World Bank (Washington, DC)

October 28, 2005

The World Bank and the new Government of Kenya today committed to work closely together on additional measures to fight corruption in development projects, building on the recommendations of a forensic audit of the Kenya Urban Transport Infrastructure Project (KUTIP) delivered yesterday in Nairobi. The audit, initiated by the Government of Kenya with the full support of the World Bank following an investigation by the Bank’s Department of Institutional Integrity, identified significant indicators of possible corruption and other control weaknesses in the management of the KUTIP project. The report is also being forwarded to the Kenyan Anti-Corruption Commission (KACC) for follow-up criminal investigation.

The $115 million KUTIP project, launched in 1996, provided infrastructure improvements to local communities in Kenya. Disbursements to Kenya for this project were suspended by the Bank in October 2001 after the Bank’s investigation found evidence that the Project Director and a former Bank staff member were involved in bribery and bid-rigging with contractors. The lifting of the suspension was conditioned upon the completion of a criminal investigation and forensic audit of the KUTIP project. Since October 2001, the Project Director has been arrested and criminal proceedings are ongoing. Two Bank staff were earlier terminated and subsequently pled guilty in U.S. Federal District Court on charges related to KUTIP.

The World Bank Country Director for Kenya, Mr. Makhtar Diop, said: “We commend the government for its full cooperation with the auditors, which has produced a detailed overview of corruption within the KUTIP project. We deplore the diversion of funds from a project that had been meant to help the Kenyan people improve their lives. It is unacceptable. We also want to be sure that systemic problems identified by the audit such as fiduciary controls over procurement and financial management are addressed quickly.” He noted that since the suspension of the KUTIP project in 2001, both the Government of Kenya and the World Bank have already taken a number of measures designed to prevent abuses of the kind that happened in that project, including reviews of procurement and financial transactions.

The new government has pledged to act on the recommendations contained in the audit report in an aggressive and transparent manner, and to take appropriate legal action against those involved. The Bank and the government will be working very closely to ensure that the lessons learned and the recommendations contained in the audit are implemented, and the Bank will undertake a review of its current portfolio to ensure that all possible anti-corruption safeguards are in place.

Background Information

World Bank funds are provided to help developing countries reduce poverty. The World Bank has the responsibility to ensure that the loans and credits it extends, and the trust funds that it administers, are used for their intended purposes. This policy is enforced through a comprehensive array of rules and procedures aimed at ensuring high standards of integrity, transparency, and accountability in World Bank-supported projects. The procurement procedures for World Bank-financed projects are monitored by World Bank staff to ensure that the process is free from fraudulent practices and corruption.

The World Bank Department of Institutional Integrity (INT) is charged with investigating allegations of fraud and corruption in World Bank-financed projects. The department reports directly to the President of the World Bank and is staffed by a multinational team of more than forty professionals, including investigators, legal specialists, forensic accountants, procurement specialists and experienced World Bank project managers. Additional information can be found at www.worldbank.org/integrity.

Allegations of fraud and corruption related to World Bank-financed projects can be reported to 1-800-831-0463 24 hours a day and an international AT&T operator with international translation is available. To reverse charges (collect calls) dial 704-556-7046. Reports may be anonymous, and can also be made in person or online at: investigations_hotline@worldbank.org.

The sanctions process is an internal administrative process within the World Bank. It provides for due process to all parties involved in the sanctions process. For more information on procurement and sanctions, see: www.worldbank.org/procure.