Units have computing facilities with access to the internet.

2. Staff are computer

literate . 3. There will be the

infrastructure for connecitivity.

4. There will be

minimal resistance to change.

.

MATRIX ON THE IMPROVEMENT OF PUBLIC FINANCE MANAGEMENT ANNEX II, Page 3 of 6

OBJECTIVE ATIVITIES OUTPUT INPUT INDICATORS RISKS/ASSUMPTIONS 4 To reduce

delays in the Procurement Process.

1. Revise the procurement regulations and the procurement manual with a view to simplify the procurement procedures.

2. set strict time bound procedures for the bidding

process. 3. Set clear evaluation and award criteria and

include as part of the bidding documents to enhance transparency and reduce evaluation delays and interference.

4. Implement the procurement threesholds matrix

mechanism to carefully balance time, transaction cost and control over the procurement process.

5. review the tender bidding process for drugs and

medical supplies.

1. Reduced opportunity for rent seeking .

2. Improve the delivery of

drug and medical supplies.

3. render the procurement

process more transparency and credible.

4. Standard methods of bibs.

1.International Consultancy to assist in preparation of procurement regulations and manualsm, standard bidding documents (see in put in Objective).

2.sensitivity workshops on methods to

be implement for reducing delays.

Reviewable Milestones 1. Issuance of Procurement

Regulations with simplified procurement procedures.

2. Issuance of procurement

manual with simplified procedures.

3. Inclusion of award criteria in

bidding documents. Procurement Indicators 1. Average time taken for

awarding contracts. 2. Average time for the supply of

drugs and medical supplies under the annual tender process.

-The new Procurement Bill is enacted into law by parliament. .

5 To have ain place a legal and regulatory framework for Public-Private partnerships.

1. Develop a legal / regulatory framework for the establishment of a Public-Private Partnership Unit and the regulations that govern the establishment of Public-Private Partnerships.

2. Establish a PPP Unit-Fast track implementation

of the regulatory framework-Borrow best preactices from other countries.

1. Regulations that guide the establishment of Public-Private.

2. The establishment of a Public Private Partnerships.

1.Study tours to Mauritius and South Africa.

2.PPP Consultancy.

Reviewable Milestones 1. Preparation of Layman’s draft

on amendment to procurement bill on PPP.

2. Enactment of PPP amendment. 3. Preparation of Draft

Regulations on PPP. 4. Establishment of PPP Unit.

The PPP amendment will be enacted into law by parliament.

6 To review the current institutional arrangements for effecting procurement procedure.

1. Change the existing policies regarding the existence of common-user items. The following departments must be reformed to be in line with reforms to be in line with reforms already in place.

• Supplies Branch of Ministry of Road &

Public Works. • Mechanical Branch of the same ministry.

1. Reduction in procurement delays, without significant loss in control.

2. Reduction in abuse due to

partial and non suply of goods, works and services.

1.International Consultances to review the institutional arrangements.

Reviewable Milestones 1. delivery of report on revised

institutional arrangements for the procurement and distribution of common user items.

2. Efficient and reformed

institutions.

-Ministries and Districts have capacity to handle mechanical issues. -Institutions have capacity to compete with the liberalize market e.g supermarket.

MATRIX ON THE IMPROVEMENT OF PUBLIC FINANCE MANAGEMENT ANNEX II, Page 4 of 6

• Government Clearing Agent of the Ministry of Finance.

• Government Press of the Office of the President..

2. Review the institutional arrangements for the

verification and certification of goods, works and services received.

3. Efficient fast delivery of

service to the public institutions.

Procurement Indicators 1. Reduction in procurement

delays for common user items while retaining value for money.

7 To improve procurement pratice to stricly adhere to the procurement lws and regulations and be more transparent.

1. Develop and issue procurement plans format. 2. Train staff on the preparation of procurement

plans. 3. Train staff on new procurement regulations and

guidelines including the use of the procurement thresholds matrix.

4. Focus on improving the back end procedures

including instituting effective checks on the goods, works and services received.

5. Introduce award criteria into all bidding documents and adhere to such criteria in the evaluation.

6. Institutionalization of continuous

benchmaerking vetting mechanisms for suppliers.

7. Conduct regular market surveys. 8. Insitute an effective blacklisting mechanism of

companies that do not comply with the laws and regulations.

9. Apply sanctions as appropriate to all offending staff and suppliers.

10. Introduce strict guidelines for inviting bids and

quotations within the regulations for the Restricted Tender and RFQ methods that rely on an annual tender process. Procurement Oversight Authority and the Internal Audit Department shall focus upon this area of abuse.

