Battle over Sh7.7 billion grant issued by America erupts

The Law Society of Kenya (LSK) has sued government, claiming it intends to spend a Sh7.7 billion grant donated by the United States of America without scrutiny or legal oversight.

In its case filed before High Court, LSK claimed the government has established an agency, the Kenya Millennium Development Fund (KMDF), to operate the grant and has already advertised for goods, services, and consultancies worth Sh1.2 billion.

The society further claimed KMDF had created an account away from what the law requires about utilisation of the  grant released last year.

LSK sued the National Treasury Cabinet Secretary John Mbadi, the Attorney General, KMDF, and the United States of America agency, the Millennium Challenge Corporation (MCC).

The court heard that in September 2023, the USA gave Kenya a grant of around USD 60 million (Sh7.7 billion) through MCC.

The was meant to grant support including the integrated transport project, which aims to improve transport planning and enhance connectivity.

At the same time, the money would be used for the first and last-mile connections project, again targeting the transport sector. The funds were also allocated for land use planning projects to optimise land use for sustainable urban and rural development.

The other project funded under the grant was the Blended Finance for Bus Rapid Transport Project (BRT), which involved building a BRT system through public and private financing approach.

The lawyers argue that creation of the new agency does not provide mechanisms to assess operational integrity or a general accountability framework.

LSK claims creation of KMDF is a precursor to the government running the grant outside scrutiny and without the requirement that all money received on behalf of the government be deposited at the Treasury.

“The structural set up of the third respondent, its integrity and general accountability framework fall short of the established legal framework on public finance management contemplated under Section 28 of the Public Finance Management Act and is therefore is illegal, unlawful and void,” argued the society.

“By the third respondent opening and operating a separate bank account other than the Central Bank of Kenya for the handling and utilisation of the grant is illegal, unlawful and void as it faults of Regulation 76 of the Public Finance Management (National Government) Regulations,” argued LSK lawyer Edgar Busiega.

LSK cast doubts on the agency’s creation. The Society’s Chief Executive Officer, Florence Muturi, said the money is likely being spent despite the gaps identified.