Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No.: 19976

IMPLEMENTATION COMPLETION REPORT

KENYA

UNIVERSITIES INVESTMENT PROJECT(CREDIT 2309-KE)

December 22, 1999

Africa Human Development 1Eastern and Southern AfricaAfrica Region

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

CURRENCY EQUIVALENTS

Currency Unit = Kenya ShillingAppraisal: US$ I = KSH 28

Project Closing: US$ I = KSH 68

FISCAL YEAR OF BORROWERJuly I -June 30

ABBREVIATIONS AND ACRONYMS

AfDB African Development BankASALs Arid and Semi-Arid LandsCHE Commission for Higher EducationCTB Central Tender BoardDCA Development Credit AgreementDO Development ObjectivesEdSAC Education Sector Adjustment CreditERIAC Equipment Receipt, Inspection, and Acceptance CommitteeGDP Gross Domestic ProductGOK Government of KenyaHELB Higher Education Loans BoardICB International Competitive BiddingICR Implementation Completion ReportIDA International Development AssociationIP Implementation ProgressJAB Joint Admissions BoardLCB Local Competitive BiddingLSP Letter of Sector PolicyMoE Ministry of EducationMTB Ministerial Tender BoardNMR Nuclear Magnetic ResonancePIU Project Implementation UnitPPTG Policy and Planning Task GroupPTTC Primary Teacher Training CollegeSAR Staff Appraisal ReportSBD Standard Bidding DocumentSDR Special Drawing RightsSLS Student Loan SchemeSTEPS Strengthening Primary and Secondary EducationUIP Universities Investment Project

Managers and Staff Responsible

Vice-President: Callisto Madavo (AFRVP)Country Director: Harold Wackman (AFC05)Sector Manager: Dzingai Mutumbuka (AFTH I)Task Team Leader: Bruce N. Jones (AFTHI)

FOR OFFICIAL USE ONLYKenya

Universities Investment ProjectImplementation Completion Report

Table of Contents

Preface

Evaluation Summary

Part I: Project Implementation Assessment

A. Project Background and Objectives ............................... lI

B. Achievement of Input Objectives ................................ 2

C. Achievement of Development Objectives ................................ 7

D. Major Factors Affecting the Project ............................... 1 1

E. Borrower Performance ................................ 1

F. Bank Performance ............................... 13

G. Overall Outcome ........................... 14

H. Sustainability, and Future Operation ........................... 14

I. Key Lessons Learned ........................... 15

Part II: Standard ICR Tables

1. Summary of Assessments2. Related IDA Credits3. Project Timetable4. Credit Disbursements, Estimated and Actual5. Key Indicators of Project Implementation6. Key Indicators for Project Operation7. Studies Included in the Project8A. Project Costs8B. Project Financing9. Economic Costs and Benefits10. Status of Legal Covenants11. Compliance with Operational Manual Statements12. Bank Resources: Staff Inputs13. Bank Resources: Missions

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

Appendices

Appendix A: Implementation Completion Mission Aide-memoire

Appendix B: Borrower's PerspectiveSummary of Borrower's Evaluation ReportBorrower's Comments on the ICR

Appendix C: Public University Financing

Appendix D: Accounting and Audit Experience

Appendix E: Procurement DetailsTable: Performed ContractsTable: Contracts Declined, Cancelled, and WithdrawnTable: Tenders Left Out

Map

KenyaUniversities Investment Project

Implementation Completion Report

Preface

This is the Implementation Completion Report (ICR) for the Universities InvestmentProject in Kenya, for which Credit 2309-KE in the amount of SDR 41.3 million (US$ 55.0million equivalent) was approved on November 14, 1991, and became effective April 29,1992.

The Credit was closed on April 30, 1999, as compared with the original Closing Dateof December 31, 1996. The last disbursement took place on September 30, 1999, bringingtotal disbursements to $54.7 million. About $3.0 will be cancelled.

The ICR was prepared by a team consisting of Messrs. Bruce Jones (senior economistand task manager) and David Court (higher education specialist) from the Headquarters staff;Messrs. James Kamunge (education advisor), Gituro Wainaina (education economist), DahirWarsame (procurement specialist), and John Ogallo (financial management specialist) fromthe World Bank Country Office, Nairobi; and Professor Shem Wandiga (consultant sciencehigher education specialist). The implementation completion mission took place duringAugust 9-27, 1999. The report is based on materials in the project file, the Borrower'sEvaluation Report, and site visits and discussions during the completion mission, includingattendance at a workshop organized by the Commission for Higher Education. The ICR wasreviewed by Mr. Harold Wackman, Country Director and Mr. Dzingai Mutumbuka, SectorManager, AFTHI.

The Executive Summary of the Borrower's Evaluation Report is attached as AppendixB.

Evaluation Summary

Project Background and Objectives

I. Original project. The Universities Investment Project (UIP) was conceived in 1990 as aninvestment-oriented complement to the Education Sector Adjustment Credit (EdSAC) in supportingKenya's education sector adjustment program. The objectives were:

(a) rationalizing and strengthening the institutional framework for higher education in both thepublic and private sectors;

(b) limiting the growth of the Borrower's budgetary resources devoted to the publicuniversities by promoting cost sharing and improved investment planning (the Letter of SectorPolicy set a ceiling of 20% of the Ministry of Education recurrent budget to be devoted to theuniversities); and

(c) improving the quality of teaching and research at the public universities.

The project included improving teaching, research, and administration at the universities by providingequipment and related staff development; strengthening the Commission for Higher Education; andreforming the Student Loan Scheme

2. PTTC component. After the IDA Credit in support of the previous project in the educationsector closed at end-1994, it became apparent that there were incomplete civil works and substantialpending bills for which financing was not immediately available. The Government requested theBank to amend the UIP Credit ($55 million) to enable some of the funds to be devoted to completionof Primary Teacher Training College (PTTC) civil works and payment of pending bills, andeventually $7.7 million was reallocated for this purpose.

Achievement of Input Objectives

3. The project was implemented more slowly than originally planned, essentially because ofdifficulties encountered in the equipment procurement process. The three extensions granted by theBank, for a total of 28 months, enabled the Government to ultimately withdraw $46 million from theCredit for the universities and related central functions, and $8 million for PTTCs.

4. Original project. Almost $12 million was spent for university computerization, and all of thebeneficiary universities except one were satisfied with supplier performance. Expenditures on librarymaterials were about 90% of the original plan. Expenditures on scientific and engineering equipmentwere only about half the amount originally planned, due to procurement delays, and expendituresgreater than originally planned on computer systems and staff development. Printing andreprographic equipment, and a number of vehicles, were also procured. About six hundred universitystaff were trained, mainly at master's degree, diploma, and certificate levels.Eight Applied Researchprojects shared the funds that had been allocated for this purpose, with five already generatingreasonable income. The Higher Education Loans Board (HELB) was assisted with 62 computers andrelated printing and networking equipment, enabling its operations to be computerized, and fivevehicles. The Commission for Higher Education benefited from study tours and training, but missedout on computerization because the Government did not finalize the contract with the winning bidder.The three planned studies on the graduate labor market, private universities, and socioeconomicaccess were completed.

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5. PTTC component. Twenty contracts relating to the PTTCs received financing ($8.0 millionin total) from the Credit: 6 main civil works contracts; 8 minor civil works contracts; 3 contracts forfurniture and equipment; and 3 contracts for professional services. However, because the allocationof GoK funds lagged behind the schedule promised to the Bank in 1996, there were periodicstoppages of work at the two PTTCs where civil works have not yet been completed. At this time, themain civil works contract at the Taita Taveta PTTC is 89% complete, while the 'main civil workscontract (not being financed from the Credit) at the Garissa PTTC is 95% complete. The sum ofpending bills and incomplete civil works has been reduced by 87%, instead of being reduced to zero.

Achievement of Development Objectives

6. Original Project: Strengthening the Institutional Framework. During the UIP period, theCommission for Higher Education (CHE) began to perform new functions of serving as the channelfor Government grants to public universities, and successfully coordinating the financing anddevelopment plans of the public universities. It coordinated important analytical work on unit costs.The legislation drawn up to revise and harmonize the CHE Act and each of the university acts wasnot passed; updating and harmonization of these laws is still needed.

7. The Higher Education Loans Board (HELB) was created by an Act of Parliament in 1995. TheAct grants enhanced legal powers for recovery of student loans. HELB administers bursaries inaddition to means-tested loans. HELB has successfully computerized loan processing and loanrecovery functions, becoming much more efficient than the former Student Loan Scheme Unit of theMinistry of Education. The percentage of loanees with mature loans who are repaying has increasedfrom 10% in 1995, to 38% in June 1999. HELB recognizes that it needs to develop a medium-to-long-term financial strategy to respond to expected increases in need for financial aid to students.

8. Original Project: University Financing. The stated objective was to limit the growth of theGovernment budget devoted to the public universities through cost sharing and improved investmentplanning, with a ceiling of 20% on the share of the MoE Recurrent budget devoted to universityeducation. The objective as stated did not adequately recognize the importance of university solvency,which became an important issue. The MoE budget share actually decreased to 12% during the UIPperiod. In 1995, it was announced that means-testing would be employed to determine eligibility forstudent loans, and that food and accommodation would be charged at cost. However, during a decadein which the real value of both Recurrent grants from the Government and tuition paid by studentswere eroded by inflation, the policies announced in 1995 have been insufficient to enable theuniversities generally to balance their budgets, with the more science-oriented institutionsexperiencing the greatest financial difficulties. Recently the universities have calculated the unitcosts of various degree programs, and have begun to place more emphasis on raising their ownrevenues, including by enrolling "parallel" students who are not sponsored by the Government.Despite the accomplishments in establishing cost-sharing, an adequate system for financing educationat the public universities is not now in place.

9. Original Project: Quality of Teaching and Research. Where delivered, the laboratoryequipment has improved the quality of learning by increasing the access of students to hands-onexperience, enabled the development of new research programs and income-generating possibilities,and boosted morale and institutional commitment. The computers supplied, organized into LocalAreas Networks, have roughly doubled or tripled the number of computers on each campus, withsignificant upgrades in capability with up-to-date software. The provision of computers to academicunits previously lacking them, and for computer labs for student instruction and student use, has had atransforming effect upon academic quality and administrative capacity. The library books suppliedunder the Project have substantially expanded the collections; there are varied reports on increasedreadership. Staff development activities have been appropriately balanced among academic,

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managerial, and technical categories and levels, and the retention rate has been high. Overall theProject investments have led to significant improvements in the quality of teaching and research,especially but not limited to science-based programs.

10. PTTC Component. The seven PTTCs initiated under the Sixth Education Project, and alsoreceiving funds from the UIP Credit, account for about 30% of the total teacher training capacity inGovernment institutions in Kenya. The six of these colleges that are operating have helped to enablethe replacement of untrained teachers, such that there are no longer any untrained teachers employed.However, the number of primary teachers has reached a saturation point in relation to current primaryenrollments. Issues of utilization are expected to be addressed in the forthcoming report of aPresidential Commission on Kenya's education system, and the Bank will continue to engage indialogue with GoK on teacher issues in the context of the next lending operation.

11. Overall Outcome. In view of the lack of indicators for Development Objectives, and the factthat for all three Development Objectives the accomplishments were partial, it is not easy to arrive atan Outcome rating in this case. Positive aspects include the receipt and utilization of computers,science and engineering equipment, and library materials; the institutional innovation represented byHELB and its steady improvement of loan recovery performance; greater coordination of publicuniversities by CHE, and the creation of a culture of planning; the establishment of cost-sharing; andthe applied research projects. Disappointments include the lack of revision of the legal framework;the dropping of some of the planned tenders; and, most importantly, the continued unsatisfactoryfinancial condition of the public universities. The outcome is evaluated asUnsatisfactory.

Borrower Performance

12. The Borrower's performance in preparing the Project is evaluated as Satisfactory, as aparticipatory approach was adopted, and rational criteria were used to scale back the universities'wishes to match the resources that would be available. Implementation experience was stronglyinfluenced by the somewhat complicated implementation arrangements, with the Policy and PlanningTask Group and later CHE responsible for policy coordination, and the Ministry of Education'sProject Implementation Unit (PIU) responsible for procurement, Withdrawal Applications, andaccounts. Although staff development and Phase I library materials proceeded on schedule,equipment procurement experienced substantial delays. The following factors played adverse roles:approval by the Bank of Phase I tender documents which were vague in some respects, contributingto the need to re-tender; the need for re-evaluations because of weaknesses in evaluation reports;delays in the GoK system beyond the PIU; delays in opening Letters of Credit and making initialpayments; deficiencies in supplier performance. The Government did not make budgetary releases forthe PTTC component according to the schedule promised. Audit reports were never submitted by theagreed due date, and were qualified. The Borrower's implementation performance was Deficient.

Bank Performance

13. The Bank's performance at the identification and preparation assistance stages is evaluated asSatisfactory. The appraisal team reached agreement with the Government on appropriate detailedpolicy conditionality, and on high-priority investments. The appraisal did not investigate the structureof revenues and expenditures of the universities as self-accounting organizations, and their unit costs.The appraisal did not establish monitorable indicators for the Development Objectives, but this wasnot normal practice for appraisals in 1991. The experience of the Fifth and Sixth projects was notreflected in the appraisal, and the risk assessment was deficient as it omitted the procurementcapacity/performance risk. The implementation period chosen of 4.5 years was overoptimistic inrelation to MoE experience and the diversity and complexity of the equipment procurement.Appraisal is evaluateq as having been Deficient.

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14. Over the seven-year implementation period, there were supervision missions every 6 monthson average. Most missions included a science higher education specialist, and one included acomputer systems specialist. After equipment deliveries had begun, missions included site visits tothe six beneficiary public universities. Problems were identified and discussed with the implementingunits, and remedial action agreed upon, although not always with adequate follow-through by theBorrower. In the earlier years, attention to procurement methodologies and Project accounts was lessthan it should have been. There was insufficient follow-up with the Government concerning theslippage in GoK funding for the PTTC component. Progress was accurately reported, and ratingswere realistic. Supervision is evaluated as having been Satisfactory.

Sustainability and Future Operations

15. Sustainability needs to be addressed at two levels: policies on university financing to enable theuniversities, especially the more science-oriented ones, to address their current solvency problems;and at the level of departments or sites where equipment or books have been delivered. Tuition paidby Government-sponsored students should be increased substantially, with Government financialsupport for education at the public universities more sharply targeted to assisting needy students. Atthe "site" level, some university institutions have initiated user fee systems for computers, instrumentusage, and consumables; there is need for wider application of this principle. Broader opportunitiesfor enhanced revenue generation can be found in the commercial application of research, andincreasing the number of parallel students. The PTTCs need to diversify their programs and revenues.Sustainability is evaluated as Uncertain.

Key Lessons Learned:

Lessons of general applicability: (a) Placing procurement and accounting responsibility in a multi-Project PIU has disadvantages of diminished focus and accountability to stakeholders; (b)Monitorable indicators for Development Objectives are needed; (b) Experience of previous andongoing projects should be taken into account; (d) Procurement and financial management capacityshould be assessed thoroughly at appraisal; (e) Technical Merit points should be avoided in mostcases, and where they are appropriate should be based on measurable improvements in functionality;(f) Institutional continuity and institutional memory are important factors for successfulimplementation.

Lessons for university projects: (a) Project design should provide for an appropriate balance betweendecentralization of responsibilities to universities, and central coordination; (b) Lending operations insupport of universities should investigate at appraisal the structure of revenues and expenditures ofthe beneficiary institutions; (c) It is important to have clear procedures and responsibilities for receipt,inspection, and acceptance testing of equipment; (d) It is possible to administer means-testing forstudent financial aid, and to recover loans from persons working in the formal sector; (e) Fullengagement of Vice-Chancellors is an important factor for project implementation and policy reform;(f) The universities are now complex organizations with an increased market orientation,necessitating greater attention to managerial training at all levels.

Project Implementation Assessment

A. Project Background and Objectives

1. Objectives of Original Project. The Universities Investment Project (UIP) was the seventhBank-supported investment project in the education sector, but the first to address universityeducation. It was conceived in 1990 as an investment-oriented complement to the Education SectorAdjustment Credit (EdSAC), in supporting the Government of Kenya's education sector adjustmentprogram. It was appraised and negotiated in tandem with EdSAC: EdSAC was appraised in March1991 and negotiated in July 1991, while UIP was appraised in May/June 1991 and negotiated inSeptember 1991. The two lending operations shared a common Letter of Education Sector Policy(LSP), and Policy Matrix of planned measures. 1

2. The objectives of UIP as originally negotiated were to support the sector adjustment programby:

(a) rationalizing and strengthening the institutional framework for higher education in boththe public and private sectors;

(b) limiting the growth of the Borrower's budgetary resources devoted to the public universi-ties by promoting cost sharing and improved investment planning (the LSP set a ceiling of20% of the Ministry of Education recurrent budget to be devoted to the universities); and

(c) improving the quality of teaching and research at the public universities.

3. Following the rapid expansion of enrollments in the 1980s, which strained available facilities,these objectives responded to important needs. However, objective (b) was stated in a way whichdid not adequately recognize the importance of the financial solvency of the universities, whichturned out to be a major issue. A Development Objective statement along the lines of"Establishing an adequate, efficient, and equitable system for financing education at the publicuniversities" would have been preferable.

4. As originally designed, UIP consisted of two Parts: Part A, central components, such asstrengthening the Commission for Higher Education (CHE) and reforming the Student LoanScheme; and Part B, university "subprojects" consisting of equipment and related staff developmentfor strengthening teaching, research, and administration at the six public university institutions. TheIDA Credit in support of UIP was for SDR 41.3 million (US$ 55.0 million equivalent at 1991exchange rates).

