Controller of Budget warns over use of manual payroll in counties

Controller of Budget Margaret Nyakang’o when she appeared before the Senate Standing Committee Finance and Budget and Council of Governors to deliberate on the prompt payment bill at the County Hall on March 30, 2023. [Elvis Ogina, Standard]

County governments continue to process personal emoluments through manual payrolls against advice from the Controller of Budget.

Government policy recommends such money be processed through the Personnel and Payroll Database (IPPD) system.

Analysis by the Controller of Budget for the first nine months of the Financial Year 2022/23 indicates that six counties in Nyanza processed close to Sh1 billion in Personal Emoluments (PE) costs through manual payrolls.

Controller of Budget Margaret Nyakang’o said counties are advised to fast-track the acquisition of Unified Personnel Numbers for their staff and have county public service boards regulate staff engagement on contract and casual workers as provided under Section 74 of the County Governments Act 2012.

“The report will be helpful to the Legislature, the Executive, and the public in creating awareness on budget implementation by each county government and enhancing effective management of public resources,” said Dr Nyakang’o.

The report reads; “The manual payroll is prone to abuse and may lead to loss of public funds where there is a lack of proper controls.”

This challenge has been attributed to delays in allocation of Unified Payroll Numbers (UPN) to staff, staff designations that do not conform to scheme of service and the IPPD system, and employment of staff on short-term contracts of less than six months, thereby limiting their inclusion in the IPPD system.

Homa Bay County had the highest amount of Sh634.12 million while Kisii had Sh39.86 million. Kisumu County processed Sh316.86 million by end of March 2023.

Siaya County had the second-highest amount processed through manual payroll at Sh477.34 million. Migori had Sh169.59 million.

The report issued in May 2023 indicates recurrent expenditure of the 47 devolved units comprised Sh135.85 billion (64.7 per cent) on Personnel Emoluments and Sh74.09 billion (35.3 per cent) on Operations and Maintenance (O&M) expenditure.

Dr Nyakango also pointed out delay in submission of financial returns from Fund Administrators in line with the requirement of Section 168 of the PFM Act, 2012.

Section 110 of the PFM Act, 2012 establishes the Emergency Fund, while Section 116 of the PFM Act, 2012 allows County Governments to establish other public funds with approval from the County Executive Committee and the County Assembly

Homa Bay had allocated Sh624.78 million to county-established funds constituting 6.2 per cent of the overall budget. The funds include bursaries, car loans, and mortgage and county emergency funds.

Quarterly returns were received from the fund administrators in line with the requirement of Section 168 of the PFM Act, 2012.

Kisumu allocated Sh520 million to county-established funds constituting 4.3 per cent of overall budget.

During the reporting period, the Office of the Controller of Budget (OCoB) did not receive quarterly financial returns from the Fund Administrators of three funds; Kisumu County Social Health Insurance Fund Sh100 million. Kisumu Enterprises Fund Sh50 million and Sh35 million for Kisumu County Rural Electrification and Renewable Energy Corp. The county had an actual expenditure of Sh81.2 million by March 31.

The OCoB did not receive quarterly financial returns from the Nyamira Fund Administrators of the three established funds; Education Sh122 million, Car Mortgage and Loans Sh70 million, and Emergency Relief Sh5 million.

The Controller of Budget also noted the diversion of funds by the County Treasury and poor budgeting practice in Nyamira County, Budget Allocation, and Absorption Rate by Departments where the County incurred expenditure over approved exchequer issues in several departments.

Kisii has allocated Sh390 million to county-established funds constituting 3.5 percent of the County’s overall budget. They include Bursaries, Emergency Funds and Car Loans, and Mortgages. By March 31, the County had received the actual money from the exchequer due to budgeting issues.  

Governor James Orengo’s Siaya County has allocated Sh285.21 million to county-established funds in the Financial Year 2022/23, constituting 3.3 percent of the County’s overall budget.

No quarterly financial returns from the Fund Administrators were received on the County Executive and Assembly car loans and house mortgage; Sh178 million and Sh96 million respectively.