1. A set of guidelines for developing procurement plans.

2. Develop and establish

island of best practices (pilot ministries).

3. A stronger linkage

between procurement plan and budget preparation and execution.

1.Consultancy to develop the procedures and format for the development and application of procurement plans in budget preparation as well as budget execution.

2.Training (see objective 1 trainings).

Reviewable Milestones 1. Completion of the guidelines

for developing procurement plans.

Procurement Indicators 1. Improvement in Quality of

Expenditure Management assessments.

2. Greater distribution of supplies

from qualifying companies participating in the annual tender process.

3. Greater incidence of sanctions

applied to abuse cases identified through the audit process.

Procuring entities will be able to prepare and adhere to the procurement plans.

MATRIX ON THE IMPROVEMENT OF PUBLIC FINANCE MANAGEMENT ANNEX II, Page 5 of 6

OBJECTIVE ATIVITIES OUTPUT INPUT INDICATORS RISKS/ASSUMPTIONS 8 To develop an effective

Review and Cmplaints process to help maintain credibility in public procurement.

1. Define a clear and non conflicting role for the review and Complaints Board that promotes it as a credible, independent and fair institution for setting procurement disputes.

1. An effective Review and Complaints Board.

Procurement Indicator Number of cases (and value of) that are submitted to and resolved by the Review and Complaints..

-The Procurement Bill is enacted into law .

9 (ii) To improve the filing and record management systems for procurement and expenditure files. (ii) to improve management of contracts.

1. Develop a standardized plans for the design of file storage facilities Units.

2. Design a filing and records management scheme to facilitate efficient linkages between procurement files and expenditure files so as to facilitate effective contracts management.

3. Training staff in records management.

4. Training staff in contract management.

1. Properly filed documents that facilitatedirect linkage between procurement files and the related expenditure files.

2. Appropriate

facilities in all spending units to facilitate the devised records management system.

Contract management guidelines and reports.

1. Consultancy on the development of an effective records and contract management system suitable in a manual environment.

2. Training workshops in records management for participants from all spending units.

Reviewable Milestones 1. A set of contract and management records guidelines. 2. The number of spending units with upgraded records

management facilities. 3. Number of staff that have attended records

management training workshops. 4. Contract management reports. Procurement Indicators 1. Reduced abuse on contract variations. 2. Improved quality of expenditure management assessments and other audits.

1. Funding shall be available to facilitate the consultancy .

2. Funding shall be available to

upgrade the filing and records management facilities in all of the spending units.

3. It will be possible to easily attract multidisciplinary staff to consitute contract management teams.

10 To establish and support a National Professional body for Procurement Professionals.

1. Provide assistance and support in drafting and legislating of legal instruments.

2. Pursue legal framework for a professional body .

Assist in the formulation of a code of conduct for professionals.

1. The establishment of an operating body for procurement professionals.

2. Publication of a guidebook on the code of conduct for procurement professionals.

1. Consultancy to assist in developing a code of conduct.

Reviewable Milestones Creation of a registrated procurement practitioner body.

1. The procurement practitioners Bill will be enacted.

11 To implement a ca pacity building program for public procurement..

1. Job evaluation. 2. Conduct trainnig needs.

See objective 1, 9 and 12 for training and 10 for code of conduct dissemination.

12 To develop and fully integrate a professional procurement cadre into the public finance management function.

1. Support the national association of procurement professionals to sanction misconduct by members through a program of self regulation..

1. Improved implementation of procurement regulations and procedures with subsequent

1. Recruitment of staff. 2. Training of staff. 3. Along with local

institutions the

Reviewable Milestones 1.Completion of training curricular. 2.Completion of organizational structures with more

slosely integrated procurement function in decision making role.

-The office of the President –Directorate of Personnel Management will approve scheme . -Public service commisssion will recruit staff and promote the existing.

MATRIX ON THE IMPROVEMENT OF PUBLIC FINANCE MANAGEMENT ANNEX II, Page 6 of 6

2. Recruit and train (initially under an accelerated scheme) university graduates with diverse backgrounds including engineers, quantity surveyors, economists, business administrators to form the core of a cadre of professional procurement staff.

3. Develop and implement appropriate training modules to address an accelerated program in conjunction with local procurement training institutions.

4. review organizational structures of public institutions to more closely integrate the procurement function into management decision making at the highest levels.

…Revise the scheme of service to cater for up-grading and better remunerations.

improvements in procurement pratice.

