Treasury Cabinet Secretary Henry Rotich has said no funds have been lost in the debacle that saw national government programmes appear in county budgets.
Instead, the CS explained that 11 counties used the incorrect descriptions for certain budget items.
Mr Rotich said the counties used national government descriptions for some items in their budgets, which subsequently appeared in printouts from the Integrated Financial Management Information Systems (IFMIS).
"We wish to confirm that county governments that submitted the said annex with national government descriptions did not budget or spend funds on the subject national government programmes and sub-programmes," Rotich said.
He added: "Further, we note that the audit reports of the affected county governments did not contain findings of misappropriation of funds based on the wrongly described programmes and sub-programmes".
The CS asked 11 governors whose budgets captured national government descriptions instead of their approved ones to re-submit them to Treasury for validation.
The county chiefs are then expected to re-submit the validated budget printouts to the Auditor General Edward Ouko for verification and subsequently re-submit the same to the Senate.
Treasury's statement came following days of sustained pressure from the affected governors, who demanded a public apology and resignation of Integrated Financial Management Information Systems (IFMIS) director, Stanley Kamanguya over the mix up, and an explanation from Rotich.
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Yesterday, the CS acknowledged that in some counties budget execution reports had erroneous descriptions reflecting typical national government programmes and sub-programmes rather than those that the counties actually budgeted and spent funds against.
Rotich, however, defended IFMIS, saying it enabled counties to operate more efficiently and transparently.
“As stipulated in the Public Finance Management (PFM) Act, county treasuries are responsible for preparation of comprehensive and accurate statutory financial reports in accordance with the prescribed standards,” he said.
However, the CS's statement did not address concerns raised by governors on why it took his office too long to resolve the matter even after Laikipia county raised the same issue in January last year.
Instead, Rotich said generally, the governors prepared annual financial statements in accordance with the standard template prescribed by the Public Sector Accounting Standards Board.
“The ministry wishes to clarify that as per the standard template, the primary statements that includes the Statement of Receipts and Payments, Statement of Assets and Liabilities and Cash Flow Statements were prepared per budget line items (also referred to as Economic Items), in adherence to the prescribed format,” he said.
“In total, 14 county governments used the correct programmes and sub-programmes descriptions while 11 county governments used national government descriptions,” stated the CS.
Rotich said all expenditure reports were configured in the IFMIS and the counties required to generate the same from the system, review, verify and confirm the accuracy of the reports before submission for audit.
“It has since been noted that some counties generated the programme and sub- programme reports with national government descriptions and submitted for audit without adequate review to confirm whether the programmes and sub-programmes related to their entities,” said the CS.
The CS said the affected counties did not spend money on items meant to be funded by the national government.
"We wish to confirm that the county governments that submitted the said annex with national government descriptions did not budget or spend funds on the subject national government programmes and sub-programmes,” he wrote.
He dismissed allegations by some governors that they were not properly guided by the ministry.
“Contrary to allegations by some counties, we wish to state that the national Treasury provides advice and technical assistance to all county governments without bias,” he said.
The Senate Committee on County Public Accounts and Investment (PAIC), currently scrutinising audit reports in line with their mandate, flagged out the anomaly while scrutinising Kiambu County Executive audit report.
He promised to cooperate with the multi-stakeholder technical team drawn from Controller of Budget, The National Treasury, Council of Governors and Auditor General Edward Ouko to review the matter.
“The National Treasury shall provide the necessary input,” he said.
Meanwhile Auditor General Edward Ouko has defended his audit reports saying they were correct and professionally done.
"We can confirm that our audit reports are subjected to internal quality control and assurance checks and adhere to international standards of auditing, which we religiously follow,” he said.
He was responding to the ongoing debate on some Sh10 billion national budget items such as State House spending, appearing in county budgets.
Ouko invited individuals with specific complaints about manipulated county reports by any member of his team to present their case. This follows claims by some governors that some auditors demanded kickbacks.
“We are aware that certain allegations have been made against our staff. We take these allegations with concern and wish to state that the Office of the Auditor-General takes them seriously. Our channels of complaints are open to receive details to enable us institute relevant actions," he said.
[Additional reporting by Moses Michira]