Why local authorities may miss out on LATF money

By John Oywa and Peter Opiyo

Misuse of taxpayers’ money at the grassroots is getting worse even as Kenyans await devolution of Government services to the counties.

This has raised concern over the readiness of counties to manage their budgets professionally and use devolved public funds efficiently.

While misappropriation of Constituency Development Fund (CDF) cash is well documented, councils countrywide have also been misusing money allocated them under the Local Authorities Transfer Fund (LATF) on a grand scale.

All indications are that the 175 civic bodies are steadily sinking into an abyss of corruption and indebtedness. "The chief officers of all those councils that were left out know why they have not been allocated funds. They have to clear with the statutory bodies and provide us a clearance letter before we release the money," warned Local Government Permanent Secretary Prof Karega Mutahi.

However, by the end of last week, none of the councils were on course to meet the March 31 deadline, and now stand to lose their entire allocation this year.

Yesterday, the National Taxpayers Association (NTA) revealed up to Sh444 million in CDF and LATF money has been lost in 28 constituencies and five local authorities, but warned this is but a tip of the iceberg.

It is enough money to train 2,400 medical personnel at the Kenya Medical Training College for a diploma course over the requisite three years. The full cost of training one student at the college is about Sh180, 000.

Under review

Constituencies misused Sh425 million and five local authorities Sh18.9 million. Ugenya Constituency was the worst user of CDF money in the financial year 2007-2008, wasting Sh10.8 million of the Sh20.7 million awarded it during the year under review. This represents 53 per cent of the amount awarded.

CDF Board’s Head of Corporate Communications, Mr George Muriuli said they were yet to receive the report and could only comment after perusing. But the Chairman of the Parliamentary Committee on CDF, Turkana Central MP, Ekwee Ethuro dismissed the findings as ‘gross exaggeration’, saying only an audit by the Controller and Auditor General could provide the real picture. "The Controller and Auditor General’s report is the official one. This [NTA] is a community auditing which has community biases," said Mr Ethuro.

Civic bodies have received a whopping Sh69 billion from the Government since the establishment of the Local Authority Transfer Fund (LATF) in 1999, but have little to show for it.

Instead, they are suffocating under massive debts totalling over Sh38 billion, according to official government records. Analysis of the fiscal transfers between Treasury and the councils, show that over 50 per cent of LATF is unaccounted for.

Most projects funded by LATF have either been shoddily done at inflated costs or stalled.

Some of the projects said to cost millions of shillings, only exist in documents, according to investigations by The Standard.

A member of the Parliamentary Committee on Local Authorities and Funds Accounts, Mr Polyns Ochieng’ said LATF was one of the most abused devolved kitties in the country.

"The LATF is bigger than the Constituency Development Fund, yet its effect has not been felt. We have visited many councils and the story is the same: mismanagement and misallocation of funds," said Mr Ochieng, who is the MP for Nyakach.

"In some cases LATF allocations don’t reach the intended projects. Some projects have received funding for 10 consecutive years, but are still incomplete," he added.

Many of the councils cannot service their debts and workers often miss salaries for several months. By 2009, the councils had not remitted Sh5.6 billion statutory fees deducted from workers wages.

Few Kenyans bother to interrogate their council’s services, expenditure and choice of projects, giving blank cheques to corrupt councillors and chief officers, a survey shows.

With the Ministry of Local tying LATF allocations to sound financial management, many local authorities have missed out on the 2010/2011 funding, forcing them to craft new methods of generating revenues, like introducing new taxes or increasing existing rates to fill shortfalls.

The City Council of Nairobi (CCN) nearly missed its Sh2.2 billion out of the Sh12 billion LATF allocation this financial year, while Kisumu had its Sh250.82 million withheld.

There was no explanation from Treasury why it lifted the penalty slapped on CCN by the LATF Advisory Committee for not paying its debts.

Nairobi Mayor George Aladwa had accused Treasury of blocking the money due to rivalry between the Party of National Unity and Orange Democratic Party.

The Ministry of Local Government, however, said it had penalised Nairobi for failing to pay its debts.

An official LATF report seen by The Standard indicates the outstanding debt by Local Authorities trebled from Sh13.6 billion to Sh37.9 billion by 2009. Nairobi alone had debts running into Sh32.4 billion, Mombasa Sh1.7 billion, Kitale Municipal Council Sh491.7 million while Eldoret and Nakuru Sh330.8 million and 308.4 million respectively, Kisumu Municipal Council Sh250.4 million and Kisii Municipal Council Sh135.9 million.

Even the much smaller Nyando County Council in Nyanza had an Sh77.92 million debt by June 2009.

Rising debt

"Closer examination, however, indicates that Sh5 billion of the increase in debt arises from the City Council of Nairobi, while the other councils showed a decrease of about 15 per cent," says the report.

The Nairobi City Council had petitioned the Government over its LATF allocation. "The debts are historical and have nothing to do with the team that I am heading. Some of the debts were inflated and fictitious, said the Town Clerk, Mr Phillip Kisia."

"We have developed good monitoring tools such as the Local Authority Service Delivery Action Plan (Lasdap), but many councils are still dogged by governance issues," said a senior manager at the Kenya local Government Reform Programme.

"Service delivery had improved in most councils but the expectations of the people have not been met," he added.

Most of the officers responsible for the LATF mess have not been surcharged as required by law.

NTA’s Communications Officer, Mr Davies Adieno said their investigations established that most Kenyans are ignorant of the financial management of their money, and thus some leaders take advantage of this to misuse the taxes. "We found out that some Kenyans are ignorant of how their taxes should be managed and some people have taken advantage to squander the money," said Adieno.

In the NTA report, Tinderet Constituency, represented by Mr Henry Kosgey, was rated the best with only Sh2.5 million of the Sh86.7 million disbursed. This represents three percent. The second best Constituency is Matuga, represented by Trade minister Chirau Ali Mwakwere, which recorded Sh731,370 in misused funds. This represents four percent of the Sh19 million disbursed.

Harun Mwau’s Kilome Constituency was rated the third best with only Sh2.4 million of the Sh49 million disbursed being misused.

CDF constitutes 2.5 per cent of the national Budget. Kenya Anti-Corruption Commission (KACC) Assistant Director (Preventive Services) Prof Jane Onsongo said the Commission has received numerous reports on allegations of corruption pointing out that Project Management Committees are poorly constituted and that projects are overpriced.

"KACC is investigating various cases of corruption in the CDF and LATF and four cases are currently pending in court," she said.

In 2006-2007 financial year, NTA said Sh252 million was misused in 17 constituencies reviewed. NTA is an NGO established in 2006 and is focusing on good governance and public funds accountability. It has so far released reports on the misuse of CDF funds for 68 constituencies.