2. Closer integration of the procurement function within overall public public finance management..

3. Improved efficiency and a reduction in procurement delays.

4. Skilled and motivated staff.

5. Redefined role for directors of procurement within public institutions.

development of relevant procurement curricular suitable to public procurement.

3.Initiation of recruitment and training programs.. Procurement Indicators 1. Number of spending agencies with trained

procurement professionals. 2. Number of procurement professionals who receive

relevant procurement training.

13 To strengthen monitoring and evaluation to enhance transparency and accountability.

5. Develop monitoring and evaluation capacity within government for the proposal activities.

6. Effectively involve independent non-government actors in the monitoring and evaluation process.

7. Develop and implement feed back mechanism.

8. Hold sensitisation workshop for stakeholders.

Develop and implement media programmes.

6. Internal M & E systems for public procurement.

7. A structure for M &

E of non-government actors developed.

8. The capacity for

non-government professional agencies and to play a monitoring role is strengthened.

4. Consultancy. 5. workshops. 6. TV radio and

printing media programmes.

Procurement Indicators 1. General procurement information put on the website

of the Ministry of Finance / Public Procurement Oversight Authority.

2. The structure for non-government actors in placed and operational.

3. Empowerment external agencies to play a monitoring role by making available to them the necessary information.

-The office of the President –Directorate of Personnel Management will approve scheme . -Public service commisssion will recruit staff and promote the existing.

Annex III Page 1 of 2

KKAACCCC OOBBJJEECCTTIIVVEESS MMAATTRRIIXX

Objectives Specific Activities Expected Outputs/Outcomes Measurable Indicators

Train Commission staff on forensic audit and investigation techniques

Improved competencies on forensic audits and investigation techniques

Number of officers trained

Conduct on job training and exchange programmes in partnership with some leading anti-corruption agencies

Improved staff productivity and operational efficiency

Number of officers trained

Carry out study tour of jurisdictions with best practices on anti-corruption strategies

Best practices developed and adopted for operations

Number of other jurisdiction studied

1. To develop staff competencies in specialised areas

Train Commission staff on policy analysis, operational reviews and systems analysis

Competency on policy analysis and operational review enhanced

Number of staff trained on policy

Produce and disseminate educational and awareness materials for regional areas

Enhanced anti-corruption awareness

IEC materials produced and disseminated

Conduct annual regional corruption reporting clinics

Improved access and convenience by public

Number of corruption reporting clinics provided annually

Make operational the delivery of mobile anti-corruption law enforcement at regional level

Delivery of key Commission’s services decentralised

Number of regions visited by the Commission and number of programmes delivered

2. To provide regional anti-corruption clinics

Produce and air various anti-corruption radio and drama-based awareness programmes

Enhanced anti-corruption awareness

Annual percentage change in public corruption awareness at regional level

Develop and produce appropriate anti-corruption awareness campaign material for regions

Improved awareness on effects of corruption

Number of materials produced annually

3. To build capacity for community-based corruption monitors and facilitators

To train community-based corruption monitors and facilitators

Enhanced capacity of the local corruption monitors and facilitators

Number of corruption monitors and facilitators trained

Annex III Page 2 of 2

KKAACCCC OOBBJJEECCTTIIVVEESS MMAATTRRIIXX

Objectives Specific Activities Expected Outputs/Outcomes Measurable Indicators

Educate and conduct anticorruption awareness

Improved public support towards fighting corruption

Number of local people educated

Conduct grass root corruption surveys and information gathering

A developed local-level corruption profile

Status report on corruption profiles

Monitor and report on all corruption cases country-wide

Reduced corruption cases at local level

Number of reported corruption cases at local level

4. To monitor and evaluate proposed activities

Conduct M&E on all activities

Improved implementation of proposed activities

M&E Report

Annex IV Page 1 of 2

KKEENNYYAA:: BBAANNKK’’SS OOPPEERRAATTIIOONNSS AASS OOFF AAPPRRIILL 22000066

SECTOR/PROJECT DATE

APPROVEDAMNT.

(UA ill.) DATE

SIGNED DATE

EFFECTIVE AMNT. DISB.

PERCENT DISB.

