Officials at the ministries of Education and Health embezzled Sh4.2 billion, a forensic audit by Treasury has revealed, in what is emerging as one of the biggest cases of fraud by civil servants.

The money which was meant for the Kenya Education Support Programme (KESSP) was misappropriated by about 100 officials at the Education ministry in collaboration with private contractors. The bulk of the cash did not reach target schools.

The audit says the Ministry of Medical Services failed to transfer funds to the Kenya Medical Supplies Agency (Kemsa) for buying drugs in the financial year 2007/2008, creating a Sh1.6 billion discrepancy.

The forensic trail revealed an attempt to cover up through manipulation of books with Sh2.27 billion not reconcilable with the Ministry of Education’s cash books or bank balances.

The report handed to the CID reveals that at least Sh1.9 billion did not reach intended schools; Sh3.1 million was deposited in bank accounts for schools that did not exist while Sh8.1 million imprest could not be accounted for.

“We have details of the schools that were to receive the funds as tabulated by the Ministry of Education but did not receive the funds as reflected in the bank payment schedules,” said Finance minister Uhuru Kenyatta when releasing the report on Monday. The results come out after reports estimated that the Education ministry lost about Sh8.2 billion that saw Britain cut Sh11.2 billion aid to the programme last year.

It is set to revive debate over the reinstatement of former Education PS Prof Karega Mutahi, now at the Ministry of Local Government.

“The purpose of this investigation was not just to prosecute the culprits but to seek ways of recovering the money lost so that it is channelled towards its intended course,” said Mr Kenyatta.

Education minister Sam Ongeri said: “We have learnt a great lesson from this experience and from this we shall endeavour to put all the disbursements on our websites to enhance transparency.”

The money lost is an equivalent of what was allocated to the Ministry of Special Programmes for resettlement of the last batch of internally displaced people (IDPs) in the 2011/12 Budget or what is required to employ the 18,000 intern teachers to ease a biting shortage. In the 2010/2011 financial year, Education ministry returned Sh23.5 billion to the Treasury.

The release of the report is in line with Kenya’s resolve to fight graft, Mr Kenyatta said. Kenya dropped to position 154 out of 178 countries in Transparency International’s 2010 corruption perceptions index.