Funding crisis creates havoc in counties

Council of Governors led by Chairperson Ann Waiguru with National Treasury CS Njuguna Ndungu addressing the media in Nairobi on the disbursement of County allocation funds on May 2,  2023. [Boniface Okendo, Standard]

Several counties are struggling to manage their debts and keep operations running seamlessly due to delays by the National Treasury in releasing funds.

While some are grappling with debts they inherited from the defunct local governments, others have accumulated new pending bills in the last one year.

Officials in a number of counties claimed that they are facing the prospects of paralysis in operations as some service providers and contractors have threatened to withdraw their services. They claimed they last received part of the disbursements in December and used a huge bulk of their allocations to offset part of their debts.

In the Coast, operations have slowed down due to the delayed disbursement of funds from the national governments.

So bad is the situation that Taita Taveta County has already announced plans to retrench workers on grounds that it cannot sustain its wage bill.

In Mombasa, the county received over Sh600 million for December last month, and most of the money was used to pay salaries.

County secretary Faruk Jeizan noted that the delayed release of funds from the national government affected procurement and other commitments such as paying pending bills.

He said, at times, the county government is forced to take credit to settle salaries and sustain its operations following delays in getting money from the exchequer.

In Kwale, executive committee member for Finance Bakari Sebe said the county has not received three months’ arrears of the equitable share amounting to Sh2 billion and was struggling to sustain service delivery.

He said the county government was waiting for the release of grants amounting to Sh2.3 billion for this financial year and Sh1.166 billion royalties from mining.

According to Sebe, the county last got Sh686 million in equitable revenue share for December but has not received funds from the exchequer for the last three months.

“The implication is that we have to have plans to sustain critical services like procurement of drugs, issuance of bursaries, and paying salaries to maintain our operations,” he said.

Sebe, however, said they were expecting disbursement of the equitable share of revenue and the conditional grants soon.

Taita-Taveta Governor Andrew Mwadime blamed the county’s financial woes and slow pace of development on the national government’s failure to disburse the equitable share of revenue on time.

He noted the piecemeal disbursement has badly affected service delivery and operations as well as servicing of pending bills in key sectors like health, water, education, and agriculture.

Mwadime disclosed that his administration received a Sh403 million equitable share of revenue from the exchequer in December last year out of which Sh320 went to staff salaries.

“Locals cannot enjoy the fruits of devolution because projects geared towards transforming their lives like health, water, education, and agriculture have stalled,” he protested.

The delay in disbursement of funds comes at a time when the county is still grappling with a persistent shortage of drugs in public hospitals, which has crippled operations.

In Taveta Sub County, residents told the governor that the sub-county hospital has been running without drugs, forcing them to buy from expensive private hospitals.

“The sub-county hospital lacks essential drugs and needles for injection. We are buying the stuff outside,” Pascal Kipande, a resident, told the governor who toured Taveta yesterday.

In the Mount Kenya region, counties are crafting formulas to keep their operations running amid a biting cash crunch.

Meru and Nyeri counties have laid out plans to clear debts from the last financial year to cater to ongoing projects and pending bills.

Based on their medium-term debt management plans, Nyeri and Meru revealed they had up to Sh911 million and Sh1.3 billion in debt respectively, inherited from the defunct local authorities and the pending bills.

In the Nyeri medium term debt management plan, the county inherited debt comprising Sh592 million from defunct local authorities while pending bills accruing from the financial year 2022/2023 were Sh29 million.

The plan also noted that Sh298 million was towards ongoing projects rolling over from the same period.

Nyeri Finance CEC Robert Thuo noted that the debts arising from the ongoing projects rolled over to the current financial year have already been appropriated in the supplementary budget.

“Most of the pending bills have been settled as the first charge per the law. Commitments should, therefore, be well planned to avoid the risk of becoming potential debts in the future,” he noted in the report.

In Meru, Governor Kawira Mwangaza’s administration said her government had managed to pay part of the Sh1.9 billion debts they inherited from the previous administration, and have committed to settling the arrears in the next two fiscal years. 

In Nyanza, all six counties are struggling to maintain seamless operations and settle their debts.

Kisumu Deputy Governor Dr Mathews Owili linked the inconsistencies by the Treasury to several court cases pitting the devolved unit against its contractors and suppliers.

He says the cases are costing the county government a lot of money in legal fees.

“The implications are that counties have to negotiate for short-term debt from commercial banks to meet cashflow requirements. Beyond that, worse effects include litigation against county governments by contractors and other service providers,” he said.

According to the deputy governor, Kisumu currently owes its contractors up to Sh600 million in pending bills.

Paul Omollo, the chairman of the Lake Contractors Association, that brought together about 174 contractors from counties around Lake Victoria, claims most contractors are unable to access loans in banks because counties are not paying them on time.

“Usually, once you get a project then you look for the financier which in this case is the bank. The banks have been shying away from financing contractors who the counties have engaged because they have noticed the delayed payment of county government projects,” Omollo said.

Similarly, Migori County Contractors Association Secretary General Godness Oucho said though no project has been abandoned in the county, some had been slowed down for non-payment.

“No one has abandoned sites, it is just that work is slowed down due to non-payment,” Oucho said.

He says the contractors in Migori County are owed about Sh400 million.

[Lydia Nyawira, Phares Mutembei, Anne Atieno, Clinton Ambujo, Patrick Beja, Renson Mnyamwezi and Marion Kithii]