5. Objectives of Primary Teacher Training Colleges (PTTC) Component Added byAmendment. At the time UIP was negotiated, the Sixth Education Project, which had beenapproved in 1986, was ongoing. Constructing and equipping seven PTTCs was the majorcomponent of the Sixth Education Project. The IDA Credit in support of this Project closed at end-December 1994, and was fully disbursed. The ICR carried out in May 1995 found a financing gapof $15 million after the final Credit disbursement, consisting of unpaid bills of $11 million andincomplete civil works of $4 million, and reflecting inadequate monitoring of escalating Projectcosts by the Ministry of Education and the Bank. 2

' The third and final tranche of EdSAC was released in December 1994, about one year later than originallyplanned. This Credit closed, after one extension, on March 10, 1995. The ICR (Report No. 15065) evaluatedthe outcome of EdSAC as satisfactory overall. See Appendix (Part II) Table 2 for more information.2 Report No. 15129.

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6. The Government requested the Bank to amend the UIP Credit to enable some funds,especially the Unallocated amount, to be devoted to meeting the Sixth Education Project financinggap. In making this request, the Government pointed out that initial experience with UIP equipmentcosts was that bids were turning out to be lower than expected at the time of appraisal. Also, theU.S. dollar value of the UIP Credit had increased somewhat, due to depreciation of the U.S. dollarwith respect to the SDR. Eventually the Bank and Government agreed that the financing gap of$13.3 million as of February 1996 (some payments had been imade since the Sixth Education ICR)would be met by SDR 5.3 million ($7.7 million) from the UIP Credit, and KSh 312 million ($5.6million) to be paid by the GoK over the five quarters ending June 1997.

7. The Memorandum to the Board recommending approval of the Amendment placed thejustification in the context of the Government's objective of universal primary enrollment, to beachieved by focussing on improving access and quality in those areas with low enrollment, whichare mainly Arid and Semi-Arid Lands (ASALs). The two Colleges to be completed, Taita Tavetaand Garissa, are located in Coast and North Eastern Provinces, respectively, both ASAL areas withlow enrollment rates and poor quality of primary schooling. The completion of the two facilitieswould enable pre-service training of local teachers as well as continuous in-servicing, thuscontributing to improving the quality and equity of primary education. Clearance of arrears to othersuppliers and contractors was justified as a matter of fairness, and would have been difficult for theGovernment to accomplish alone in view of its fiscal situation. Following approval by the Bank'sBoard in October 1996, the Amendment became effective in November 1996. The intention was tocomplete the outstanding civil works by the (then established) Closing Date of December 31, 1997.

B. Achievement of Input Objectives

Overview of Implementation Experience

8. As indicated in project documents, the Project was expected to be completed by June 30,1996, and the Credit Closing Date was set at December 31, 1996. With Credit effectivenessplanned for early 1992, implicitly a project implementation period of about four-and-a-half yearswas assumed. This shorter-than-normal implementation period was based on the lack of civil worksin the Project.

9. The Project was implemented more slowly than originally planned. The prolongation of theimplementation period was due to difficulties in equipment procurement, which are discussed laterin Section E, Borrower Performance. By end-June 1996, only $17 million (31% of the Credit) hadbeen disbursed. The Closing Date was extended three times - twice for 12 months, and a third timefor 4 months, yielding a final Closing Date of April 30, 1999. Thus, from Credit effectiveness inMay 1992, the project implementation period turned out to be roughly seven years.

10. UIP first became rated within the Bank as a "Problem Project" after the supervision missionof October 1994, with ratings of Unsatisfactory for both Implementation Progress (IP), and progresstoward achievement of Development Objectives (DO). This reflected not only delays in equipmentprocurement, but also delays in reforming the Student Loan Scheme and in revising andharmonizing laws relating to the universities and CHE, and concern over the financial condition ofthe public universities. Looking at the supervision ratings from October 1994 onwards, the IP ratingwas Unsatisfactory three out of eight times, while the DO rating was Unsatisfactory seven out ofeight times.

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11. The three extensions granted by the Bank gave the Government more time than originallyplanned to procure and install the equipment, and to address the institutional and policy issues. Theextensions enabled the Government to eventually draw $54.7 million from the Credit, with about$3.0 million to be cancelled when the Credit account is finally settled by the Loan Department. (Atthis time, the value of the Credit is about $57.7 million, reflecting depreciation since 1991 of theU.S. dollar against the SDR.) The utilization of the funds by the Government is illustrated in Table1, and the experience with delivery of Project inputs for the various components is describedimmediately thereafter.

Table 1: IDA Disbursements, Originally Planned and Actual(in millions of U.S. dollars)

ActualOriginal Original IDA

Project Costs IDA Credit Disburse-(SAR) Allocation ments

Part A: Central Components 9.5 6.4 5.7

Part B:University Subprojects 45.6 43.6 40.6

Original Project - Subtotal 55.1 50.0 46.3

Part C: PTTCs (not included) - 8.0

Unallocated 5.1 -

TOTAL BASE 55.1COSTSPrice Contingencies 6.0Total projected cost including 61.1

contingencies

IDA Credit - Total 55.0 54.4

Note: The expected GoK contribution of about $6 million would be for minor civil worksto accommodate equipment, and GoK's share of project administration costs.

Note: Project administration (CHE and PIU incremental operating costs) is includedunder Part A.

Original Project (universities and related central functions)

12. Equipment and staff development for university teaching and research. As originallyplanned, science and engineering equipment would have accounted for almost half of Part B(university subprojects) expenditures. Delays in processing of tenders, award of tenders toincompletely performing suppliers, and greater expenditure on staff development and procurementof computers (for which the bidding documents were prepared in 1996) at the request of theuniversities resulted in lower-than-planned expenditures for science and engineering equipment.Several of the originally planned science equipment tenders, such as medical, forestry, geological,and some physics, were ultimately dropped, as the Credit ran out of both time and money. (SeeAnnex E for details.) This resulted in variation in the numbers of equipment received by variousdisciplines.

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Table 2: Composition of Part B Expenditures(millions of U.S. dollars)

ActualOriginal Original IDA

Base Costs IDA Credit Disburse-(SAR) Allocation ments

Staff development 6.2 6.2 9.4

Equipment and library materials 39.4 37.4 31.2Science and engineering equip. 22.1 11.4Library materials 6.3 5.6Telephone systems 2.2 0Vehicles 3.2 1.5Printing and reprographic equip. 1.7 1.1Computer systems 4.0 11.6

TOTAL 45.6 43.6 40.6

Note: The IDA Disbursement Percentages were 100% for both Staff Development, andEquipment and Library Materials. The difference betweeni the Base Costs and the originalIDA Credit allocation reflects minor civil works to accommodate equipment, financed by GoK.

13. Supply of computers was satisfactory in all institutions except one where a supplier did notperform to the full satisfaction of the end user. Most equipment supplied have been installed andcommissioned except for some workshop heating equipment whose site preparations have beenslow to complete, due to scarcity of funds for civil works sourced by the universities. Within thetender for vehicles, most vehicles supplied were according to specification, while the busesdelivered were reconditioned and not according to specification, and were rejected.

14. Supply of library books and other library materials such as CD-ROMs was largely achieved.However, there were some considerable delays in the processing by the of library books tenders bythe Ministry of Education. This resulted in some of the requisitioned books not being supplied dueto having become unavailable. Actual expenditures on library materials were 89% of the amountindicated in the SAR.

15. Six hundred and thirty five staff were trained during the project implementation. originallyonly 22 Ph.D. trainees were anticipated in the SAR, but 35 were trained. there were no limit set forother categories of trainees at the beginning, and the project trained 132 at masters, 6 at first degree,55 at higher national diploma, 124 at diploma, 173 at certificate and 68 at non-certificate levels. theinitial budget was exceeded by $ 3.2 million at the end of training. The majority of trained staffhave resumed their duties except for a few who are finishing their studies, some have transferred toother universities in the country, a few died or left the service. the staff trained included academic,administrative, finance and technical. therefore, the original staff development objectives weregenerally met. Except for delays in remission of fellowship funds by PIU, the majority of traineesand department chairmen were very well satisfied with this aspect of the project.

16. Applied Research. All funds allocated for applied research (US $1.5 million) weredisbursed. Eight applied research projects were supported, and funds provided have been used forstaff training, purchases of equipment, consumables, vehicles, computers and payment of support

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staff salaries. All applied research projects have potential for success, with five already generatingreasonable income, the sixth is likely to market its product soon and the remaining two will do so inthe near future. Five projects have impacted on teaching and research, while three need closersupervision (Papaya, Biomass, and Walking Tractor).

17. Student Loan Scheme. Disbursements for the SLS subcomponent were negligible duringthe first three years of implementation. The Higher Education Loans Board (HELB) was created byan Act of Parliament in 1995, and significant expenditures on improving the administration of thestudent loan program began thereafter. HELB officers and staff were enabled to make a number ofstudy tours to learn about student loan programs, some involving commercial banks, in Europe,North America, and East Asia and the Pacific. HELB acquired 62 personal computers and relatedprinters and networking equipment, and five vehicles, financed by the Credit. Training in computerutilization was financed from the Credit. Loan recovery records have been computerized, andcomputerization has also made loan processing and disbursement more efficient. Ultimately, about$800,000 was disbursed for this subcomponent.

18. Commission for Higher Education. Following reorganization of CHE and the appointmentof additional senior staff, staff capacity was developed through training and visits to gainexperience from higher education in other countries. The Credit financed preparation of a Reporton the Review and Harmonization of the Legal Framework. CHE's intended computer procurementcollapsed when the Government decided not to sign the contract with the winning bidder, becauseof the firm's blacklisting by the Government following adverse comments, in the Report ofParliament's Public Accounts Committee, on the firm's prior performance.

19. Studies. Three studies were planned: (a) the graduate labor market; (b) the development ofthe private university sector; and (c) gender and socio-economic factors affecting universityenrollment and subsequent performance. Commissioned and supervised by CHE, and carried out byconsulting groups, the studies were intended to generate information that would support policyformulation and planning within CHE and the universities, in respect to institutional rationalization,curriculum reform, degree patterns, course design and admissions policy. The conduct of theresearch was hampered by liaison problems between CHE and the PIU over progress monitoringand payment procedures, with resulting delays and consultant frustration. Although the studies tooklonger than anticipated, they were all completed in 1996, with comprehensive and relevantrecommendations. The studies have yet to be absorbed or applied by the universities themselves,evidently reflecting inadequate dissemination to the universities and other relevant groups such asemployers. As a result of the Borrower's project evaluation process, it has been agreed thatdissemination will now be undertaken.

PTTC Component

20. Following the effectiveness of the Amendment, an exercise was carried out in March/April1997, with the assistance of a firm of consulting engineers, to review the pending bills. Site visitswere made to Muranga PTTC (completed and operational) and the incomplete Taita Taveta PTTC.At these two colleges, invoiced goods were found to be there, and the civil works were found to bein accordance with specifications. The outcomes of the review were as follows:

No issues were identified in the contracts for goods or minor civil works (landscaping,playing fields), and the Bank communicated in April 1997 its willingness to disburse againstthese contracts.

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For the main civil works contracts, there was an issue with regard to the reflection of the highrate of inflation in Kenya in the percentages of contract values to be paid in U.S. dollars.Following agreement between the Ministry of Education and the Bank on principles ofcontract interpretation, the Ministry of Education reached agreements in August 1997 withthe contractors on corresponding revision of Payment Certificates for six out of the sevenmain civil works contracts (all except Garissa), following which the Bank began to disburseagainst these contracts.

The existing professional services contracts were for periods of time which had expired, andtherefore needed to be renegotiated, with no-objection to be obtained from the Bank. Thiswas subsequently done.

Thus, a number of months elapsed between July 1996 when the Government fulfilled the last of theBoard presentation conditions (commitment of GoK funds; compliance with audit covenants), andthe actual availability to the Government of funds from the Credit.

21. A total of 20 contracts relating to the PTTCs received financing from the Credit as amended:6 main civil works contracts; 8 minor civil works contracts; 3 contracts for furniture and equipment;and 3 contracts for professional services. As compared with the IDA allocation of $7.7 millionplanned at the time of amendment, actual IDA disbursements for Part C were $8.0 million. GoKpayments for the PTTC component were as follows: KSh 13 million in the fourth quarter of1995/96; KSh 177 million in 1996/97, KSh 52 million in 1997/98, and KSh 70 million in 1998/99.Thus, the promised amount of KSh 312 million ($5.4 million at contemporary exchange rates ) waseventually provided, but over thirteen quarters ending in June 1999, instead of five quarters endingin June 1997. The Government's failure to make funds available on the schedule promised in 1996resulted in delays in the main civil works contract at Taita Taveta, and the minor civil workscontract at Tambach.

22. The current status of accounting and payments for civil works financed from the Credit is asfollows:

For the main civil works contracts at Baringo, Bondo, Muranga, Narok, and Tambach, all ofwhich were completed no later than 1994, final accounts have been issued, and all bills havebeen paid;

The main civil works contract at Taita Taveta is 89% complete. The outstanding works willbe funded from the Government from its own resources; however, the Government hasallocated only KSh 6.6 million (about $90,000) in its .1999/2000 budget for this purpose.

The minor civil works at Bondo, Baringo, Muranga, and Narok were completed and handedover in 1998, and all payments have been made. Some playing fields are yet to be completedin Tambach PTTC. This was occasioned by delays in payment to the contractor, which wascaused by internal regulations of the Borrower. The pending bills include KSh 37 million($500,000) for landscaping and playing fields at Garissa.

23. As a result of the implementation delays, the sum of pending bills and incomplete civilworks, instead of being reduced to zero as was the intention, has been reduced by 87%.

3At the time of Amendment, the exchange rate was KSh 56 per U.S. dollar. The average exchange rate for1997/98 was KSh 62/US$, and the average exchange rate for 1998/99 was KSh 63/US$.

7

C. Achievement of Development Objectives

Original Project (universities and related central functions)

24. Rationalizing and strengthening the institutional framework for higher education.Within this objective, the two key priorities set out in the Letter of Sector Policy were:strengthening of CHE, which previously had concentrated on accreditation of private universities,for coordination of the planning, programming, financing and budgeting of the public universities;and establishment of a Loan Board to administer the student loan program (especially loanrecovery) more effectively.

25. The organizational structure of CHE was revamped through the appointment of more seniorstaff and their capacity developed through training, tours and visits to gain experience from otherhigher education. In July 1994, CHE took over the responsibilities of the former Policy andPlanning Task Group (PPTG) for coordinating the planning, programming, and financing of publicuniversities, and its trained staff and equipment. The appointment of the CHE's Secretary (chiefexecutive) as officer accounting for public funds to public universities enabled the Commission, forthe first time, to coordinate the preparation of public universities annual budgetary estimates, andfor the government to channel Recurrent grants for the universities through the Commission. CHEalso successfully coordinated the preparation of development and financial plans, and proposals unitcost-based financing of public universities. (This work did not result in restoration of financialhealth at the universities, but this was due to factors beyond CHE's control.)

26. Early during UIP, it was recognized that the CHE Act and each of the individual UniversityActs needed to be revised, to enable CHE to perform its intended functions for coordination ofpublic universities effectively over long term. Bills to revise the Acts were published in 1997, butwere never enacted by Parliament. All education legislation is being reviewed by a PresidentialCommission on the future of the Kenyan education system.

27. Notwithstanding the lack of legislation to update the laws governing CHE and theuniversities, CHE today is performing a coordination role that it was not performing in 1991. Thedeficiencies in public university financing reflect the inability of parties beyond CHE to reachagreement on the specifics of reform, rather than any lack of analysis and advocacy by CHE.

28. With regard to the student loan program, the EdSAC ICR found that improvement instudent loan collections by the Ministry of Education had been negligible through 1995. TheHigher Education Loans Board (HELB) was organized following the passage of the HigherEducation Loans Board Act in 1995. The Act grants enhanced legal powers for loan recovery,including mandatory payroll deductions for loanees working in the formal sector, and also gives theBoard the power to determine interest rates on student loans. It enables the Board to make loans tostudents in private as well as public tertiary institutions. The administration of bursaries in additionto loans was given over to the Board.

29. In 1995, the interest rate on student loans was raised from 2% to 4%. Since student loanscarry such a low interest rate, the demand far exceeds the supply, and HELB has had theresponsibility of administering means-testing in this environment. HELB officers seek to verifyinformation on loan applications in order to screen out non-needy applicants.

30. The value of collections has increased from about KSh 25-30 million annually during theEdSAC period, to KSh 281 million in 1998/99 - an increase by a factor of ten. This reflectsHELB's efforts to locate and bill loanees, which have been quite successful for those loaneesworking in formal sector organizations, especially the public sector. Out of about 65,000 loanees

8

who should be repaying, about 25,000 (38%) are currently repaying (as compared with 10% ofloanees repaying in 1995). HELB has announced that defaulters who do not commence repaying byJuly 1, 1999, will have the interest rate on their loans escalated to the current market rate, andexpects that this policy will encouraging more loanees to repay without special efforts to searchthem out. It has also been holding discussions with a private credit bureau about sharing of creditinformation among financial institutions including credit-card issuers. HELB is hoping to increasethe percentage of repayers to 70% by the end of 1999.

31. In sum, HELB has made substantial progress during its four years of existence. It will needto further improve loan recovery performance and diversify funding sources in order to meet futureexpected needs for financial aid to students.

32. Limiting the growth of the Borrower's budgetary resources devoted to the publicuniversities by promoting cost sharing and improved investment planning. The LSP set aceiling of 20% of the Ministry of Education recurrent budget to be devoted to the universities. Asnoted earlier, the ICR team considers that, in addition to the Government budget, universitysolvency needs to be taken into account, and that a Development Objective statement along the linesof "Establishing an adequate, efficient, and equitable system for financing education at the publicuniversities" would have been preferable.

33. In the actual event, the MoE budget share decreased during the UIP period to only 12%. (SeeAppendix C for detail on public university financing). The value in real terms of the Governmentbudget allocation to the public universities decreased during the early 1990s, increased during1994/95 and 1995/96, and has been on a decreasing trend subsequently. Together with the limitedmobilization by the universities of other revenues, the consequence was that the public universitiesincurred substantial deficits and accumulation of debts, with this problem being more severe at theinstitutions with a greater percentage of students pursuing science-based programs, which are moreexpensive to teach.

