Nairobi county staff will no longer have to contend with salary delays after City Hall and Cooperative Bank signed a Memorandum of Understanding (MoU).
According to the agreement Cooperative Bank will provide payroll support services on need basis following persistent salary remittance delay by the Treasury.
This means that in case of salary delay, City Hall can borrow up to Sh160 million monthly from the bank to pay workers at no extra cost. The funds will then be reimbursed immediately they are released by the exchequer.
According to a report tabled before the assembly on Tuesday, the county opted to sign the MoU with the bank due to delay in payment of salaries for July, which was occasioned by delay to upload of the budget for the 2021/2022 financial year.
The report of the Finance and Budget committee notes that the MoU between the county government and Cooperative Bank will be in force for 24 months and shall renew automatically unless terminated by either parties.
The report was adopted by the House.
“…the agreement is meant to ensure timely payment of salaries to public and state officers serving within the rank and file of the county government. In line with the signed documents, authority of the county assembly is required before rolling out the memorandum,” stated the report in part.
According to the report the money borrowed by City Hall will be repaid monthly and the bank shall charge a 0.5 per cent late payment fee for any amounts that shall remain outstanding after 30 days from the due date of settlement.
The bank will facilitate the opening of the salary processing account in the nearest county headquarters which will be designated as the domicile branch for the account.
It will then collect and verify payroll details submitted by the county government as well as receive payroll and approvals from the CEC Finance, together with a confirmation that a request for transfer of funds has been requested from the Central Bank of Kenya (CBK).
Moreover, the bank will also receive the payment from the CEC and submit the same to the payroll account.
After necessary confirmations the bank will process the employees’ salaries by debiting the designated payroll account and crediting the employees accounts as provided in the payroll within three days.
Cooperative Bank will be obligated to share the payment report with CEC Finance and there after submit monthly statement to the county detailing total transactions received and processed for the month.
On the other hand City Hall shall ensure settlement of the salary processing account by the 10th day of the subsequent month and no salary/payroll shall be processed before settlement of the last account to the bank.
The county government shall however, seek exceptional support through a formal request for the start of financial year exchequer disbursement delays especially in July and August when IFMIS is usually locked for new budget loading.
The agreement further prohibits City Hall from signing an MoU with any other bank for the processing of its payroll management for the period stated.
“City Hall should inform the bank within 7 days of any actual or threatened stoppage of funds by the Controller of Budget, Parliament or CBK or of any other threat or material changes that will affect the actualiSation of the operations of this agreement,” reads the agreement in part.