LAST DISB. DATE

AGRICULTURE COMPLETED 1. Agric. Sector Adjustment Programme (ADF/ADB/TAF) 26/02/91 11.1 28/11/91 14/04/91 11.1 100 30/06/96 12.0 12.0 100 1.4 0.6 46 2. West Kenya Rainfed Rice Development (ADF) 27/11/86 14.9 09/02/87 16/12/87 13.8 93 31/12/99 3. Nyayo Tea Zones and Forestry Development (ADF) 21/05/91 15.1 28/11/91 23/04/92 8.7 58 30/06/01 4. Livestock Project (ADF) 24/06/92 4.6 17/11/93 18/01/96 1.9 41 31/12/99 5. Ewaso N'giro River Catchement Conservation Study (TAF) 11/06/97 1.1 04/04/98 23/02/00 1.1 99 31/12/00 6. Horticulture and Traditional Food Crops (ADF) 24/11/93 9.2 23/05/95 18/11/96 0.2 2 31/12/00 7. Kimira-Oluch Smallholder Irrigation Study (TAF) 11/11/98 1.4 27/07/99 16/11/00 0.6 44 31/09/01 ONGOING 8. ASAL-Based Livestock and Rural livelihoods Support

P j17/12/03 21.5 03/06/04 22/11/04 0.8 3 31/12/11

SUB-TOTAL 92.2 50.9 55 INDUSTRY COMPLETED 9. Pan-African Paper Mills (ADB) 25/06/70 1.3 23/09/70 N/A 1.3 110 10. 1st Line of Credit to Industrial Development Bank (ADB) 16/07/76 3.0 04/11/76 N/A 3.0 100 11. 2nd Line of Credit to Industrial Development Bank (ADB) 21/03/79 5.0 16/05/79 31/12/80 5.0 100 12. 3rd Line of Credit to Industrial Development Bank (ADB) 10/05/84 20.0 10/05/85 16/04/87 19.5 97 30/06/96 13. Industrial Sector Adjustment Operation (ADF/ADB) 23/02/89 18.4 21/04/89 26/06/89 18.4 100 30/06/91 30.0 30.0 100 14. Line of Credit to Kenya Industrial Estates (ADF) 22/12/86 4.6 09/02/87 27/02/89 4.5 98 30/06/96 15. Feasibility Study for Mombasa EPZ (TAF) 27/08/90 0.7 15/11/90 02/09/91 0.7 100 30/06/94 16. Export Development Programme(ADF) 22/10/93 28.4 17/11/93 24/04/95 24.4 86 30/06/96 ONGOING 17. Line of Credit to CFC Bank Limited (ADB) 22/11/03 4.7 18/03/04 02/07/04 4.7 100 17/03/05 18 Line of Credit to Kenya Commercial Bank (ADB) 01/12/04 10.0 0 SUB-TOTAL 126.1 111.6 88 TRANSPORT COMPLETED 19. Two International Roads (ADB) 21/04/67 2.3 08/08/67 N/A 2.3 100 20. Yala-Busia Road (ADB) 24/11/72 3.0 09/12/72 N/A 3.0 100 21. Makutano-Tana Bridge (ADB) 08/05/74 3.0 07/07/74 N/A 3.0 100 22. Kitale-Kapenguria Road (ADB) 24/06/75 3.0 14/08/75 N/A 3.0 100 23. South Nyanza Sugar Road (ADB) 18/08/77 5.0 21/09/77 N/A 5.2 104 24. Meru-Mau Road (ADB) 19/09/77 4.1 21/02/78 N/A 4.1 100 25. Kenya Railways (ADB) 28/10/80 10.0 11/05/81 30/09/81 10.0 100 31/12/96 26. Homa Bay-Rongo Road (ADB) 27/06/80 5.3 06/02/81 26/08/81 5.3 100 27. Thika-Makutano Road (ADF) 14/12/88 10.9 21/04/89 27/03/91 10.9 100 31/12/96 28. Nakuru-Nyahururu Road (ADB) - Savings Utilisation 23/06/81 9.0 31/12/81 08/09/83 8.7 97 30/10/99 29. Mumias-Kakamega Road (ADF) - Savings Utilisation 24/02/83 6.0 11/08/83 03/10/83 6.0 100 30/10/99 30. Kakuma-Lokichokio Road (ADB) - Savings Utilisation 27/09/83 27.0 14/12/83 20/03/84 27.0 100 30/10/99 31. Rural Roads Upgrading (ADF/ADB) 11/06/90 23.0 03/02/91 27/07/92 23.0 100 30/06/99 12.2 12.2 100 32. Rumuruti-Maralal Road Study (TAF) 02/05/91 1.0 01/02/91 10/08/93 0.9 89 30/06/00 33. Ziwa-Kitale Road (ADF) 02/05/91 17.0 28/11/91 10/08/93 12.1 71 30/06/02 34. El-Nino Infrastructure Rehabilitation Project (ADF) 29/10/98 11.5 29/01/99 11/05/99 7.3 64 31/12/02 ONGOING 35. Roads 2000-District Rural Roads Rehab. Project (ADF) 12/07/01 20.0 15/02/02 03/10/03 0.0 0 31/12/06 SUB-TOTAL 173.4 143.9 83 PUBLIC UTILITIES COMPLETED 36. Nyeri Sewerage/Nanyuki Water Supply (ADF) 19/12/78 7.4 19/10/79 23/10/79 7.4 100 37. Thika Water Supply (ADB) 27/11/79 8.0 04/02/80 03/11/83 7.8 98 38 Ndia Water Supply (ADF) 27/06/81 6.9 30/12/81 12/10/84 6.9 100 31/12/96 36. Kiambere Hydro-electric (ADB) 08/11/83 20.3 14/12/83 12/09/84 20.3 100 31/12/96 39. Third Nairobi Water Supply (ADF/ADB/Supp. Loan) 23/02/89 13.8 21/04/89 23/02/90 13.8 100 31/12/94 13.0 13.0 100 18/10/96 14.0 13.7 98 31/12/97 40. Rural Electrification Study (TAF) 05/05/ 93 0.8 17/11/93 03/11/94 0.7 93 30/06/97 41. Nakuru Water Supply Study (TAF) 23/06/93 0.8 17/11/93 26/06/95 0.8 94 30/06/98 42. Murang'a, Kisii & Bungoma Sewerage (ADF) 25/11/82 12.0 01/02/83 09/12/92 11.6 97 31/12/99 ONGOING 43. Rift Valley Water supply & Sanitation 07/07/04 18.06 06/09/04 21/12/04 0 0 31/12/09 SUB-TOTAL 115 96.0 83