34. With regard to cost-sharing, as part of the adjustment program in 1991 a "direct" tuitioncharge of KSh 6,000 was added to the longstanding Student Loan Scheme disbursement for tuition,also KSh 6,000, making the total tuition charge KSh 12,000. In 1995, the total tuition charge wasincreased to KSh 16,000, of which KSh 8,000 was "direct". At the same time, automaticity ofstudent loans was replaced by means-testing. This was an important reform, going beyond thecommitments in the LSP (which said that loans "will continue to be optional to all students"). Thecredibility of deferred cost recovery through student loan repayment has been enhanced by HELB'ssteadily improving loan recovery performance. However, during the decade the real value ofstudent tuition was eroded by inflation. and presently recovery of academic costs from Government-sponsored students at the public universities is only the range 6-13%, which is too low.

35. With regard to "investment planning", there has not in the 1990s been any repetition of the1 980s experience of insufficiently planned expansion of university enrollment, without regard forthe market demand for graduates. Relatively few new courses have been offered in the 1990s, andthese have been in response to market demand.

36. In sum, "direct" cost-sharing is well established, and "deferred" cost-sharing is becomingprogressively better established as the credibility of loan recovery by HELB is increased. However,the level of cost-sharing from Government-sponsored students for academic costs, in the range 6-13% (Table C2), is too low. Additionally, the distribution of Government financial support needs tobe reformed to recognize the reality the science-based programs are more expensive. Despite theaccomplishments in establishing cost-sharing, an adequate system for financing education at thepublic universities is not now in place.

9

37. Improving the quality of teaching and research. Assessment improvements brought aboutby the inputs of science and engineering equipment is made difficult by the fact that the bulk ofdelivered equipment arrived during the last two years of the project, and very recently in some casessome conclusions can be made now with relative certainty. The laboratory equipment received isvery much appreciated by the academic staff. It has improved the quality of learning by increasingthe access of students to hands on experience. In some institutions, it has led to the development ofnew courses and research programs, involving undergraduate and postgraduate students and staff.In some cases (including but not limited to the applied research projects), the availability oflaboratory equipment has provided new income-generating possibilities. More broadly it hasenlarged the scope and improved the style of teaching, and enlivened the academic environment.While delays, cancellations and partial provision of equipment have caused understandabledisappointment in particular departments, in others morale has been boosted and institutionalcommitment enhanced.

3 8. The biggest challenge with regard to the equipment is that of maintenance and sustainability.Several instances were encountered of equipment lying idle because of the absence of relativelycheap but indispensable accessories to the larger machines. The project assigned responsibility forthe provision of such accessories to the universities themselves, but their intervening financialdecline has made it more difficult for them to meet these recurrent costs and created anunexpectedly serious problem of under-utilization. One positive aspect of the universities' responseto the problem of under-utilization is the extent to which the presence of specialized equipment atdifferent institutions has strengthened the need and willingness of all to share facilities, as isoccurring with the shared use and cost of the Nuclear Magnetic Resonance (NMR) equipment.

39. Computer provision to the universities is perhaps the biggest single most beneficialcontribution of the project. In all universities, the computers doubled or tripled, and significantlyupgraded, overall computing capacity. The provision of computers to academic units previouslylacking them, and for computer labs for student instruction and student use, has had a transformingeffect upon academic quality and administrative capacity. It is now possible for students and staffto become computer literate, the universities are insisting on it, and most are already around the80% mark. Local area networks are already in place and full institutional networks are beingdeveloped within and between campuses and universities. In the academic domain, quality has beenimproved by the accelerated production of documents and proposals, by greatly enhanced scope forscientific research and by wider access to journals. There is now some Internet access at eachuniversity, and there are plans for Internet accessibility to be expanded in the near future.Printingand reprographic equipment is also being intensively utilized.

40. Computers in university administration have enhanced managerial capacity throughapplication to payroll, accounts, transcripts and examinations. Most of the universities are poised togo beyond these routine measures, but comprehensive management information system remains atan early stage of development.

41. Maintenance and sustainability are being addressed through charges for paper, e-mail,Internet access, and continuing and extension courses for individuals and groups outside theuniversity. Throughout the universities the provision of computers has had an almost palpablypositive effect upon staff morale because of their ability to rapidly enhance previously depressedprofessional competence, commitment and productivity, on the national and international scenes.

42. The use of library books provided under the project reflects in large measure theachievement of the intended development objective with regard to improved teaching and learning.However this general conclusion has to be qualified by observed variation between the universitiesin their capacity to process received volumes, by inconsistent reports about increased readership

10

levels, and by an apparent slowness in computerization for the specific needs of the library despitethe provision of computers.

43. The training component of the project has been important for the improved quality ofteaching and learning, in providing the capacity to operate and utilize available equipment, andbringing back new energy and vision to the academic enterprise. The spread of training acrossacademic, managerial and technical categories and levels, and between local, international andfactory training has been particularly important. In most universities, an appropriate balancebetween types has been struck, and the return rate has been high in comparison with similarfellowship schemes. Particularly notable is the success of the training of trainers ideal, and theprospect of developing training courses in equipment maintenance that would serve all theuniversities as well as communities outside them.

44. The most evident shortfalls in achieving timely impact on the quality of teaching and researchhave been: a) slow installation of received equipment in a minority of cases; b) delayed processingof library books at some universities; c) limited consideration or implementation of the findings ofthe research studies for planning and management in the universities. Overall, the Projectinvestments have already led to significant improvement in the quality of teaching and research,especially but not limited to science-based programs, and this impact can be expected to deepen inthe next couple of years.

PTTC Component

45. In the Memorandum to the Board, two different types of higher-level objectives wereidentified. One objective was "fairness" to suppliers and contractors, and the funds provided by theCredit have certainly assisted the Government to clear the unpaid bills to private businesses, whichwere burdened by the Government's arrears. The other higher-level objective was improvingprimary education in two low-income, semi-arid regions. The aide-memoire of the Midterm Reviewmission had pointed out that "MoE still needs to resolve questions about the need for additionalteacher training capacity in the aggregate. Conversion to other purposes of some older PTTCs inwell-provided areas of the country may be appropriate."

46. Of the seven PTTCs initiated under the Sixth Education Project and also receiving funds fromthe UIP Credit, five have been graduating teachers for several years. A sixth (Garissa) began in1998 to graduate new teachers and provide in-service training to serving teachers, even thoughworks are still under way at that site. The Garissa PTTC has begun to make an impact on teachertraining in North Eastern Province, especially training of Kenyans of Somali origin. It is expectedthat Taita Taveta will begin to enroll students in the near future. These seven PTTCs account forabout 30% of the total teacher training capacity in Government institutions in Kenya. The increasein trained teachers has enabled replacement of untrained teachers, such that there are no longer anyuntrained teachers employed.

47. However, contrary to expectations/plans when the PTTC expansion program was drawn up inthe mid-1980s, primary enrollments have stagnated in the 1 990s, and both gross and net enrollmentratios have been falling, reflecting deteriorating economic conditions. The number of primaryteachers has reached a saturation point in relation to current primary enrollments, and theGovernment has discontinued guaranteeing of employment to PTTC graduates. In this context, thejustification for conversion to other purposes of some older PTTCs in well-provided areas isprobably even stronger today than when this issue was raised by the Bank in 1996. These issues areexpected to be addressed in the forthcoming report of a Presidential Commission on Kenya'seducation system. The Bank will be continuing dialogue with GoK on teacher issues in the contextof the forthcoming Strengthening Primary and Secondary Education (STEPS) project.

11

D. Major Factors Affecting the Project

48. No major factors affecting the project that were beyond the Government's control wereidentified.

49. The weak performance of the Kenyan economy in the 1990s was a major factor affectingthe project. Due to output growing more slowly than population, real Gross Domestic Product percapita fell by 10% from 1991 to 1998. This had adverse consequences for the university subsector:the availability of real resources from the Government budget decreased; the number of studentsfrom poverty backgrounds and thereby needing financial aid increased; and the labor market forgraduates weakened. According to the Bank's Country Assistance Strategy for Kenya, the weakperformance of the economy in the 1990s was due to poor economic governance by the Governmentof Kenya.4 Another major factor was the Amendment for the primary teacher training collegesat the Government's initiative. This complicated the Project, and added to the agenda ofimplementation by the Borrower (although the PTTC problem would have been a distraction to theMinistry of Education in some form even without the Amendment), and supervision by the Bank

50. The factors lying more specifically within the Ministry of Education's control - thecoordination within the Ministry; the capacity for procurement, contract management, and financialmanagement; oversight by the Permanent Secretary - are discussed in the following section.

E. Borrower Performance

51. Identification and Preparation. The concept of a Project to strengthen university educationin Kenya originated with the Government. Universities prepared the initial project documentsubmitted to the World Bank. It proposed an investment of about US$ 800 million to financemostly civil works as well as teaching and learning equipment, computers, books, staffdevelopment, vehicles. This was intended to address the crisis arising from rapid expansion ofpublic university enrollments following two double intakes, the bigger one being in 1989/90 whenuniversities admitted 20,000 students, as a result of two secondary school cohorts graduatingsimultaneously following a change in the duration of secondary education from 6 years to 4 years.

52. In consultations with the Bank it was to decided to drop the costly civil works component,and the project was scaled down to US$ 61 million. A project planning group comprisingrepresentatives from each of the six public university institutions and relevant governmentministries was formed to prepare the project, undertake wide consultation and to build consensus onand commitment to the critical higher education reform policies to be implemented under EdSACand UIP. Appropriate criteria were applied in scaling back the universities' wishes to match theresources that would be available. The Borrower's performance in preparing the project is evaluatedas Satisfactory.

53. Implementation. Implementation performance was strongly influenced by the somewhatcomplicated implementation arrangements agreed upon at appraisal. Responsibility for planningand institutional reform relating to university education was initially vested in a temporary Policyand Planning Task Group (PPTG), headed by a Coordinator, and then with CHE beginning in July1994. Responsibility for procurement, Withdrawal Applications, and accounts was given to theexisting MoE Project Implementation Unit (PIU), which was already implementing the SixthEducation Project and an AfDB-financed project. In due course, the ICR for the Sixth EducationProject found the PIU's performance in implementing that Project to have been unsatisfactory.

4ReportNo. 18391-KE (September 1998).

12

54. As noted earlier, the repeated extensions of the Credit were necessitated by thedelays in theequipment procurement program. During 1992 and 1993, the university staff developmentprogram and the Phase I library materials procurement proceeded on schedule. However, the Bankdeclined to accept the bid evaluations submitted for the first fourteen equipment tenders, on thegrounds that the process had been "flawed", and called for re-tendering. The bidding documents forthese 14 tenders, which had been approved by the Bank, included Technical Merit points but werevague as to how they would be awarded, and were vague on grouping of items into Lots. (It wassubsequently agreed that Technical Merit points would not be employed in bid evaluation formulae,except for computer systems, and with reliance to be placed on technical responsivenessspecifications to ensure the adequacy of equipment.) The first 14 tenders were re-advertised in1994, and awarded in 1995. In some cases, there were delays at the Central Tender Board stage.Deliveries began in 1996 - originally planned to be the last year of the Project.

55. The Ministry's procurement performance deteriorated significantly in 1997. In some cases,excessive time was taken between award recommendations being made by the PIU and being sent tothe Bank, due to delays at the MTB or CTB stages, and resulting in the need for extensions of bidvalidity. In a number of cases, lower-priced bidders were rejected on slender justifications that werequestioned by the Bank; upon re-evaluation, awards went to the lower-priced bidder, resulting insignificant cost savings. Initial award recommendations for computer systems (ICB) departed fromthe bid evaluation methodology set out in the bidding documents, and the Bank therefore called forre-evaluation. The Ministry's procurement performance improved dramatically in 1998, and thisled to the burst of disbursements ($27 million) in 1998/99.

56. In addition to the difficulties and delays in making awards,contract managementencountered difficulties and delays in some cases. There were some delays in opening Letters ofCredit and making initial payments to suppliers, sometimes because of GoK budget ceilings. Somewinning bidders declined to enter into contracts, and some suppliers performed only partially. TheBank advised re-tendering in those cases where suppliers had not performed, but this was not done.When equipment deliveries began, it became apparent that there was a need to clarify acceptanceprocedures and improve liaison between the universities and PIU; this was done through creation ofan Equipment Receipt, Inspection, and Acceptance Committee (ERIAC) at each university.Because many tenders were for more than one Lot, at times there were as many as 60 contractsunder implementation. The backloading of most of the work of equipment procurement andcontract administration into 1996-98 placed a heavy burden on the relatively small number of staffin the PIU. In 1997 the Bank urged MoE to ensure that PIU had adequate staff capacity in thesecircumstances, but in the Bank staffs opinion the Ministry did not follow through adequately.

57. CHE was not vigilant in monitoring the PIU's work and the procurement process beyond thePIU, as a guardian of the universities' interests. The division of responsibilities between PPTG andsubsequently CHE, and the PIU, created a situation in which the interest taken in the Project by theincumbent Permanent Secretary, MoE, was an important factor. During the life of the Project, therewere four Permanent Secretaries of MoE, and considerable variation among them in their degree ofinterest and involvement in UIP. In particular, the keen interest taken by the Permanent Secretaryfrom 1998 onwards was an important factor in the dramatic improvement in 1998 of the Ministry'sprocurement performance.

58. With regard to Part C, the Government did not make budgetary releases according to theschedule promised in July 1996. As a result of this deficiency, the objectives of completing the civilworks, and clearing all existing arrears and avoiding new arrears, were not fully achieved.

13

59. As indicated in Annex D, audit reports were never submitted to the Bank within the agreeddeadline of six months after the end of the financial year. Most audit reports have been qualified, anindication of deficiencies in the ability of the implementing agency to maintain records andaccounts to reflect the operations, resources, and expenditures in respect of the Project. TheGovernment's unsatisfactory performance in this area with respect to UIP is not exceptional; almostall Bank-financed projects in Kenya display weaknesses in accounting and audit performance.

60. Despite the improvement in the Ministry's procurement performance toward the very end, onthe basis of the entire record the Borrower's implementation performance is evaluated asDeficient.

F. Bank Performance

61. Identification and Preparation Assistance. The project concept originated with theGovernment, and was appropriately sharpened through the Bank/Government dialogue. The Bankproposed and reached agreement with the Government on a set of objective, appropriate criteria, forscaling back the universities' wishes to match the resources that would be available5 The Bank'sperformance at the identification and preparation assistance stages is evaluated asSatisfactory.

62. Appraisal. The appraisal team reached agreement with the Government on appropriatedetailed policy conditionality, building upon EdSAC, and on selection of high-priority investments.In the area of university financing, the appraisal should have gone beyond the issue of the MoEbudget share, to investigate the structure of revenues and expenditures of the universities as self-accounting organizations, and their unit costs (as is done for electric power projects and watersupply projects, for example). The appraisal did not establish monitorable indicators for theDevelopment Objectives, but this was not required or normal practice for appraisals in 1991.

63. At the time of appraisal, the Fifth Education Project, which had been approved in 1981, wAasnearing completion; it finally closed in September 1991 after five extensions. The ongoing SixthEducation Project, which had been approved in 1986, was clearly headed toward multipleextensions in view of its disbursement lag. In this context, the decision at appraisal to assignresponsibility for procurement, Withdrawal Applications, and Project accounts to the existing MoEPIU was risky. The alternative of establishing capacity for procurement and project financialmanagement in PPTG and then CHE would also have entailed risk, but in the opinion of the ICRteam would have been preferable, in view advantages of greater focus and greater accountability tostakeholders. The SAR made no mention of the implementation experience of the Fifth and Sixthprojects. The Ministry's procurement capacity (or the performance of the GoK procurement systemmore broadly), which in view of experience should have been an obvious risk, was not mentioned inthe risk assessment section of the SAR, which therefore was deficient.

64. The appraisal chose an implementation period of 4.5 years, well below norms for educationprojects in Africa. This was based on the change in the object of procurement from civil works toequipment. While it was reasonable to expect acceleration of the Ministry's implementation pace ascompared with the experience of the Fifth project, the magnitude of acceleration implicitly assumedwas overoptimistic, in relation to the number of items of equipment to be procured, their diversity,and the technical complexity of some of it. If an implementation period closer to Africa Regionnorms - for example, 5.0 years or 5.5 years - had been chosen, then the subsequent phenomena ofdisbursement lag and multiple extensions would have been of smaller magnitude.

65. Weighing the various positive and deficient aspects, appraisal is evaluated as having beenDeficient.

5 The criteria are reflected in Annex 7 of the SAR, and Schedule 5 of the DCA.

14

66. Supervision. During the seven years of implementation, there were eleven supervisionmissions, one Midterm Review mission, and two special-purpose missions (one on higher educationfinancing, one on PTTC pending bills) (Part II, Table 13). Thus, over the period as a whole, therewere missions every 6 months on average. Missions were more frequent during the earlier years1993-95, but involving fewer persons and shorter periods of time. During the final years 1997-99,the frequency of missions stretched to once every 9 months. Task management responsibilitychanged between appraisal in 1991 and initial supervision in 1992, and again in 1995. Thus, overthe seven years, there was adequate continuity. Most missions included a science higher educationspecialist, and one included a computer systems specialist. After equipment deliveries had begun,missions included site visits to the six beneficiary public universities. In the earlier years, attentionto procurement methodology and Project accounts was less than it should have been. Implementa-tion progress was accurately reported, and ratings were realistic. Problems were identified anddiscussed with the implementing units, and remedial action agreed upon, although not always withadequate follow-through by the Borrower.

67. The supervision team supported repeated extensions as a calculated gamble that the procure-ment constraints would be overcome, especially to enable faculty and students to have adequateaccess to computers and Internet, and more science equipment, and that adequate universityfinancing would be achieved through higher and differentiated unit costs. There was payoff to thisgamble on procurement, but not on university financing as far as Government-sponsored studentsare concerned.

68. Following the intensive review of PTTC pending bills in March/April 1997, supervision wasinclined more toward the universities rather than Part C. Site visits were made to Taita Tavetawhich was the only main civil works contract being financed from the Credit; for the other collegeswhere minor civil works were being completed, reliance was placed on reports from the PIU. Therewas insufficient follow-up with the Government concerning the GoK funding for Part C.

