"In Kenya of course corruption is pervasive and has been for a long, long time ever since independence but it doesn't get much worse than taking money from a child I think," US ambassador Michael Ranneberger told the BBC.
In solidarity with other donors the US withheld $7 million intended for a programme in the Ministry of Education.
Britain held back £10 million ($15 million).
This action was taken after an audit showed that roughly $1m had disappeared from the Education Ministry in just one month.
The donors are in a dilemma. On the one hand they do not want to play politics with the education of Kenya's children.
The next election could be fraught with all kinds of difficulties and violence if we are not careful
On the other hand they cannot stand by while their funds are being looted.
"In terms of corruption we have moved backwards," campaigner John Githongo told the BBC.
"The type of corruption we see today was last seen in the 1990s in Kenya… it is cold-hearted and rapacious."
Mr Githongo was President Kibaki's anti-corruption chief after he came to power in 2002 with an election promise of stamping out the vice.
But after Mr Githongo exposed high-level looting, he fled the country saying his life was in danger.
Now back in Kenya, Mr Githongo sounds worried about where the country is headed – especially after the post-election violence of two years ago.
"There are those who say this corruption is the price of peace after what happened in 2007 and 2008," he said. "But I think for the poor it is increasingly becoming a price that is too high to pay.
"That could mean that the next election could be fraught with all kinds of difficulties and violence if we are not careful."
Another corruption scandal that has exposed the rot in the coalition government was the discovery that during an effort to subsidise the staple crop, maize, more than $26 million were siphoned off.
This is not a country where ministers take political responsibility over corruption scandals.
Both the education minister, Samuel Ongeri, and agriculture minister, William Ruto, are staying put.
President Mwai Kibaki and Prime Minister Raila Odinga fell out over whether or not the PM had the power to suspend the two ministers.
Kenya is polarised by conflicting loyalties to the two leaders
But many Kenyans view the whole saga as a dirty game of power politics.
"It is turning into political football where my aim is not to stop you from corruption but to make you look bad so that I gain political mileage out of it and vice versa," said Job Ogonda, the head of Transparency International in Kenya.
Whilst Kenyans watched the referee-less political football match, some decided to publicly show their anger.
A demonstration through the streets of Nairobi last week was small – there were more journalists than marchers.
But the fact that the police gave the go-ahead for the protest and the tear gas canisters were kept for another day, was for some a small step forward.
The test will come if the street protests grow. Would the tear gas be back?
Rallies against corruption have drawn as many reporters as protesters
Most analysts believe the current political spat between the rival camps is temporary.
The prospect of the coalition collapsing is a dangerous one especially as none of the reforms intended to prevent a repeat of the last chaotic elections have been fully carried out.
A new constitution is still work in progress, electoral reform has been slow, the overhaul of the judiciary is yet to be done and, perhaps most importantly, no-one has been punished for the more than 1,300 killings.
Some feel that greed, will at least for now, prevent a collapse of the coalition which had been formed as part of a peace deal to end the violence.
"I think that ultimately the coalition will fragment ahead of the next election," said John Githongo. "That seems to be inevitable, it is just a matter of time."