Memorandum audit report on review of host country contributions associated with a Louis Berger International, Inc. host country contract in Kenya

(LBII) in the arid and semi-arid lands development project in Kenya. Audit report covers the period 8/81-10/82 and is based on document review and interviews with Government of Kenya (GOK), USAID/K, and LBII officials. The GOK has failed to meet its financial and personnel obligations to the project. As a result, A.I.D. has paid costs that should have been paid by the GOK, and LBII technicians have not been able to work effectively. The GOK has not provided the specified funds for 30.3% of project costs or for stipulated facilites, equipment, and services in spite of assurances that it would do so when GOK-AID transfer of funds procedures were clarified. USAID/K has failed to press the GOK to meet its commitments. Offices and housing for LBII personnel were not provided by GOK as required, causing LBII to use A.I.D. funds to construct or rent facilities and to pay commuting costs; the lack of facilities in turn lowered team morale. The GOK also failed to make available and maintain vehicles and tractors purchased by A.I.D., resulting in the use of project funds to rent vehicles and purchase gasoline. Furthermore, the GOK did not provide laborers to maintain maize and bean fields or a draftsman. GOK counterparts for the soil and water conservation component spent only 5% of their time on the project. Training in soil/water conservation, targeted for 55 technicians, was cancelled after completion of the first course for 20 participants as the GOK would not assure hiring of course graduates. Recommendations are made for USAID/K to: (1) finalize within 90-120 days procedures for obtaining appropriate GOK reimbursements, or, if this is not possible, either withhold further disbursements or reduce the LBII"s scope of work to a level supportable by the GOK or require the GOK to deposit local currency funds generated by A.I.D. Commodity Import or P.L. 480 Title I programs in a special project account or terminate the project; (2) determine the best method of placing vehicles under full LBII control; and (3) reach agreement with the GOK that conservation technicians who pass the course and probation will be hired and paid by the GOK.