69. Supervision is evaluated as having been Satisfactory overall.

G. Overall Outcome

70. In view of the lack of monitorable indicators for Development Objectives, and the fact thatfor all three Development Objectives the accomplishments were partial, it is not easy to arrive at anOutcome rating in this case. Positive aspects include the receipt and utilization of computers,science and engineering equipment, and library materials; the institutional innovation representedby HELB and its steady improvement of loan recovery performance; greater coordination of publicuniversities by CHE, and the creation of a culture of planning; the establishment of cost-sharing;and the applied research projects. Disappointments include the lack of revision of the legal frame-work; dropping of some of the planned tenders; and, most importantly, the continued unsatisfactoryfinancial condition of the public universities. The outcome is evaluated asUnsatisfactory.

H. Sustainability, and Future Operation

71. Original Project. Sustainability needs to be addressed at two levels: policies on universityfinancing to enable the universities, especially the more science-oriented ones, to address theircurrent solvency problems; and at the level of departments or sites where equipment or books havebeen delivered.

72. All the parties that have been engaged in the dialogue recognize that current unit revenues forGovernment-sponsored students are much too low to cover true unit costs for science, engineering,agriculture, medicine, and other science-based programs. Unit revenues must be raised to cover unit

15

costs. Tuition paid by Government-sponsored students should be increased substantially. Govern-ment financial support for education at the public universities needs to be more sharply targeted toassisting needy students through bursaries and loans. In this regard recent measures that havesubstantially increased loan recovery are to be commended and should be intensified and shouldplans for the establishment of a revolving loan fund. For any remaining component of Governmentfinancial support for undergraduate education which is not means-tested, Government fundingshould be reallocated relatively more toward the more expensive science-based programs.

73. At the "site" level, some university institutions have initiated user fee systems for computers,instrument usage, and consumables. There is need for wider application of this principle to generatesufficient funds to pay for full cost of maintenance and replacement. The universities will need toconsider how to finance continued acquisition of library books to keep the library collections up todate. Opening up the library for public use and charging for the privilege is one possibility beingconsidered. Broader opportunities for enhanced revenue generation can be found in the commercialand industrial application of the applied research projects, the sale of maintenance services, therenting out of large scale equipment and increasing the number of parallel students. The fruits ofimproved financial management are evident in the just announced targets for staff retrenchment.

74. PTTC Component. At this time, it is unclear when civil works at the Taita Taveta andGarissa PTTCs will be completed. With regard to their current operations, PTTCs are short offinancial sustainability because of declining Government grants, and need to diversify theirprograms and revenues. The Government needs to encourage more rational use of the nationalcapacity of these institutions.

75. Sustainability is evaluated as Uncertain.

=. Key Lessons Learned

76. At the workshop organized by CHE to discuss the UIP experience, participants from tteuniversities and the Ministry of Education agreed that UIP had been a valuable learning experience.Following are significant lessons derived from the UIP experience:

Lessons of general applicability:

Placing procurement and accounting responsibility in a multi-Project PIU has disadvantages ofdiminished focus and accountability to stakeholders, as compared with placing these responsibilitiesin a Unit or Coordination Office devoted to a single focus.

Monitorable indicators for Development Objectives are needed.

Implementation experience of previous and ongoing projects should be reflected in design andappraisal.

Procurement and financial management capacity should be assessed thoroughly at appraisal.

In tender documents, Technical Merit points should be avoided in most cases, with reliance placedon the specifications for technical responsiveness to ensure that equipment will be adequate for thepurposes intended. In those small number of cases where Technical Merit points are appropriate,they should be based on measurable improvements in functionality.

Institutional continuity and institutional memory are important factors for successfulimplementation.

16

Lessons for university projects:

Project design should provide for an appropriate balance between decentralization of responsibilitiesto universities, and central coordination.

Just as with power projects and water utility projects, lending operations in support of a smallnumber of universities which are self-accounting organizations should investigate at appraisal thestructure of revenues and expenditures of the beneficiary institutions, and their unit costs. TheProgress Reports should routinely monitor these aspects.

It is important to have clear procedures and responsibilities for receipt, inspection, and acceptancetesting of equipment.

It is possible, although not easy, to administer means-testing for financial aid to university students.It is possible to recover student loans from persons working in the formal sector.

Full engagement of Vice-Chancellors is an important factor for project implementation and policyreform.

The universities are now large-scale, complex organizations with an increased market orientation.This requires correspondingly greater attention than before to managerial training at all levels.

Table 1 Summary of Assessments

Snbstantial Partial Neggible Not applkiableA. Achievement of Objectives

Macro Policies XSector Policies xFinancial Objectives XInstitutional Development XPhysical Objectives X

Poverty Reduction xGender Issues xOther Social Objectives XEnvironmental Objectives XPublic Sector Management XPrivate Sector Development X

____________.________ Likely UacerUai Unlikely

B. Project Sustainability X

Highly Satisfac Deet. ~ ~Satif cory ._ _ _ _ _ _ -______-_.____

C. Bank Performance

Identification xPreparation Assistance XAppraisal XSupervision X

D. Borrower Performance

Preparation xImplementation xCovenant Compliance x

:;H- ; - i- 0-:--: ig0-H*h . - hlySatisetory a Highlry

E.Assessmentof Outm e, ___

E. Assessment of Outcome X

Table 2 Related Bank Loans/Credits

Loan/Credit0 ;i- XPurpose^ 0 ; Yearbf;:l 0: 000 000 l:l e70 of

PrecedingOperations

Sixth Education The specific project objectives were to 1986 The credit was extended three times by a total of two-and-a-half years,Project improve the equity and quality of Kenya's eventually closing December 31, 1994. Following Credit closing, a

education systems and to promote financing gap of $15 million was identified, consisting of unpaid bills ($11institutional development through million) and incomplete civil works ($4 million).strengthening the Government's capability toeffectively plan and mange educationalexpansion at all levels. Overall, the project objectives were partially achieved and the generalTo achieve these objectives, the project was outcome was not satisfactory. The project did not sufficiently enhance

to: (a) construct sevennewprimaryquality and equity of the education system. Cost and time control wastraining colleges (PTTCs)o ( coe nstruct three inadequate. The AZSs and PTTCs were over-designed, over-specified andnew aind zone primary schools (AZs) in over-supplied with furniture and equipment. Insufficient attention was paidremote locations; (c) provide the Kenya to sustainability or beneficiaries' needs when specifying requirements forInstitute of Education (KIE) with equipment, physical works: these have inherited problems of maintenance andspecialist services and training to support the sustainability. The AZSs are under-enrolled and the facilities of both thedevelopment of educational materials PTTCs and the AZSs are underused. The institutions are not sustainable:delivered by the Educational Media Services poor children's access to schooling in the arid zones remains low because

(EMS); (d assist KE in prepring andof learning-related costs such as boarding fees; and the PTTCs are not(EMS); (d) assist KIE in preparing and financially sustainable with limited cost-sharing.testing new curricular materials forsecondary and technical education; (e)strengthen the capacity of the Planning Unit(PU) of MOE and the Teachers ServiceCommission (TSC).

Loanicredit Purpose Year of StatusTitle Approval

PrecedingOperations

Education Sector The principal objective of the credit was to 1991 The third and final tranche was released in December 1994, about a yearAdjustment Credit support the Kenyan Government in the later than originally planned. The Credit Closing Date, after one extension,(EDSAC) implementation of its education sector was March 10, 1995.

reform program which sought: (a) to reduce Overall, the objectives of the credit were partially achieved. Achievementthe rate of growth of the education recurrent of the budgetary stabilization was substantial, and the slower growth ofbudget; (b) to expand access to education and teachers and university enrollments undoubtedly contributed to his result.increase retention at the primary andincrease rlevels,ont hespecimaly f idr It is important to note, however, that (i) budgetary achievements were

from disadvantaged areas; (c) to enhance and modest relative to targets in the Letter of Sector Policy (LSP), particularlyfrom disadvantaged areas; (c) to enhance and if the accumulation of arrears by public educational institutions is takenimprove the quality and relevance of into account; (ii) sustaining an appropriate budget share will depend on theeducation at all levels; and (d) to strengthen Government's ability to introduce deeper reforms in the areas of teachersector management, planning and recruitment and training, and to successfully implement financinginformation systems.' mechanisms for university education. Contrary to the access objective,

primary gross enrollment rates declined substantially. The quality objectiveSpecific actions supported by the credit was not defined in terms of output indicators and therefore achievement of

Speclfic actlions supported by the credit this objective cannot be assessed. Achievement of the strengthening ofincluded: limiting the growth of the primary sector management, planning and information systems was partial.and secondary teaching forces, limiting new admissions to the public universities, The most difficult reforms were in the area of higher education fnancing.introducing a direct charge on all public Prior to the adjustment program, there were no direct charges to students atuniversity students and reforming the loan public universities. A direct charge of KSh. 6000 was introduced for thescheme, re-introducing the public financing first time at the beginning of the program, and a bursary scheme introducedof textbooks to primary schools, to assist poor students in meeting it. As a result of high inflation, however,strengthening the Ministry of Education's the direct charge represented about 5% of unit costs by the end of the creditPlanning Unit, and strengthening the period. Progress on loan scheme reform was negligible during the CreditCommission for Higher Education to oversee period. The Government announced revised cost-sharing policies in Julythe development and financing of public 1995. According to these, "non-needy" students could pay up to 42% ofuniversities. the direct costs of university education which includes the full cost of food

and boarding. With the enactment of the Higher Education Loans BoardAct on July 21, 1995, the functions formerly carried out by the SLS unit inthe MOE are being transferred to the new Loans Board.

Table 3 Project Timetable

Step inl Project Cycle ' ~t Plalfte Pat LculL s Estimate

Identification(Executive Project Summary) July/August 1990 July/August 1990Preparation November 1990 November 1990

Appraisal May/June 1991 May/June 1991

Negotiations September 1991 September 1991

Board Presentation November 11, 1991 November 11, 1991

Signing n.a. December 11, 1991

Effectiveness March 1992 April 29, 1992

Major Reviews' Sept. 1992 and Sept. 1994 February 1996

Project Completion June 30, 1996 April 30, 1999

Credit Closing T December 31, 1996 April 30, 1999

The original plan was for two major reviews. As indicated in the SAR, "The first will be in the second half of 1992 toensure smooth transition to project management by CHE; the second in the 1994 to evaluate progress in the achievementof project objection in general, and the functioning of the restructured CHE in particular, in advance of Phase III for theUniversity components." In the actual event, there was only a single major review (Midterm Review), in February 1996.

Table 4 Credit Disbursements - Cumulative Estimated and Actual(US$ millions)

FY92 FY93 PY94 FY95 FY96 FY97 F FY9 FYOO

Appraisal 8.4 23.5 34.0 44.5 55.0 n.a n.a. n.a.Estimate

Actual .4 4.1 7.6 9.2 16.9 24.1 29.3 56.1 56.1

Actual as % of 4.8 17.4 22.4 20.7 30.7Estimate(cumulative)

Date of Final Disbursement: August 1999lAs of October 1999. Includes $1.7 Special Account (Revolving Fund) advance, not yet recovered. After the

Special Account advance has been refunded to the Bank, disbursements from the Credit will finally amount to$54.4 million.

Table 5 Key Indicators for Project Implementation

Indicators Etu' at ' Actual

1. Rationalizing and Strengthening The InstitutionalFramework of Higher Education

Establishing appropriate Legal Framework Review of existing laws, to be followed by revisions Revised Acts for CHE and each of theifjustified. universities drafted & tabled in Parliament

but never passed.

Re-organization of CHE Staff development, management re-organization, and Capacity enhanced, but no computers or MISequipment provision to achieve full coordinating role

Planning, Programming Budgeting of Public Three-year financing plans and six-year development Prepared by universities, 1994-1995

Universities plans.

Student loan scheme To be re-structured for improved efficiency & loan HELB established 1995; specialized staff,recovery computerization; 700% increase in loan

recovery

Studies Three projected: Graduate labor market; Private Three completeduniversities; Socio-economic access

2. Improve Quality of Teaching and Research

2.1 Science Equipment

Laboratory and Workshop Equipment $21.2 million $9.3 million

Library Materials $6.3 million $5.6 million

Printing & Publishing $1.7 million $1.06 million

Telephone Systems $2.2 million Re-allocated

Vehicles $3.2 million $1.88 (135 vehicles)

Computer Systems $4.0 million $11.58 million

Indicators Estimated at Apprraisal Ahtual

2.2 Applied Research Projects $1.5 million $1.5 million (8 funded)

2.3 Staff Development

PhD. 22 35

MA/MSc No limit 132

BA/BSc No limit 6

Higher National Diploma No limit 55

Diploma No limit 124

Certificate No limit 173

Non-Certificate No limit 68

Total 593

3. Limiting Growth of Budgetary Allocation toPublic Universities

Decreased Budget Allocation 20% of MOE budget Decreased to 11.8%

Cost Sharing Fee increase Fees raised from 12,000 to 16,000

Limited Growth of University Admissions Projected ceiling 10,000 per year Kept to 9000

Table 6 Key Indicators for Project Operation

eSTiC 4lctor A;iee Une the Projec Act4ouX 0 i .V .0f to9Xf beXA Take

Rationalizing and Strengthening theInstitutional Framework of HigherEducation.

Revised legal framework to Harmonization Bills drafted but never passed Legislation is still needed to governharmonize & coordinate public & private universities & enhanceinterrelationships of universities and implementing authority of CHECHE

CHE re-organized Staffing and managerial capacity of CHE CHE seeking to obtain computers &enhanced but no legal authority given. develop MIS system needed to realize

managerial potential & new Act toprovide legal authority.

Universities Produced Development 3 and 6 year plans developed by each Universities plan to revise & update asPlans institution flexible planning tools.

Student Loan Scheme Established A well-staffed & equipped HELB was HELB is now seeking to intensify loanbrought into being & has achieved a recovery rate and capitalize a revolvingconsiderable improvement in loan recovery. fund

The three projected Studies Studies provided information to CHE & CHE & universities intend to publicizecompleted universities, which was especially useful to & discuss study findings more fully with

CHE in its relationship with private employers, NGO's agencies & amongstuniversities & maintaining momentum on themselves.female access.

Indicators Achieved Under the PMjOt Actions to be Taken

2. Improve Quality of Teaching andResearch

Science equipment improved quality Premature to judge impact on teaching but Universities should make specialof teaching & research beneficial impact on graduate research and provision for maintenance & efficient

faculty morale. utilization

Library Materials in Use Bulk of books tendered for supplied, most Complete processing & inform studentsprocessed & available other universities & public of new titles

Vehicles used for academic Purposes 135 vehicles delivered: Intensively used for Universities attention to maintenancefield work and outreach activities facility essential if full utilization to be

achieved.

Computer systems improved Computer order increased three folds.academic & administrative Transformed undergraduate teaching &functioning graduate & faculty research & enhanced

efficiency of administration. Most importantsingle project element.

Exploited academic and commercial Five projects well established; already used Universities intending to intensifypotential of applied research projects for teaching and being developed for income-generating gains of & bring to

commercial & industrial purposes full potential the 3 less mature ones.

Staff Developed. Training achieved Balanced mix of academic, technical & Universities will need to insure retentionimproved teaching and learning administrative capacity achieved in allocation of staff through diversified salary

of scholarships. Most returned to roles for structure & maintenance of awhich training intended and contributed to professional work environment, throughimproved quality of teaching and research. financial & intellectual incentives.

Ibifilo!rs A0i~e ud-eir='- the;PWoieet Ac 0 *tion to lxte akXe

3. Limiting growth of BudgetaryAllocation to Public Universities

Limit the share of MOE recurrent The budget share has remained well below Continued attention by HELB tobudget devoted to the public 20% reaching a level of only 12% in recent increasing loan recovery & byuniversities to 20% years universities to income generating

possibilities. In order to achievefinancial viability at current levels ofGok support, universities will need toearn more revenue from other sources,including higher tuition fees.

Fees increased lncreased from Shs 12,000 to 16,000 during Diversified and cost-related fee structureproject period should be introduced at universities

Ceiling of 10,000 per year on Admissions ceiling kept to 9000 GOK should ensure that this ceiling foradmissions to public universities public universities is maintained.

Table 7 Studies Included in the Project

Study Consultants Status Iwp34t

Graduate Labor Market Deloitte and Touche Completed September The study, although delayed in completion1996 produced findings which were significant and

relevant to university planning. However, theirimpact was slight because they were never

Cost US$ 188,795 implemented nor discussed, publicized ordisseminated. Their consideration would still beuseful although they need up-dating.

Private Universities Deloitte and Touche Completed February This study has helped CHE improve its internal

1996 organization and operation in relation to its mostactive area of responsibility--private universities.The findings helped CHE to streamline

Cost US$ 88,800 communication with the private universities mostnotably in matters concerning accreditation

Socioeconomic Access British council Completed May Extensive and valuable information was produced

1996 but was never adequately communicated to theuniversities, with the result that it was neveradequately discussed internally or with other

Cost US$ 121,448 relevant constituencies. The impact was thereforelimited to providing information to CHE on socio-economic and gender factors in relation touniversity access.

Tables 8A and 8B, Project Costs and Financing

The amendment of the Credit in November 1996 created some conceptual issues for"project costs". The amendment added "Construction and equipping of seven new primaryteacher training colleges" to the Schedule 2, Description of the Project. Did this mean thatthe estimated costs (about $50 million) of the seven colleges since 1987 should be added tothe costs of UIP as conceived and estimated at appraisal, making a project of more than $ 100million?

To avoid such a situation, the Bank's task team obtained the agreement of the Ministryof Education during the supervision mission of November 1996 that Part C would beaccounted for and audited separately from the original project. (This was reflected in theagreed aide-memoire; however, there were no corresponding amendments to the accountingand audit covenants of the DCA on this particular point.) In effect, for purposes of projectaccounts, the amendment would be treated as creating a subtraction of IDA Credit fundsavailable for the original project. In effect, Part C would be accounted for as a new project of$13 million, consisting of payment of pending bills and completion of civil works.