Annex IV Page 2 of 2

KKEENNYYAA:: BBAANNKK’’SS OOPPEERRAATTIIOONNSS AASS OOFF AAPPRRIILL 22000066

SECTOR/PROJECT DATE

APPROVEDAMNT.

(UA ill.) DATE

SIGNED DATE

EFFECTIVE AMNT. DISB.

PERCENT DISB.

LAST DISB. DATE

SOCIAL SECTORS COMPLETED 44. Sec. Teacher Training College (ADF) - Reallocation** 17/08/82 10.2 11/05/83 31/10/84 9.2 90 31 Dec. 96 45. Rural Health (ADF) 20/11/85 7.8 27/01/86 14/08/87 7.8 100 31 Dec. 95 46. Education II (ADF) 16/12/91 18.4 17/11/93 06/09/94 0.1 1 31 Dec. 00 47. Health Sector Rehabilitation Study (TAF) 23/06/93 1.5 17/11/93 21/03/95 1.3 88 31 Dec. 98 ONGOING 48 Education III (ADF) 17/12/03 31.0 03/06/03 24/11/04 4.0 13 31 Dec. 10 49. Rural Health II (ADF) 15/07/98 8.0 20/07/98 06/05/99 2.5 32 31 Dec. 02 50. Rural Health II (ADF) 07/07/04 23.1 06/09/04 0 0 0 31 Dec. 10 SUB-TOTAL 100.1 25.0 25 MULTI-SECTOR COMPLETED 51. Institutional Support for Tax Modernization I (TAF) 30/01/90 3.3 03/02/91 11/09/91 3.3 100 31 Dec. 95 52. Institutional Support for Tax Modernization II 16/02/95 2.7 05/05/95 05/05/95 2.6 99 ONGOING 53 Structural Adjustment Loan (ADF) 03/11/00 28.2 27/11/00 20 /03/01 14.1 50 30 Jun. 05 SUB-TOTAL 100.1 25.0 25 ENVIRONMENT COMPLETED 54 Aberdares Natural Resources Dev. Project (ADF/TAF) 27/10/99 15.0 N/A N/A 0 0 N/A 0.5 0.0 0 ONGOING 55 Ewaso Ngiro Natural Resources Conservation Project 22/04/05 16.4 N/A N/A 0.0 0 N/A 56 Green Zones Development Support Project 12/10/05 25.04 30/11/05 Not yet N/A N/A 31/12/2013 SUB-TOTAL 56.90 GRAND TOTAL 697.94 447.4 66% TOTAL ADB 211.2 200.4 92 TOTAL ADF 486.74 247.0 54 NET OF CANCELLATIONS 637.9 70 ADB 210.7 97 ADF 452.24 58 ** = Balance reallocated the Institutional Support for Tax Modernization II