Mismanagement to blame for huge debts in counties

Inability to meet revenue targets, reckless spending and irregular hiring of staff by governors has been blamed for debts amounting to billions of shillings accumulated by counties over the last four years.

A majority of the counties had been put on the spot over fiscal indiscipline by governors and members of the county assemblies, leading to mismanagement and wastage of public funds in their first county governments.

The devolved governments have also been accused of hiring staff against the law, resulting in unsustainable wage bill.

Controller of Budget Agnes Odhiambo attributed the problem to counties overestimating their revenue collections and then including them in their annual budgets and going ahead to procure yet they do not have the money.

“All counties are not meeting revenue targets yet when they prepare budgets, they budget as if they will collect all that money,” Ms Odhiambo said at a meeting with the Senate’s Finance and County Public Accounts and Investments committees.

AUDIT
Cumulatively, the county governments are reeling under a Sh100 billion debt in the form of unpaid bills.

Pending bills grew from Sh37.8 billion in 2014/15 financial year to Sh37.3 billion in 2015/16 to peak at Sh96.5 billion last June.

In Kisumu, Governor Anyang’ Nyong’o has set up a special task force on pending bills to look into Sh3 billion owed to service providers that did business with the previous regime.

Vihiga County government owes contractors and suppliers a sum of Sh826.3 million, adding up to the millions of shillings in debts that the devolved unit is grappling with more than four years after the start of devolution.

PROCUREMENT
Ms Odhiambo said counties have not been aligning their procurement plans with their cash flows and their budgets, resulting in backlog of payments.

Previous reports by Ms Odhiambo and Auditor-General Edward Ouko on the spending in the counties in the past four years have attributed the huge pending bills to failure by governors to effectively manage the procurement function.

Some counties, the reports have argued, are on a spree to award tenders even in situations where there is no guarantee of budgetary allocations.

Most of the devolved units have also failed to meet their revenue targets due to graft in the collection systems, leading to borrowing from banks at higher interests.

For instance, Nyeri County failed to meet its revenue target of Sh1 billion and only collected Sh643 million last year, according to the county reports.

EXPENDITURE

The case was the same in Kiambu County, which had planned to raise Sh3 billion but managed to collect Sh2 billion, representing 66 per cent of the revenue target.

The regional governments have also been on the spot over incessant expenditures on trips and allowances of its officials, figures which Mr Ouko says shot past the recommended expenditures.

She said counties need to have proper estimates of their revenues before preparation of budgets and align their procurement with the flow of cash.

Ms Odhiambo asked the Finance Committee to help keep check of the financial management in counties by scrutinising the reports she publishes regularly and organising meetings with her to get more information.

The Controller of Budget had initially wanted to be allowed to review budgets before they are approved but that was refused.

Now, it is only the Cabinet Secretary for Treasury who can stop the disbursement of money to counties because of persistent breaches of the Public Finance Management Act.