Audit of Kenya rural private enterprise project, project no. 615-0220

The $36 million loan program resulted in loans of only about $3.3 million, and additional approved loans by the project"s planned termination date could not be expected to exceed an additional $6.8 million. In addition, the $7.1 million grant program was contributing little to the project purpose. Concerning the second audit objective, internal accounting controls over grant funds were inadequate to ensure their proper use. Despite these problems, the project had many positive aspects. On the loan side, the project successfully introduced the concept that Kenyan commercial banks could make long-term loans, and the rate of loan approvals appeared to be increasing. Further, commercial banks were contributing their promised one-third share of the loans, and the Central Bank of Kenya had opened a special account that may, in the future, provide a conduit for reloaning repayments from benefiting organizations. On the grant side of the project, the Kenya Rural Enterprise Programme, Limited (REP) had provided institutional and training support to Kenyan NGO"s. It had also done much to introduce satisfactory internal accounting controls over grant funds. The audit identified three areas requiring improvement. USAID/Kenya needed to improve the rate at which loans were being made, and to require that REP better focus its subgrants. Further, REP needed to further improve its internal accounting controls of project funds by the Kenyan organizations. (Author abstract)