Since the amendment became effective during fiscal year 1996/97, the audit reports for1996/97 would have been the first ones to be affected by this understanding. However, onlya single Project Accounts audit report on the combined project (the original project plus thenew Part C) for 1996/97 was received by the Bank, in May 1998. Similar practice wasfollowed for the 1997/98 audit report, received in June 1999.

It is, however, possible to separate out Part C on the basis of available data, and thishas been done in the tables presented here.

Table 8A: Costs of Parts A and B (Universities and related central components) -Appraisal Estimate, and Actual(in millions of U.S. dollars)

Appraisal Actual Of which: Of which:Estimate Expend. IDA GoK

Part A - Central Components 9.4 6.2 5.7 0.5Al. Strengthening CHE (PPBF functions) 5.0 1.7 1.6 0.1A2. Studies 0.7 0.5 0.5A3. Applied Research Projects 1.5 1.5 1.5A4. Reforming the Student Loan Scheme 1.5 0.8 0.8Project Administration 0.8 1.7 1.3 0.4

Part B - University Components 45.6 44.6 40.6 4.0Equipment and library materials 37.4 31.2 31.2Staff development 6.2 9.4 9.4Minor civil works and furniture 2.0 4.0 4.0

BASE COST 55.1 50.8

Contingencies 6.0

TOTAL INCLUDING CONTINGENCIES 61.1Financing: IDA Credit 55.0 46.3Financing: GoK 6.1 4.5

Note: This table utilizes IDA disbursement values from the Bank's Loan Department, and GoKexpenditures as reported in the Borrowers Evaluation Report. The IDA disbursement valuesin the Borrower's Evaluation Report differ slightly; presumably this reflects use of slightlydiffering exchange rates by the PIU as compared with the Bank's Loan Department in valuingtransactions in currencies other than the U.S. dollar.

Table 8B: Costs of Part C (Primary teacher training colleges cornponent) -Amendment Estimate, and Actual(in millions of U.S. dollars)

Cost estimate at Midterm Review (Feb. 1996); Amendment financing plan:

Pending bills (civil works, furniture, equipment, and 11.4professional services) and claims

Civil works to be completed - Taita Taveta and Garissa 1.6Minor civil works (landscaping, playing fields) to be 0.3

completed - five other CollegesTotal 13.3Financing: IDA Category 6-A (civil works) 6.6Financing: IDA Category 6-B (equipment and furniture) 0.5Financing: IDA Category 6-C (professional services) 0.7Financing: GoK (including all interest and claims) 5.6

Actual expenditures through end-June 1999:IDA GoK Total

Civil works 6.5 5.0 11.5Furniture and equip. 0.5 0.3 0.8Professional services 1.0 0.1 1.1Total 8.0 5.4 13.4(Note: IDA disbursement data are utilized here.)

Remaining liabilities as of end-September 1999

Unpaid bills 0.8Outstanding civil works 0.5Other claims 0.3Total 1.7

Table 9 Economic Costs and Benefits

No attempt was made at appraisal to estimate a Net Present Value (NPV) or an economic rateof return, and therefore there is no baseline. The objectives of the ICR mission did notinclude attempting to apply NPV/rate-of-return methodology to a project of this type,focussing mainly on quality improvement.

Table 10 Status of Legal Covenants

Agreement: 2309KE Credit Number: IDA -23090DCA Desrption orC Coeat ovenant Present Original Actual Comments

Section Type 8tatus Date Date3.01(a) (a) The Borrower shall carry out the Project with due 05 CP N/A N/A The Bank has taken the position that

diligence and efficiency and in conformity with unsustainable university financial deficitappropriate financial, administrative and higher are not appropriate financial and highereducation practices. education practices. Balanced university

budgets have not yet been achieved.3.02 Procurement of goods and services required for the 10 C N/A N/A In compliance.

project and to be financed out of the proceeds of thecredit shall be governed by the provisions of Schedule3 to the Agreement.

3.03 The Borrower shall limit undergraduate admissions at 10 C N/A N/A In compliance.the public universities to 10,300 in 1992, 10,610 in1993, 10,930 in 1994, 11,260 in 1995 and 11,600 in1996.

3.04 The Borrower shall (a) through 1993, cap student 10 C N/A N/A In compliance.loans at KShs. 21,500 per student; (b) eliminate thepersonal expense element from the student loanprogram; (c) maintain a direct student charge of atleast KShs. 6,000 per annum; and (d) operate bursaryscheme for needy students.

3.05 The Borrower shall: (a) by June 1992, furnish a 05 CD January July Implemented (July 1994) after someproposal for restructuring CHE with effect from 1993 1994 delay.January 1993; and (b) by January 1, 1993, havecommenced implementation of said proposal.

4.01 (a) (a) The Borrower shall maintain adequate records and 01 CP N/A N/A The most recent audit report has foundaccounts. inadequacies relating to Part C.

DCA Description of Covenants Covenant Present Origitaal Actual Comments

Section Type Status Date Date

4.01 (b) (b) The Borrower shall have the records and accounts 01 CD N/A N/A Audit reports have always been submitted

including the Special Account for each fiscal year later than the due date.

audited. Furnish to the Association, as soon asavailable, but in any case no later than six monthsafter the end of each such year a certified copy of thereport by said auditors.

5.01 (a) (a) The Universities Act shall have been amended, 05 C N/A N/A In Compliance

suspended, abrogated, repealed or waived so as toaffect materially and adversely the ability of CHE toperform any of its obligations under the project.

4 (1) The project shall be implemented by CHE. 05 C N/A N/A In Compliance.

4 (2) The Borrower shall by March 1, 1993 furnish to the 05 CD March 1994 Furnished

Association for its review and comments, a draft 1993

Public Universities development plan for 1993through 1999.

4 (3) The Borrower shall by March I in each year furnish to 09 C March I In Compliance.

the association for its review and comments proposals each year

for: (a) project implementation schedule (b) CHE'swork program; (c) CHE's recommendations onuniversity budgets; (d) student loan scheme workprogram

4 (4) The Borrower shall, commencing August 1992, 01 C February In Compliance.

furnish to the Association by February I and August I and

in each year, progress reports. Augusteach year

4 (5) 5. The Borrower shall ensure that the Studies under 10 C N/A N/A In Compliance.

Part A.2 of the project are carried out in accordancewith a timetable satisfactory to the association

4 (6) The Borrower shall submit to the Association for its 10 C N/A N/A In Compliance.

approval the first three applied research proposalsunder Part A.3 of the project satisfying the criteriaexpressed in the DCA and SAR.

OC Desriptn of Covenants COvenant Present Original Actual NCometSection~ ~ e,Type Staltus ate Date XtV;V m eAs000t

4 (7) The sub-projects under Part B of the project shall be 10 C N/A N/A In Compliance.prepared in accordance with the criteria specified inSchedule 5.

4 (8) 8. The Borrower shall carry out with the Association 10 CD Sept. 1992 February The two reviews were combined into atwo reviews of the project, in September 1992 and and 1996 single Midterrn Review, held in February1994, respectively. Sept. 1994 1996.

Covenant type: Present statusI = Accounts/audit 10 = Project implementation C = covenant complied with4 = Counterpart funding II = Sectoral or cross-sectoral budget or other resource CD = complied with after delay5 = Management aspects of the project or allocation CP = complied with partially

executing agency 12 = Sectoral or cross-sectoral policy/regulatory/ NC not complied with9 = Monitoring, review, and reporting institutional action N/A= not applicable

Table 11 Compliance with Operational Manual Statements

Project complied with all applicable Bank Operational Manual statements

Table 12 Bank Resources Staff Inputs

Weeks US$ ('000) Weeks US$ ('000)

Preparation - Appraisal 60.6 154.4

Negotiations - Board 10.6 19.4

Supervision 94.7 206.8 272.0 619.2

Completion 6 16.8 24.4 60.5

Total 100.7 223.6 367.6 853.5

KENYA UNIVERSITIES INVESTMENT PROJECT

Table 13 Bank Resources - Missions

St.g. at, MaantWr ber Da, 'i- "' ' ''obl.m

Implement. Develop.Progress Objectives

Identification July/Aug. 12 19 Economics, Education1990

Pre-appraisal Nov. 1990

Appraisal May/June 6 Economics, Education,

1991 Science Education

Supervision March 1993 4 10 Architect, Education, I I Phase I library books were being distributed. Phase I

Science Education, equipment bids were being evaluated. Work program for

Economics 1993/94 includes "starting the procurement of Phase IIequipment".

June 1993 2 5 Architect, Education NR NR Finalization of Legal Harmonization report was delayed.Phase I bids had been evaluated by MTB and were with CTBfor fnal approval. Lagging disbursements. Problem ofcontinued subsidization of student meals.

Oct. 1993 2 12 Architect, Education NR NR Bank had advised MoE on Sept. 21 that the Phase I equipmentevaluation process had been "flawed", and that re-tenderingwould be needed. Phase II equipment lists and specificationshad been sent to the Bank for comment.

Feb. 1994 3 10 Architect, Education, 2 1 Documents for Phase I equipment re-tenders and Phase II

Science Education equipment tenders were being prepared. Need for action on therecommendations of the Legal Harmonization report. Auditreport overdue. Implementation rating downgraded to 2.

6Performance ratings for some of the supervision missions were not given, hence not rated (NR).

t 0 -~~~~~~prson Fiel:dDiscussions June 1994 3 9 Division chief, NR NR University deficits and arrears are not appropriate financialon higher Economics, Education practices. The institutional framework has not beeneducation performing adequately. The real value of cost sharing has(EdSAC/UIP) been on a decreasing trend since 1991, and the credibility of

the Student Loan Scheme as an instrument of cost sharing hasnot been established. There is not yet evidence of improvedinvestment planning. Compliance has not yet been achievedwith covenants relating to appropriate financial practices, CHErestructuring, and the 6-year public universities developmentplan.

Supervision Oct. 1994 3 15 Architect, Education, U U Procurement of Phase I and Phase II science equipment,Economics vehicles, and computers had been organized into 34 packages.

The Bank had approved tender documents for the first 15 ofthese packages. Bids for the first 4 of these packages had beenreceived at the PIU. Preparation of Phase III specificationsand documents would commence in 1995. CHE had takenover the activities of PPTG in July 1994. Need for action onLegal Harmonization. Good progress on university financial

____________________ ._____________________ plans (EdSAC third tranche condition).

Stage cf Monthlyear Number Days Spe.ilize4l staff skills Performance Rating - Findings; Types of Problemsprojeetvyele . of: .i eprstd

persons Fietd

Jan./Feb. 3 12 Economics, Architect, U U Audited accounts of the universities, requested by the Bank,

1995 Education were overdue. University deficits still being incurred.Acceptable university fmancing plans (EdSAC third tranchecondition) had been submitted to the Bank in November 1994.Enhanced cost recovery should be put into place beforecommencement of 1995/96 academic year. 6-yeardevelopment plans submitted to the Bank in January 1995.Need for data on repayment performance of SLS loanees (notmerely aggregate values). Harmonization legislation expectedto be tabled in March 1995.

Evaluations on first 4 equipment packages with CTB for finalapproval. Bids for 6 packages had been received in Decemberand were being evaluated. Bids for 4 packages were dueFebruary 6. Another 20 packages planned. Very little of SLScomponent had been spent.

Project Accounts deficient: do not reveal expenditure on thevarious components; omit GoK contribution; too low inrelation to IDA disbursements. Audit report overdue.

Graduate Labor Market study reveals significant graduateunemployment (12% overall; 15% for class of 1992), anddissatisfaction of graduates and employers.

(Notice of Banks sends letter July 11 stating intention to suspend on

Intention to August 18 in the absence of adequate action on university

Suspend) financing. Ministry of Education issues Press Release onenhanced cost recovery on July 25. Bank refrains fromsuspension (letter dated September 5) in view of progressreported by August supervision mission.

Supervision Aug. 1995 7 Economics, Education S U Audited accounts of universities overdue. New studentfinancing package "welcome". SLS interest rate increasedform 2% to 4%. Enactment of Higher Education Loans Board(HELB) Act. Harmonization legislation expected to besubmitted to Parliament in session commencing October.

Technical meeting held on Project Accounts.

Phase 11 library books, vehicles, and microscopes had beenordered. For other packages, action by CTB had been delayed.

Mid-Tern Feb. 1996 22 Economics, Education, S S Universities: Government commitment in PFP to presentReview Science education, harmonization legislation to Parliament by June 1996. HELB

Student loan specialist, dealing with the new task of means-testing for student loanArchitect eligibility. Universities's share of MoE recurrent budget down

to 16.6%.

Only 20% of expected Project expenditures had been made.All components lagging, except for staff development. Thefirst 14 equipment packages had all been awarded. "Theuniversities, CHE, and PIU now need to monitor the arrival,commissioning, and use of the equipment."

PTTCs: Mission agreeable to recommending to Bankmanagement an amendment for PTTCs. Need to address "thetotal problem of incomplete civil works and unpaid bills".GoK would write to Bank concerning size of reallocation toPTTCs. ""MoE still needs to resolve questions about the needfor additional teacher training capacity in the aggregate.Conversion of other purposes of some older PTTCs in well-provided areas of the country may be appropriate."

Stage of Monthlyear Number D)ays Specialized stiff skills Performantce Rating Findings; Types of Problemsproject cycle of in reproeented

persons Field

Nov. 1996 17 Economics, Education, S U Delays in the implementation of ongoing equipment contracts.Science Education, Draft bidding documents often returned for more work. NeedFinancial management to: follow SBD for Goods; group items appropriately; have

achievable technical spec's; avoid Technical Merit Points, orclarify their use in terms of functionality. Two officers hadattended Advanced Procurement course in September 1996.Revised procurement timetable to be submitted March I

"Thin" informnation on university finances in the ProgressReport. University indebtedness worsening at someuniversities. Need for better data on SLS recovery.Monitorable Project indicators to be developed.

Project Management: Project Steering Committee to bechaired by P.S. to be created. Need for two full-timeCoordinators, one in PIU and one in CHE.

.~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Special Mar. 1997 12mission onPTTC bills

Aug. 1997 21 Economics, Education, S U Universities: Mission welcomes publication of HarmonizationScience Education. bills. Information on university finances better "but still

requires improvement". Overdue audits on HELB and itspredecessor. About 22,000 out of 100,000 loanees arerepaying. Experience represents departure from the universityThree-Year Financial Plans. Stock of recurrent debt has goneup instead of down. True unit costs not adequately financed.Incomplete "de-linking" of food and accommodation.Universities' share of recurrent budget down to only 12.6%.Agreement that differential unit costs for academic programs,and food and accommodation, will be put into place for1998/99.

"Less than 10% of planned equipment has been delivered andaccepted." Some contracts have been cancelled, and need tobe re-tendered. Twenty buses did not meet specifications; "re-tendering will take place shortly". Excessive time taken (6months or more) by GoK in some instances to submit awardrecommendations to Bank. Variation among universities intheir attention to delivered equipment. Agreement to have anEquipment Committee (ERIAC) at each university.

Emergence of potential Project "financing gap", due tomagnitude of recently opened computerization bids, over-expenditure on staff development, and the reallocation toPTTCs. MoE will apply to MoF for GoK funds for scienceequipment in 1998/99 budget

PTTCs The issue of interpretation of the main civil workscontracts had been resolved, as reflected in a letter from MoEto the Bank dated August 27. The forthcoming audit report onPart C should enable verification of GoK commitment topaying overdue bills (letter from Ministry of Finance datedJuly 25, 1996).

Stage of Month/year Number Dlays Specialized stsff skills Performance Rati Findigs, Types of Problems

project cycle of In representedpersons, Field

Apr./May 21 Economics, Education, U U Universities: The Harmonization legislation had not been

1998 Information systems tabled in the Seventh Parliament before it adjourned forelections. Agreed that "Attorney General will re-publish andtables the bills" to enable Parliament to enact the legislation byend- 1998.

Percentage of loanees who are repaying up to 32%, from 10%earlier. Continuing university financial deficits. MoE hadpresented to Treasury six "degree clusters", each with its ownacademic unit cost. Mission disappointment that GoK had notadhered to agreed timetable (August 1997 supervision) foradoption and dissemination of higher and differentiated unitcosts. Essential to have action for 1998/99 academic andfiscal year. GoK to informn Bank by June 30, 1998.

Expenditure thus far on university equipment and librarymaterials only 27% of the amount originally planned. Failureto re-tender when suppliers have defaulted. Need for re-evaluations in some cases. Delays in opening LCs. Need formore effective contract management. CHE computer contractfrustrated by MoF blacklisting. HELB procurement(computers, vehicles) finally under way.

Dissatisfaction with Project Accounts as reported in ProgressReport. Audit report 4 months overdue.

Disappointment that Project Steering Committee has met onlyonce.

Next Progress Report will report on university subprojects.

PTTCs: Work at Taita Taveta re-commenced only November1997. Inadequate provision in GoK budget; this problemaddressed in Supplementary of April 1998. Adequateprovision would be made to enable college to be completed byDecember. MoE will submit quarterly reports to the Bank onthe PTTC component, including the plans for utilization of theGarissa and Taita Taveta PTTCs.

Nov. Dec. 6 16 Science education, S U Universities: Harmonization legislation referred to1998 Education, Economics Presidential Commission of Inquiry into the Education

System. Need to build capacity in CHE.

HELB financing issue: tap the Revolving Fund to supplementannual GoK budget allocation?

Universities' share of MoE recurrent budget down to only11%; continued unsatisfactory financial condition. "Theuniversities are faced with enormous problems". Part-timeand parallel courses. MoE is seeking for Cabinet approval foruniversities to effect unit costs for all students in the1999/2000 academic year.

Improvement in the quality of teaching "has been achieved insome areas".

Disbursements had increased from $25.4 million at end-1997to $41.8 million as of November 1998 - $16 million in only 11months. Support for a third extension (by 4 months) of theClosing Date.

PTTCs: Taita Taveta civil works now about 85% complete.The "major and critical" works will be completed by theClosing Date. There is currently a freeze on hiring moreteachers, and the Colleges may become more diversified, withteacher training being only one of their activities.

Completion Aug. 1999 Economics, Education,Science education,Higher education,Financial management

Appendix APage 1 of S

KenyaUniversities Investment Project, Cr. 2309-KE

Implementation Completion MissionAide-Memoire on Parts A and B

August 27, 1999Introduction

1. A World Bank team consisting of Messrs. Bruce Jones (senior economist) and DavidCourt (higher education specialist) from World Bank Headquarters, Messrs. James Kamunge(education advisor) and Gituro Wainaina (economist) from the Resident Mission, and Prof.Shem Wandiga (consultant science and higher education specialist) carried out anImplementation Completion mission on the Universities Investment Project (UIP) duringAugust 9-27, 1999. Mr. John Ogallo (financial management specialist), Mr. Dahir Warsame(procurement specialist), and Ms. Margaret Olale (disbursement analyst) participated in themission' s work for part of the time. The mission visited each of the beneficiary publicuniversities, and also attended a workshop organized by the Commission for HigherEducation (CHE) on the implementation experience and way forward. The work of themission benefited enormously from the excellent Borrower's Evaluation Report prepared bythe Commission for Higher Education. The mission wishes to express its thanks to theMinistry of Education for the excellent cooperation.

2. Information on Part C (Primary Teacher Training Colleges) is still being gathered andanalyzed, and therefore a separate aide-memoire on Part C will be prepared by the Bank staffand discussed with the Ministry of Education in the near future.

3. The Bank's ICR team largely concurs with the findings and assessments contained inthe Borrower's Evaluation Report, and we therefore expect that the themes and lessonsderived in the Bank's ICR will be broadly similar.

Implementation Experience

4. Implementation experience was strongly influenced by the somewhat complicatedimplementation arrangements agreed upon at appraisal, with the Policy and Planning TaskGroup and later CHE responsible for policy coordination, and the Project ImplementationUnit (PIU) responsible for procurement, Withdrawal Applications, and accounts. Althoughstaff development and Phase I library materials proceeded on schedule, equipmentprocurement experienced delays and difficulties. At various points in time and in variouscases, the following factors played an adverse role: approval by the Bank of Phase I tenderdocuments which were vague in some important aspects, contributing to the need to re-tenderthe first 14 equipment tenders; the need for re-evaluations because of weaknesses inevaluation reports; delays in the GoK system beyond the PIU; delays in opening Letters ofCredit and making initial payments; nonperforryiance or incomplete performance bysuppliers.

Appendix APage 2 of 5

5. Notwithstanding the difficulties encountered, the additional time allowed by the threeextensions ultimately enabled about $48 million to be disbursed for Parts A and B. However,the composition of actual Part B expenditures (university subprojects) differed somewhatfrom the original plan, with more expenditure on staff development and especially computersystems, and less on science and engineering equipment. Some of the originally plannedscience equipment tenders were dropped when the Credit ran out of both time and money.

Progress toward Achievement of Development Objectives

6. Strengthening the Institutional Framework for Higher Education. During the UIPperiod, CHE was reorganized and recruited additional senior staff. Capacity was enhancedthrough training and study tours. CHE began to perform new functions of serving as thechannel for Government grants to public universities, and coordinating the financing anddevelopment plans of the public universities. In the mission's view, CHE should havemonitored the work of the PIU on behalf of the universities more closely, and should havedone more to encourage reflection of the findings of the studies in policies and programs.The legislation drawn up to revise and harmonize the CH4E Act and each of the universityacts was not passed; updating and harmonization of these laws is still needed.

7. The Higher Education Loans Board (HELB) was created by an Act of Parliament in1995. The Act grants enhanced legal powers for recovery of student loans. HELBadministers bursaries in addition to means-tested loans. HELB has successfullycomputerized loan processing and loan recovery functions, becoming much more efficientthan the former Student Loan Scheme Unit of the Ministry of Education. The percentage ofloanees with mature loans who are repaying has increased from 10% in 1995, to 38% in June1999.

8. University Financing. The stated objective was to limit the growth of the Govern-ment budget devoted to the public universities through cost sharing and improved investmentplanning, with a ceiling of 20% on the share of the MoE Recurrent budget devoted touniversity education. The objective was stated in a way which did not adequately recognizethe importance of university financial solvency, which became an important issue duringimplementation, and remains so today. The MoE budget share actually decreased to 12%during the UIP period. In 1995, it was announced that means-testing would be employed todetermine eligibility for student loans, and that food and accommodation would be charged atcost. However, during a decade in which the real value of both Recurrent grants from theGovernment and tuition paid by students were eroded by inflation, the policies announced in1995 have been insufficient to enable the universities generally to balance their budgets, withthe more science-oriented institutions experiencing the greatest financial difficulties.Recently the universities have calculated

Appendix APage 3 of 5

the unit costs of various degree programs, and have begun to place more emphasis on raisingtheir own revenues, including by enrolling "parallel" students who are not sponsored by theGovernment and pay full fees.

9. Quality of Teaching and Research. Where delivered, the laboratory equipment hasimproved the quality of learning by increasing the access of students to hands-on experience,enabled the development of new research programs and income-generating possibilities, andboosted morale and institutional commitment. The computers supplied, organized into LocalAreas Networks, have roughly doubled or tripled the number of computers on each campus,with significant upgrades in capability with up-to-date software. The provision of computersto academic units previously lacking them, and for computer labs for student instruction andstudent use, has had a transforming effect upon academic quality and administrative capacity.The library books supplied under the Project have substantially expanded the collections;there are varied reports on increased readership. Staff development activities have beenappropriately balanced among academic, managerial, and technical categories and levels, andthe retention rate has been high. Overall the Project investments have led to significantimprovements in the quality of teaching and research, especially but not limited to science-based programs.

10. Overall Outcome. In view of the good progress toward the Development Objective ofimproving the quality of teaching and research, and the progress made, especially theinstitutional innovation represented by HELB, toward the other two Development Objectives,the ICR team considers that an overall outcome rating of "Satisfactory" is appropriate.

Sustainability

11. Sustainability needs to be addressed at two levels: policies on university financing toenable the universities, especially the more science-oriented ones, to address their currentsolvency problems; and at the level of departments or sites where equipment or books havebeen delivered.

12. All the parties that have been engaged in the dialogue recognize that current unitrevenues for Government-sponsored students are much too low to cover true unit costs forscience, engineering, agriculture, medicine, and other science-based programs. Unitrevenues must be raised to cover unit costs. Tuition paid by Government-sponsored studentsshould be increased substantially. Government financial support for education at the publicuniversities needs to be more sharply targetted to assisting needy students through bursariesand loans. For any remaining component of Government financial support for undergraduateeducation which is not means-tested, Government funding should be reallocated relativelymore toward the more expensive science-based programs.

Appendix APage 4 of 5

13. At the "site" level, some university institutions have initiated user fee systems forcomputers, instrument usage, and consumables. There is need for wider application of thisprinciple to generate sufficient funds to pay for full cost of maintenance and replacement.The universities will need to consider how to finance continued acquisition of library booksto keep the library collections up to date.

14. Among the possible ICR ratings for Sustainability of "Likely", "Uncertain", and"Unlikely", the mission considers that a rating of "Uncertain" is appropriate for UIP.

Equipment Shortfalls

15. In view of cancelled tenders and partial performance in some awarded tenders, requestswere made in the Borrower's draft Evaluation Report, and reiterated orally, for a UniversitiesInvestment Project Two. The Bank's team explained that the Bank's lending program forKenya is in a "low case" of two new IDA Credits annually, until there have beendemonstrable improvements in economic governance. As determined in consultationsbetween the Ministry of Finance and the Bank, the next four projects, planned to be approvedin 2000 and 2001, are for primary and secondary education, health, rural roads, and watersupply. Financing of additional university equipment from an IDA Credit is therefore not arealistic possibility in the near future.

Key Lessons Learned

16. Following are significant lessons derived from the UIP experience:

Placing procurement and accounting responsibility in a multi-Project PIU has disadvantagesof diminished focus and accountability to stakeholders, as compared with placing theseresponsibilities in a Unit devoted to a single focus.

Project design should provide for an appropriate balance between decentralization ofresponsibilities to universities, and central coordination.

Just as with power projects and water utility projects, lending operations in support of a smallnumber of universities which are self-accounting organizations should investigate atappraisal the structure of revenues and expenditures of the beneficiary institutions, and theirunit costs. The Progress Reports should routinely monitor these aspects.

In tender documents, Technical Merit points should be avoided in most cases, with relianceplaced on the specifications for technical responsiveness to ensure that equipment will beadequate for the purposes intended. In those small number of cases where Technical Meritpoints are appropriate, they should be based on measurable improvements in functionality.

Appendix APage 5 of 5

Full engagement of Vice-Chancellors is an important factor for project implementation andpolicy reform.

Institutional continuity and institutional memory are important factors for successfulimplementation.

If a project has an objective of educational quality improvement, there should be indicators tomonitor this.

The universities are now large-scale, complex organizations with an increased marketorientation. This requires correspondingly greater attention than before to managerialtraining at all levels.

Borrower's Views

17. The Bank's ICR aide-memoire is expected to summarize the Borrower's views inaddition to the views of the Bank team. As the most convenient means of doing this, theExecutive Summary of the second draft of the Borrower's Evaluation Report is attached.

Audit Reports

18. The audit report on the 1997/98 Project Accounts was submitted to the Bank on June14, 1999, more than five months later than the due date. The report included queries on PartC (PTTCs), but not on university components of the Project. An audit opinion on Statementsof Expenditure for 1997/98 is still awaited.

19. The audit reports for 1998/99 are due December 31, 1999. The mission urges theMinistry of Education and the Office of the Controller and Auditor-General to take allnecessary steps to submit the 1998/99 audit reports by the due date.

Next Steps

16. The Bank's ICR is expected to be finalized and circulated to the Board within sixmonths of the Closing Date, which implies end-October for UIP. Accordingly, the followingschedule is agreed:

Bank's aide-memoire on Part C to be given to Ministry of Education for discussion -September 15;

Bank's draft ICR to be sent to Government for review and comment - October 1;

Final version of Borrower's Evaluation Report to be sent to Bank - October 15.

Appendix BPage 1 of 5

Executive Summary of theBorrower's Evaluation Report on the

Universities Investment Project

The Government of Kenya undertook the Universities Investment project (UIP) Cr. 2309-KEin order to support the education sector adjustment programme as it pertains to theuniversities.

The project was expected to take five years. The cost of the goods and services was based onJune 1991 prices (excluding taxes). The total cost was estimated as US$ 61.1 million ofwhich US$ 6.1 million and US$ 55.0 million were to be contributed by the Government ofKenya and the World Bank, respectively. The total amount disbursed for Central andUniversities components was US$ 47.968 million while US$ 6.997 million was re-allocatedto complete the outstanding civil works in the Primary Teachers Colleges under the 6thEducation project Cr. 1673-KE.

This support for the education sector focused on key areas of university education, namelystaff development, provision of laboratory equipment, library books, telephone, transport,computers, photocopying facilities and applied research activities. Other areas included, thestrengthening of the Commission for Higher Education (CHE) and the reforming the StudentLoans Scheme.

The project was evaluated by the Borrower, and the beneficiaries, namely: the ProjectImplementation Unit (PIU), the Public Universities, Commission for Higher Education(CHE) and the Higher Education Loans Board (HELB). The evaluation was done during themonth of July, 1999.

The strengthening of CHE was not fully achieved partly due to the failure to amend both theUniversities Act, 1985 and the individual Universities' Acts.

The students Loan Scheme was restructured and reformed through the establishment ofHELB in July 1995. This has increased loan recovery from Kshs.3 to 4 million per month in1995 to Kshs.30 million per month by June 1999.

Four consultancy studies were commissioned and undertaken by Deloitte and Touche and theBritish Council under the supervision of CHE.

During the project period, the Government reduced the recurrent budgetary allocation topublic universities from 19.9% of the Ministry of Education and Human ResourceDevelopment budget in 1991/92 to 11.8% in 1999/2000 financial year. This has had adversefinancial consequences to the public universities.

The public universities limited their undergraduate admission to less than 10,000 per yearduring the project period.

Appendix BPage 2 of 5

The universities staff development was considered to have had reasonable achievement. The projecttrained 629 staff out of the 920 nominated from all the public universities, CHE, HELB and PIU,representing 75% achievement.

The universities acquired various laboratory equipment, ranging from single equipment tomore sophisticated equipment such as Nuclear Magnetic Resonance (NMR). Out of thenumber requested, 62% were received. Out of the total allocation of US$ 22.1 million toprocure laboratory and workshop equipment, only US$ 9.3 million was utilised.

Library books and journals were also procured. Many new editions requested for were notalways available, instead earlier editions were supplied. The universities received 61 % oftheir requests. Out of a total allocation of US$ 6.3 million, US$ 5.6 million was spent onlibrary supplies.

The transportation facility was not fully achieved. Out of 116 vehicles, 84 were supplied ofthe universities, but 20 buses and 12 wagons did not meet tender specifications and wererejected.

Computer supply to universities performed better than other equipment because the tenderwas awarded per institution.

CHE, however, did not receive computers from both the Local Competitive Bidding (LCB)and International Competitive Bidding (ICB).

Several problems were encountered during implementation. There were complaints ofprocurement of some substandard and outdated equipment.

Procurement of equipment, vehicles and library books was hampered by a number ofconstraints leading to non-procurement of some equipment and vehicles for not meetingtender specifications.

A number of tenders were cancelled due to non-responsiveness of the bidders. However,there was no mechanism put in place to have the non-performing bidders replaced. A total of17 tenders were not floated due to financial shortfalls in the credit.

The payment up front of 90% created a major problem in the suppliers tended to neglectcertain quality and installation requirements for the equipment.

The establishment of Equipment, Receipt, Inspection and Acceptance Committee (ERIAC) ateach university improved implementation of the project. However, the Borrower's and theBank's bureaucratic process of procurement slowed down the implementation process.

Appendix BPage 3 of 5

The universities also received funds to support eight applied research projects. Three ofthese are already self-sustaining.

The introduction of new conditionalities by the Bank during the project period, such asdifferentiated unit cost per programme at public universities, was considered unfair by theBorrower.

A number of key lessons were drawn from the project, but the critical one was thatprocurement capacity and procedures of the govermment need to be thoroughly assessed andprovisions be made in future for the universities to handle procurement through their tendersystem.

A number of recommendations made by the Borrower and the beneficiaries include inter alia:

* That in future less bureaucratic mode of procurement should be put in place for donorfunded projects, and that universities should wherever possible be directly involved inimplementation of projects that benefit them.

* That the Government should make efforts to assist the public universities to balancetheir operating budgets and settle the pending bills as a first step towardsimprovements of the universities financial performance.

* That there should be a Universities Investment Project Two:

- to procure the equipment not supplied under the current project.

- to provide funds for setting up a revolving fund for HELB.

- to provide for a central maintenance unit for the universities.

- to provide for networking of Management Information System in the universitysub-sector.

- to provide for implementation of findings of the consultancy studies

In general the achievement of the UIP CR.2309-KE was evaluated to have enhanced theteaching and research at the public universities. However, the financial difficulties facing thepublic universities are yet to be rectified.

Appendix BPage 4 of 5

Commission for Higher EducationP. 0. Box 54999, Telephone: 228753,224938,335790/1 Nairobi, Kenya

Fax: 222218 NairobiTelegrams: COMHIGH, Nairobi

OurRef:CBE/20/36/15. 15'" December 1999. V

World BankHill Park / CEtVr. yUpper Hill Road 4AflXNs -> "P.O. Box 30577 Da,

NAIROBI, Kenya.

Attention: Mr. James Kamun2e

RE: UNIVERSITIES INVESTMENT PROJECTCREDIT 2309 - KE

COMMENTS ON DRAFT IMPLEMENTATIONCOMPLETION REPORT

The Commission has carefully studied the draft UIP Implementation CompletionReport (ICR) forwarded by your office through the Permanent Secretary, Ministry ofEducation, Science & Technology. On the basis of the overall assessment of UIP asunsatisfactory. the Commission has the following comments and observations:

(i) that the rating scale should be provided in quantifiable terms;

(ii) that from 1994 onwards, meaning upto the end of the project, the ratings of UIPwere as follows:

* Implementation Progress (IP) = 62.5% satisfactory* Development Objectives (DO) = 12.5% satisfactory* Overall = 37.5%

Statistically, 37.5% is more of a borderline case than unsatisfactory. The outcomeshould therefore be evaluated as Deficient rather than unsatisfactory.

(iii) that the project encountered procurement delays and the cancellation of sometenders for which the Borrower and the Bank share equal blame. In this case, ifthe performance of the Borrower and the Bank was Deficient, then logically theproject should also be rated Deficient

Appendix BPage 5 of 5

(iv) that the computers, laboratory equipment and the books have improved teaching,research and students loan recovery. The accrued benefits to the participatinginstitutions can not therefore be rated unsatisfactory. Indeed, the benefitsoutweighed the, problems encountered by the projects; and

(v) that it appears that the overall unsatisfactory rating of UIP was based wholly onDO. The uncontrolled factors that affected DO included depressed economyduring the project period and the stakeholders' unfavorable reactions to the 1997CHE's and the Universities Bills. These were project risks that were envisaged atthe inception and should not, therefore, be used to negate the projectachievements and performance.

Given the magnitude of the project and the lessons learned, the intendedobjectives were achieved and the Commission therefore appeals to the Bank to upgradethe rating of the overall outcome.

Thanks.

Yours sincerely,

Prof. Ezra . MaritimFor: Commission Secretary

Appendix CPage 1 of 7

Public University Financing

1. In the area of university financing, the stated objective of UIP was to limit the growthof the Government's budgetary resources devoted to the public universities by promotingcost sharing and improved investment planning. Specifically, the Letter of Sector Policy saidthat a ceiling of 20% would be set on the universities' share of the Ministry of Educationrecurrent budget. The Staff Appraisal Report said that public expenditure on the universities"should now stabilize at around 20 percent of the overall recurrent budget for education".

2. Before the education sector adjustment program supported by EdSAC and UIP, therewere no direct charges to students at Kenya's public universities. The only cost recovery foracademic costs was a KSh 6000 tuition component of the Student Loan disbursement (whichalso supported student's food and accommodation expenses). At that time, the Student LoanScheme, administered by the Ministry of Education, had such a low interest rate (only 2%)and poor collection performance that it was grant-like in practice.

Developments During UIP: University Finances

3. Developments through 1994/95. In 1991, as part of the adjustment program, theGovernment introduced a "direct charge" of KSh 6000, so that the student's total tuitionexpense became KSh 12,000. At the same time, it introduced a bursary scheme to aid needystudents in meeting the direct charge. Throughout the UIP period, admissions to the publicuniversities remained below the limits (10,300 in 1992, rising to 11,600 in 1996) agreedbetween the Government and Bank. The share of the MoE recurrent budget devoted touniversity education, which had been 21.6% in 1990/91, fell to 17.4% in 1992/93 and 15.3%in 1993/94.

4. The early 1 990s were a period of substantial inflation in the Kenyan economy, withprices increasing 90% on average during the four years from 1990/91 to 1994/95, reflectingvarious problems in economic management. This inflation had the consequence of reducingthe real values of Government grants to the universities and of the student's tuition payments(Table C 1). The universities, in addition to owing Development debt to contractors arisingfrom building projects (many of them stalled), began to incur substantial Recurrent deficits.In addition to tuition remaining fixed in nominal terms, food prices charged to studentsremained fixed at below-market levels, so that catering services incurred deficits.

5. The Bank and Government discussed this situation in the context of the both EdSACand UIP. Eventually, the Bank found the Three Year Financing Plans for 1994/95 through1996/97 satisfactory, in relation to the EdSAC third tranche condition relating to this matter.These plans provided for increased cost-sharing by beneficiaries, promotion of income-generating units, rationalization of academic programs, and retrenchment of excess staff.These measures were expected to result in clearance of the Recurrent arrears by June 1997.

Appendix CPage 2 of 7

Table Cl: Nominal and Real Values of Government Recuirrent Expenditure on University Education, and Tuition Due from Students

1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00Actual Actual Actual Actual Actual Actual Actual Prov. Approved Budget

(in millions of Kenya pounds, in nominal terms)

Sub-vote 318 123.5 97.9 125.0 142.0 199.9 235.5 223.7 257.5 254.7 265.8Comm. For Higther Education 1.2 1.3 3.1 3.3 4.0 4.2Student Loan Scheme (HELB) 37.2 53.1 49.0 49.3 37.1 37.5Grants to universities 103.6 145.5 183.4 171.1 213.6 224.1

Ministry of Education - Total 571.0 608.3 719.4 927.4 1224.6 1391.6 1478.2 2121.7 2200.3 2216.5

Sub-vote3l8/MoETotal (%) 21.6% 16.1% 17.4% 15.3% 16.3% 16.9% 15.1% 12.1% 11.6% 12.0%

(in real terms)

Sub-vote 318 in realterms 123.5 84.8 89.0 84.6 105.1 112.8 95.1 96.6 87.8 n.a.

(in Kenya shillings, in nominal terms)

Tuition charge 6,000 12,000 12,000 12,000 12,000 12,000 16,000 16,000 16,000 16,000

(in real terms)

Tuition charge in real terms 6,000 10,390 8,541 7,147 6,309 5,747 6,803 5,999 5,515 n.a.

Memorandum item: 100 115.5 140.5 167.9 190.2 208.8 235.2 266.7 290.1 n.a.GDP Deflator (1990/91=100)

Note: Expenditure on university education was unusually low in 1991/92 because some of the universities were closed after student demonstrations,

Appendix CPage 3 of 7

6. Reforms and Temporary Recovery, 1995/96. There was a delay in announcingenhanced cost recovery measures, and the plans were therefore revised and rolled over intoPlans for 1995/96 through 19997/98, with the Recurrent debt to be retired by June 1998. TheMinister of Education issued a Press Release in July 1995 concerning university financing,making the following points:

The Government had determined that the unit cost of educating a student at the publicuniversities was KSh 120,000 per year, of which KSh 86,000 was the unit cost ofinstruction, with the remainder being for food, accommodation, and books.

The tuition charge to students was being'increased from KSh 12,000 to KSh 16,000 (ofwhich KSh 8,000 was "direct"), with effect for the 1996/97 academic year.

The remainder of the instructional unit cost would be met by Government grant of KSh70,000 per student.

Food and accommodation would be charged at cost.

The maximum annual student loan disbursement was being increased to KSh 42,000.However, instead of loans being granted automatically to all students, means-testingwould be employed to determine eligibility.

7. These policies were expected to enable the universities to balance their operatingbudgets. In addition, the Three Year Plans for 1995/96-1997/98 provided that the Ministry ofFinance would give the universities additional allocations to enable their existing Recurrentarrears to be progressively cleared by June 1998, and this was actually done for 1995/96. Inthis year, the share of the MoE budget devoted to university education rose back up to16.9%, and the real value of Government expenditure on university education was greaterthan in any other year following 1990/91.

8. Renewed Financial Deterioration from 1996/97. However, after 1995/96, the realvalue of university revenues began to decline once again, and their financial conditiongenerally deteriorated once again. This reflected the following factors:

The share of the MoE budget devoted to university education declined to 12.1 % in1997/98 and only 11.6% in 1998/99, yielding a substantial decline in real terms.

The real value of student tuition had been eroded by inflation to only half the level of1991/92.

The instructional unit cost of KSh 86,000 announced in 1995 had been based on themost recent audited accounts of public universities at that time, which were for1991/92. Because of the high inflation of the early 1990s, this unit cost was alreadytoo low when announced. A particular problem was that the uniform unit cost did notprovide for the substantially higher costs of teaching science-based programs.

Appendix CPage 4 of 7

University catering services charged food prices which covered the raw material foodcosts, but not the costs of labor, electricity, and water involved in food preparation;thus, implementation of the policy announced in 1995 was incomplete.

Although excess non-teaching staff had been identified, the funds necessary to paythem severance benefits as part of retrenchment were not available.

In some cases, lack of seed capital was constraining ideas for income-generatingactivities from become launched.

9. As a result of these factors, in the late 1990s a majority of the public universities,especially those with relatively greater enrollment in science-based programs, wereexperiencing financial difficulties. For example, the Report of the Auditor-General(Corporations) on Egerton University for 1996/97 reported that the university had incurred adeficit of KSh 27 million, that its current liabilities had increased from KSh 186 million atJune 1996 to KSh 319 million at June 1997, and that it had been unable to remit variouspayroll deductions (Income Tax Department, NSSF, NHIF, etc.). The audit report on theJomo Kenyatta University of Agriculture and Technology (JKUAT) found the university tobe "technically insolvent" due to Net Current Assets of negative KSh 51 million. As ofAugust 1998, the Recurrent and Development indebtedness of the six institutions stood atKenya Pounds 72 million and Kenya Pounds 42 million, respectively.

10. Higher and Differentiated Unit Costs. In 1997/98, the universities under thecoordination of CHE carried out an exercise to identify the unit costs of instruction forvarious degree programs. The numerous degree programs have been grouped into a smallnumber of "clusters". The currently proposed unit costs as a basis for university financingare illustrated in Table C2. As can be seen, the unit revenue to the university is roughlyadequate for an Arts degree (humanities or social science or education), but substantiallyinadequate for science-based degrees.

11. In 1998, the Ministry of Education conveyed to the Ministry of Finance the unit costsfor various degree programs, as a basis for financing of public universities. The Ministry ofFinance replied that it would not be possible to increase the resources from the Governmentbudget devoted to university education, but that within this envelope it had no objection toreallocation of funds according to unit costs (which implies more budgetary funding forscience-based programs and less for non-science programs). However, thus far, including inthe 1999/2000 budget, GoK budget allocations to the universities have remained level perstudent, regardless of degree program.

7 Interministerial Committee on Unit Costs for Public Universities, "A Report on Unit Costs for PublicUniversities", December 29, 1998.

Appendix CPage 5 of 7

Table C2: Coverage of Academic Unit Costs by Unit Revenues, in Degree Clusters(in shillings)

C1 C3 C4Social C2 Natural Engineering C5

Sciences Humanities Sciences Applied Sci. Medicine

Unit Cost 127,000 135,000 183,000 188,000 256,000

Unit Revenue 126,000 126,000 126,000 126,000 126,000Government grant 110,000 110,000 110,000 110,000 110,000Tuition paid by Government- 16,000 16,000 16,000 16,000 16,000

sponsored student

Percentage of Cost Covered 99.2% 93.3% 68.9% 67.0% 49.2%

Percentage of Cost Recovered 12.6% 11.9% 8.7% 8.5% 6.3%from Government-sponsoredStudent

12. Introduction of parallel programs. In order to raise more tuition funds, some of theuniversities have recently initiated so-called "parallel" programs for students who are notadmitted through the Joint Admissions Board and are not supported financially by theGovernment. These "parallel" programs include, for example, medicine and law at theUniversity of Nairobi, law at Moi University, and programs to upgrade the credentials ofteachers. In some cases, parallel programs are offered in the evenings, on weekends, orduring school vacations; in other cases, "parallel" students are taught alongside regular"JAB" students. At Moi University, parallel students are charged the KSh 86,000 unit costannounced by the Minister of Education in 1995; at Nairobi, parallel students are charged fullunit cost as estimated by the universities and CHE in 1997/98, including about KSh 450,000for medicine. Because HELB recently has found it difficult to meet the financial needs ofeligible "JAB" students, parallel students do not receive financial assistance from HELB.The funds raised by parallel programs go partly to additional remuneration the teaching staff,and partly to the university.

Developments During UIP: Student Loan Scheme

13. The EdSAC ICR found that, during the EdSAC period (through 1995), improvement instudent loan collections by the Ministry of Education had been negligible.

14. The Higher Education Loans Board (HELB) was organized following the passage ofthe Higher Education Loans Board Act in 1995. The Act grants enhanced legal powers forloan recovery, and also gives the Board the power to determine interest rates on studentloans. It enables the Board to make loans to students in private as well as public tertiaryinstitutions. The administration of bursaries in addition to loans was given over to the Board.

Appendix CPage 6 of 7

15. In 1995, the interest rate on student loans was raised from 2% to 4%. Since studentloans carry such a low interest rate, the demand far exceeds the supply, and HELB has hadthe responsibility of administering means-testing in this environment. In the Kenyan contextwhere income other than wage and salary income is often important, this is a challengingtask. In some cases, HELB follows up with secondary school headmasters or makeshousehold visits to check on the validity of applications, and complaints about fraud inapplications and inequity in loan awards have diminislhed.

16. The value of collections has increased from about KSh 25-30 million annually duringthe EdSAC period, to KSh 281 million in 1998/99 - an increase by a factor of ten. Thisreflects HELB's efforts to locate and bill loanees, which have been quite successful for thoseloanees working in formal sector organizations, especially the public sector. Out of about65,000 loanees who should be repaying, about 25,000 (38%) are currently repaying (ascompared with 10% of loanees repaying in 1995). HELB has announced that defaulters whodo not commence repaying by July 1, 1999, will have the interest rate on their loans escalatedto the current market rate, and expects that this policy will encouraging more loanees torepay without special efforts to search them out. It has also been holding discussions with aprivate credit bureau about sharing of credit information, so that other financial institutionsincluding credit-card issuers would be aware of an applicant's HELB situation (repayer ordefaulter). HELB is hoping to increase the percentage of repayers to 70% by the end of1999.

17. Repayments to HELB (including the former Higher Education Loans Fund whichHELB inherited from the Ministry of Education) are not returned to the Treasury, but insteadare retained by HELB as a sort of endowment which is invested in liquid assets. HELBrefers to its accumulated capital as its "Revolving Fund", now amounting to about KSh 600million.

18. As indicated in Table C 1, the annual Parliamentary appropriation to HELB for loans tostudents has been decreasing recently. HELB intends to begin tapping its Revolving Fundfor loan disbursements to students, in view of the reduced grant to HELB from the Treasury.

19. In looking at HELB, it may be useful to think of the ways it has been functioning orpotentially could function in terms of three "models":

In the Agency model, the student loan body acts as an agent of the Government. Onbehalf of the Government, it makes loans to students, with any repayments accruingback to Government as nontax revenue.

In the Endowment model, the student loan body has a fund which is something like theendowment of a private university or a charitable foundation. The capital is invested inhigh-yielding liquid assets; the current income from capital can be invested in risky andrelatively low-yielding student loans, but the capital itself is not placed at risk andtherefore is preserved.

Appendix CPage 7 of 7

In the Financial Intermediary model, the student loan body obtains funds from financialmarkets, which it onlends to students.

17. In actual practice, HELB has been following a mixture of the Agency and Endowmentmodels. It is not pure Agency because HELB retains the repayments (instead of passingthem to Treasury as nontax revenues) to build up its Endowment. HELB has not tappedfinancial markets thus far.

University Financing Including Student Loans: the Way Forward

18. University finances. The public universities need to be placed on a stronger financialfoundation in order to provide the quality of teaching and research that Kenya needs,especially in view of the shift in student enrollment relatively more toward science-basedprograms. Presently, the universities derive about 80% of their revenue from theGovernment grant, with the remaining 20% coming from tuition paid by students andincome-generating activities. The revenues of the universities must be increasedsubstantially. It is known that the public universities will not, in the aggregate, be receivingmuch more funding from the Central Government budget.

19. As indicated in Table 2, recovery of instructional costs from Government-sponsoredstudents at the public universities ranges from 6% to 13%. This percentage of cost recoveryis too low, in the context of fees paid by "parallel" students at the public universities,students attending private universities in Kenya, and Kenyan students studying at universitiesin other countries. Tuition paid by Government-sponsored students should be increasedsubstantially. Government financial support for education at the public universities needs tobe more sharply targetted to assisting needy students through bursaries and loans. For anyremaining component of Government financial support for undergraduate education which isnot means-tested, Government funding should be reallocated relatively more toward the moreexpensive science-based programs.

20. Student loans. Pursuant to higher fees for Government-sponsored students at thepublic universities, and the desirability of making HELB loans available to parallel students,there is a need to expand the volume of student loans and bursaries. In view of limits on theannual Parliamentary appropriation to HELB, HELB will need to either enlist commercialbanks in student loans in some way (for example, financing the final year of a student'sdegree program), or else tap financial markets itself and begin to function as a FinancialIntermediary. In the latter case HELB would be, for the first time ever, onlending high-costfunds. HELB could follow this option sustainably only if its average weighted cost of funds(including cost-free funds provided by GoK) were less than the sum of its average returnderived from low-yielding student loans (taking into account not only the interest rate butalso the repayment performance) and higher-yielding financial market investments, andHELB's administrative expenses. In order to consider such issues, HELB should prepare anumber of alternative scenarios for its sources and applications of funds.

Appendix DPage 1 of 2

Accounting and Audit Experience

Submission of audited project financial statements lagged behind the submission duedates throughout the life of the project, as reflected in the table below. In addition, mostproject audit reports have been qualified, an indication of deficiencies in the ability of theimplementing ministry to maintain records and accounts adequate to reflect the operations,resources and expenditures in respect of the project. Response to audit queries by theimplementing ministry has also been less than satisfactory, as in most cases follow up actionshave been prompted by the Bank.

Table: UIP Audit Reports Submitted to IDA

Fiscal Due date Date Currency of Auditor Type of RemarksYear Submitted Accounts Report

1991/92 12/31/92 SDR Githongo PA1992/93 12/31/93 March 1995 US$ C & AG SA Unqualified1992/93 12/31/93 April 1994 SDR Githongo PA Qualified1993/94 12/31/94 July 1995 US$ C & AG SA Unqualified1993/94 12/31/94 June 1995 SDR Githongo PA/SOE Qualified1994/95 12/31/95 March 1996 US$ Githongo PA/SOE Qualified1994/95 12/31/95 05/07/96 US$ C & AG SA Unqualified1995/96 12/31/96 03/18/97 US$ C & AG SA Qualified1995/96 12/31/96 03/18/97 KC & AG PA Qualified1995/96 12/31/96 04/11/97 KC & AG SOE Qualified1996/97 12/31/97 04/28/98 US$ C & AG SA Unqualified1996/97 12/31/97 05/1198 KC & AG PA Qualified1997/98 12/31/98 06/17/99 K C & AG PA Qualified1997/98 12/31/98 06/14/99 US$ C & AG SA Qualified1997/98 12/31/98 Pending K£ C & AG SOE

Project Account and Special Account audit reports for fiscal year ended June 30, 1998contain unresolved audit queries. The ministry's attempt to address the issues during andafter the audit has been less than satisfactory, and the mission recommends that theoutstanding audit issues be resolved, to the satisfaction of the Bank, not later than September30, 1999. SOE audit report for fiscal year ended June 30, 1998 is still pending, and themission recommends that this report be finalized and submitted to the Bank not later thanSeptember 30, 1999.

Audit reports for fiscal year ended June 30, 1999 are due on December 31, 1999, andthe mission urges the implementing ministry to aim at submitting the audited financialstatements by the due date. The last audited project financial statements under this project,for fiscal year ending June 30, 2000, will cover disbursements made during the grace periodto August 31,1999. These reports should be submitted to the Bank not later than December31, 2000.

Appendix DPage 2 of 2

It is noted that universities, as beneficiary institutions and participating implementingagencies have not been routinely submitting their audited financial statements ascommunicated to CHE in April 1995. Financial viability of the universities was vital to thesuccess of the project; and one of the objectives of the project was to improve theinstitutional capability of the institutions, particularly in financial management.

The borrower did not submit separate project audit reports for the PTTCs component asagreed during the Mid Term Review mission The purpose of requiring separate auditedfinancial statements was to enable the Bank to confirm that GoK expenditures for the sevenPTTCs have been consistent with commitments made to the Bank regarding payment ofEducation VI pending bills. A schedule presented to the Bank in respect of direct paymentsmade pursuant to the government's undertaking shows that a total of KES 296,613,165.45was paid by the GoK between 1996 and June 1999. In the absence of separate audited projectfinancial statements for Part "C" it is not possible to confirm whether the governmentfulfilled its commitment.

Appendix EPage 1 of 7

TABLE PT2

QNWERSmES INVESTMENT PROJECT .PROCU MEENr OF EQUPMENr. UBRARY BOOKS & SUPPUJES. VEHICLES ANO COMPU TERS:

1. PERFORMED CONTRACTS

1 - 2 3 4 5 S1 ~~~~~~~AMOUNT

TENDER SUPPLIER B8D US$ K.SHS. DISaURSED________________ ___________CURRENCY EQUIVALENT EQUIVALENT IN US$

UBRARY SOOKS |1. SMI Overseas StgE 1,0t2,143.31 1,687,87.12 58,833,866.32 1,687,887.12

20 1 OSCILLOSCOPES | . Joh Achelis & Sohne DM 630,11S.20 345,505.25 17.730.937.64 345,505.25

21 I (A). J.Y 148.248,400 64,;21,731.40VEHICLES I1. Lonhro motors (B). J.Y 41'.203.100+ 2,841,382.61 1.332,116.02

Ura 1,400,000,000 56.367,098.29

1. 8aker and Taylor lus S 1,440,974.51 T 1,440,974.51 61,172,606.60 886,549.65

-22 2. B.H. Slackwed Stg.E 208,831.46 347;416.98 14,2C6,511.86 212,923:94BOCKS I_________ ________ _____

Stg.0 37,544.37 .. ,3. Fabrications & Sales US S 127,847.27 192,079.79 8.069,204.40 125,892.'31

IKShs.93.750-00 _

4. Research Periodicals uss 668,677.34 668,677.84 28.355,283.B0 526,900.45

S. SMI Overseas Ltd IStgE 59,538.00 95,503.11 4,050,286.80 22.164.15

23 L_ I_| -MICROSCOPES 1. Jencons Sdlentific (a) Stg 830,791.97 134.765.64T 5.500,714.58 134,765.64

2. Joh Achelis & Sohne OM 31,164.04 20,679.90 876,931.15 20,79.90

3. Leica Microscopie IUSS 356,750.94 j 356.750.94 15,128.023.47 | 356.750.94

4. Agita GMBH SigE 73,547.00 122,580.57 | 5,003.299.04 122,680.57

1. Bibby Steriin SIg9 103.843.09 173.216.16| 7.355.046.35 1 173,216.1624~~~~~~~~~~~~~~~~~~~ i -0TI2411GLASSWARE 2. 3alton OP LUd. Stg.E 28.155.15 34,210.18 1.444,853.75 34,210.18

3. F& SAssociates Stg.£ 37,761.75 60,317.25 ! 2725,935.64 60.317.25

1 . Balton CP Ltd. Stg.£ 54,376.55 90,703.17 3.851,376.80 90,703.17

25CENTRIFUGES 2. Joh Achelis & Sonne DM 95,635.00 52.438.90 2,860.448.25 52,438.90ANO SHAKERS I__ I__ __ I __ _ _I

3. Lile Sciences Slg.5 14.34700 { 23.931.61 1,016,187.90 23,931.61cienL s1.z 177 0

Appendix EPage 2 of 7

1 2 3 4 5 6

TENDER SUPPUER BID US S K.SHS. AMOUNTCURRENCY EQUIVALENT EQUIVALENT DISBURSED

IN USSOM.83,334.00

26 1. Fuji (K) Ud. J.Y. 458.800.00 94,609.61 2.649,524.35 94,609.61PFfOTOGRAPHIC US 5 89S.00

EQUIPMENT1. Laborama SFR.16.938.00 12.783.90 577,746.70 12,7a3.90

27 _BALANCES 2. Baltan CP Ltd. Stc.E 74.081.30 123.571.81 5.247.022.80 123.571.8a

CHROMATOGRAPHS 1. S.M.M. Instruments US108,989.00 108,989.00 4,925.572.50 108,989.00AND _ _

EL1CTROPHORESIS2. F:sons Sdentific Ltd. Stg.' 11,044.74 17,930.17 81'0;323.55 17,930.17

3. Joh Achelis & Sohne GM 168.321 .78 92,294.33 4,853,221.90 92,294.33

29 [ 1 ,OCMESTIC 1. P & S Assoc5atas Stg.£ 99,326.00 165,681.40 6,435,051.70 t65.681.41JEQUIPMENT ._I

2. Adees & Co. USS 9.104.32 f ,104.32 411,454.27, 9,104.32

30 _SPECTROPHOTOMETERS 1. Fisons Saentific Stg. £ 54,607.00 91,087.57 3,792.931.00 91,G87.57

CALORIMETERS _

2. S.M.M. Instruments US S 86.034.00 86.034.00 3.825,407.00 86.034.00

3. Balton CP Ltd. Stg. £ 106,249.20 177,229.69 7,379,931.00 177,229.89

31 1. Tradezone Ltd. US 276,099.75 276.100.00 12.276.471.88 276.100.00ATOMIC ASSORPTCON | 7 2

iSPECTROPYOTOMETER . I 1AND FLAME 2. Balton CP Ltd. Sig. £ 158,179.75 126a53.21 | 10,986,959.00 263,853.21

PHOTOMETERS | _ _______

42 1. Skoda Export Co. uS s 997,351.00 997,351.00 65,669,978.18 997,351.00WORKSHOP HEATING (Lot 2 &3)

I EQllIPMENT jLOT 2 & 3

j43 _ ''NUCLEAR MAGNETiC Sherwood Export Hold. US5522.600 522,500.00 34.410,283.44 522,00.00RESONANCE (NMR) !_j________

44CARBON HYDROGEN 1. ExeterAnalcal Inc. US S199.560.00 199,560.00 11,652.188.66 199,560.00

NITROGEN (CHN)ELEMENTAL ANALYSERS

45 fXerox (K) Ltd. (Lot 1) us$ 1,061,118.00 1.061,118.00 69,668.678.04| 1,061,118.00PRINTING L REPROGRA.

PHIC EQUIPMENT I U $ I

2

Appendix EPage 3 of 7

. t .- . Z 3 4 5 6 _

TENDER SUPPUE BID US S K.SHS. MCURRENCY EQUIVALENT eQIUIVALENT cisD URSED

______________________________ -_______________ IN USS

48 1.Phywe Systeme CM. 4,852.617.74 2.a55.527.54 188.020.497.48 z2,855,27.54PH4YSiCS (ELECTRICITY, GMI6HILot t)MAGNETISM, ATOMIC &..._

NUCLEAR) 7.Geest Overseas L:d Slg£ 582.82 992.176.99 65,329.298.13 99Z17.99

EQUIPMENT (Lot 41 - _______

PHYSICS EQUIPMENT 1. saiton C? Ud. Stg_ 137,991.70 Z30.11798 12.286.091.08 230.117 98

(THERMODYNAMICS _ __ _._ :ANO SOUNCS)

2. PIywe Systems GM8H OM.25.894.75 17,476.S6 1,0z0,445.60 17,476.56

3 SEPU usS 31,958.00 ¶8.57-8.00 1,084,769.421 18,578.00

52 1. Salton CPLtd.(Lot4) STG 406.315.73 591,69s.6 45.543.930.18 691,690.2

LABORATORY HEATING

1. Balon C?. -t, Stg a 16807.t1 I 280,365.49 11,574,471.60 28038.6.49

APPUED PHlYSICS 5aUIFM£Nr |S rsgd.3.ntemadnal Sst 28.846.25 48.117.18 2,003.623.03 T tS.17.1S

56| ANALSi_R |1 Hon_ba France _ FRF.145.992. I 23.aas.13 | 1,225.719.64 | 23,886-13 j

I e5 CTR OOSS & __ _ _ _ _ _ _ _ _ _ _ _ ._ _ __ _ _ ___| _ __ I I| .H. MeTERS {_.

2. Iaiton C? ULz. S1g.5 86.809.79 144,803.65 5.029.695.,s5 144,803.65

65 1. ilaltan C° Ud.(Lt 1) SSTG -0 51,227 40 1,023,489.00 67,391.018.82 1.023.489.00

BI9LOG;CAL SC:E.NCE;EQUIPMENT

71 1. a kazineC4. nc. IUS S 3,830.035.85 3.sss.947.23 216.578,993.86 | 2059909.28

LIBRARY BOOKS Kst.s. 3.075.363.00 _

2. 9 & S Consaurn. Slq. _ 391.881.55 631,183.12 35,178.296.70 | 442952.49 i

3

Appendix EPage 4 of 7

1 2 3 4 5 6

TENOER SUPPULER BID US $ KSHS. AMOUNTCURRENCY EQUIVALENT EQUIVALENT OIN3URSES

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _iN U S $

72VSIHICLES TO HELS Mitsubish Corporation J.Yen 6,487,101.00 55,794.59 2.982.z40.00 55.794:59

73COMPUTERS TO HELS Kenya MicroComputers usS 399,704.00 399,704.00 26,318270.06 399,704.00

LCS 2 1. Maaiifa Computer US S 191,322.00 + 223,117.59 12,344,114.44 223,117.59COMPUTERS TO Ltd. Ksahs. 1,759.110.00

JKUAT

LC8 3 1; NCR (K) Ltd. US 5 97623.00 97,623.00 5,395,675.18 97,62.00COMPUTERS TO

KENYATTA UNIVERSITY

LC8 5 1. NCR (K) Ltd. US S 170,190.50 170,190.50 9,415,891.53 170.190.50COMPUTERS TOMOI UNIVERSITY

IC8l4/96-97COMPUTERS TO EGERTO Kenya MicroComputers [ USS1,728,991.20 1,728,991.20 | 3,474,969.94 1.728,991.20

ics/5196-97i-COMPUTERS TOJKUAT Ashford Intematonal INC USS 1,135.876 t,13576.0U 61,409,204.95 1,.135876.00

(LOT 1') I__ _ _ _ I__ _ _ _ _ _ _ _ _

Maonfa Computers (Lot 2 USS 189,421 192,84Z.68 10,425,711.34 192,842.682 Ksh. 184.987 00

IC916/98-97 C .COMPUTERS TO KENYAT1 Digital/Copy Cat Ltd USS 1,636208,00 1,636.208.00 88.458,803.97 1,636,208.00

IC&87196-97 ~- l-~

OMPUTERS TO MASENO|Kenya MicroComputers | U 2.591,916.90| 2.591,916.90 140.127,580.94 2.591,916.90

ICB18196-97 --COMPUTERS TO MOI Ashford International INC USS 1.884,436.00 1,S84,436.00 101,878,828.79 1,884;436.00

iC8&9/96.97COMPUTERS TO UON The Copy Cat Ltd (Lot 2) T USS 1,368,91Z00 1,368.912.00 7 .007,90o.12 1,366.912.00

The Copy Cat Ud (Lot 3) USS 5-9,669.00 549.669.00 29,716,920.04 549,6690

!TOTAL | 3S.867,672.13 11,913.766,646.30 1 31,373,921.73

4

Appendix EPage 5 of 7

2. CONTRACTS DECLINED-, CANCELLED AND WITHDRAWN

TENDER SUPPLIER BIDKS-H-S.US$ REMARKS

Oscilloscopes . A.NS Export StgP 175.946.40 11,969,387.27 293,488.S7. Contract withdrawn

2. John Laing [nter -Kt7gP 8,776.94 597,082.93 1`4,080.48 Contract cancelled

Microscopes . A.N.S Export Ltd. (a) US$ 664,625.l10 2 -T8.181,562.22 6~64,625.10. Conmtracwithdrawn(b)USS 3,738.8 3.550,943.76 83,738.80 Contract withdrawn

24 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Glassware I. A.NS. Export -Ltd. USS 31,328.95 1,415,858.64 31,328.975 -Contract with~drawn

Ccntrifuges & I. Mangt Agencies KShs.6,865,696.00 6.865.696.00 151,918.45, Contract cancelledShakers I _ _ _ __ _ _

2. Alfavet F___ 30,273,27 ___ 254,147.10 5,623.55 Contract cancelled

photographic 1.TaeZn td. 2sP.2.246.25 1.516,880.20 37,07.59 Contract withdrawn

Balances ,j . TFrade Zone Ltd., DM. 157,009.38 f ~4,527,051.26 100,I70.85 Contract withdrawn

2. l4ospital Engineering DM. 1,065.00 I 30,4333.23 673.4 Contact cancelled

Chromatographs & I. T.MB. international .~StgP 555,962.10 39f762 5927,376.31 Contract withdrawnElectrophoresis -

Domestic 1. T.M.. I__mtioa_ tgP 45,38 _2 IT0,286,l105 2T 242,265.42 Contract withdrawnEquipment______ ____

2. Kenya Kochlightt Ltd. US$ 67,78 1.00 3,063.247.-35-i 67,781.01 Contract witltdrawn

r301 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Spectrophoromcter I. T-rade Zone Ltd. USS 1.293,66 1.73 57,521,264.00 1,293.66 1.75 Contract withdrawn

Atomic Absorption 1. Multi-line Ltd. StgP 41,493.20 2,882.063.73 64,818.06 Contract cancelledSpectrophotometers

& Flame Photometer___ __ ___

Phsics Equipment 1. Muti-line Ind. Ltd. Sg 1151 ,7,7.5 47.53733 Contract wifthdrawn

(Thermnodvma.oct I ________ ________Sc Sound) 4.Joh Achelis & Sohne USS 17,995.20 1,050,728.94 17.995,1 0 __tract_withdrawn _

Applied Physics 1. T7MB. Intemnational LYSS-6 601,80.25 23.762.410.25 601.809.25 Contract withdrawn

Analysers. elctErodes I. .M.B. Intemnational StgP 6,106.77 424,168.31 9,539.61 Contract withdrawn& P.R. Meters ___ _____

_________________ 2. Apricot Apple USS4,105.70 182,555.60 4,105.70 Contract=canelled

3. S.E.P.U. StgP 54,058.00 3,754,798.39 8--4-,446.00 -Co-ntract withdrawnLCBD I

computers to Egerton , I. computer Appl. Ltd. US$ 99,108.00 5,477.639. 99,108.00 Contract cancelled

LCB 4__Computers to Maseno T . Computer AppI. Ltd. USS$ 230,296.004 +344843 242,290.45 Contr act cancelled

____ ____ ____ ____ T__ ____ ____ ____ ___ KShs. 663600.00 r_ _ _ _ _ _ _ _

LCB 6 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

computera to CHE I. Computer AppI. Ltd. US55 185,75~9.00 + f 0.967.916.13 196,435.58 Contract cancelledI ~~~~~~KShs. 590,688.00 _________

TOTAL 28800.4 5,281.925,3) ___________

Appendix EPage 6 of 7

TABLE PT4

3. REPORT ON TENDERS LEFT OUT

A. TENDERS ADVERTISEDEVALUATEDADJUDICATED,SENT TO THE BANK FOR 'NO- OBJECTION' TO AWARD BUTNOT APPROVED

Value in USS

1. Tender No. EDU/MDA2JIP/42197-98Workshop Heating Equipment Lot 1 3,046,921.00

2. Tender No. EDUCflAAffP52I97-98Laboramtoy Heating Equipment Lot 2,3 & 5 867,525.59

3. Tender No. EDUC=AIPU/65/97-98Biological Science Equipment Lot 2 & 4- 1,937,906.00

B. TENDEZSX DVERTISED, BCT CANCELLED DUE TO LACKOF FUNDS INmTHE CREDIT

1. Tender No. EDUC/DAJTIPI49/95-96Physics Equipment (Optics & Sound) 600,000.00

2. Tender No. EDUCIDA/U2l55/95-96Forestry Equipinent 640,000.00

3. Tender No. EDUC/(A/UM/51/94-95Mechanical Engineering Equipment 700,000.00

4. Tender No. EDUCIIAAJ1P/S4/94-95Physics Equipment (X_Ray Diffintometers, X-Ray Flouresence Angleand X_Ray Scaltering) 300,000.00

5. Tender No. EDUC /IDAJU/66194.95Biological Equipment 600,000.00

6. Tender No. EDUC/DA/JUIP/41194-95Workshop Equipment(Machine Tools, Ceramics & Textiles) 600,000.00

C. TENDERS PROCESSED AND SENT TO THE BANK FOR"NO-OBJECTION" TO ADVERTISE BUT NOT APPROVED

1. Tender No. EDUC/IDA/JUIPI46/94-95Audio Visual Equipment 650.000.00

Appendix EPage 7 of 7

2.Tender No. EDUCIDAIUI/ 67/94-95Elecuic and Electronic Equipment 870,000.00

3. Tender No. EDUTC/IAIJI/60/94-95Medical Equipment 900,000.00

4. TenderNo. EDUCIQDA/IP!61/94-95Medical Equipment 900,000.00

5. Tender No. EDUCIGDAUIP/62194-95Medical Equipment 400,000.00

6. Tender No. EDUC/IDAJIJP/5894 95Hydraulics and Environmental Equipmenr 870,000.00

7. Tender No. EDUCJDAJfTJ157/94-95Civil Engineerng Equinrment (Material Testing) 900,000.00

8. Tender No. EDUCIDAX2J/47194-95Workshop Hand and Power Tools 710,000.00

9. Tender-No. EDUCIDAIU2/70/94-95Boats 400,000.00

10. Tender No. EDUCIDAiJrP/59194-95Surveying,Geology r.awing and Model Stuctre 640.000.00

D. TENDER NOT GIVEN A "NO-OBJECTION" BY THE BANKDUE TO LACK OF TENIE

1. Tender No. EDUC'lDA/UIP/74/94-95Management Ti3formation System for C-E 400,000.00

2

Note concerning Map: The Map included in this report was prepared in 1991. At thattime, the Jomo Kenyatta University College of Agriculture and Technology (JKUCAT)was a constituent college of Kenyatta University. Subsequently, this college became afree-standing university, the Jomo Kenyatta University of Agriculture and Technology(JKUAT).

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