Controller of budget tells Senate committee counties owe Sh85b in pension

Controller of Budget Margaret Nyakang’o when she appeared before the Senate Standing committee on Finance and Budget payment of pending bills on March 30, 2023. [Elvis Ogina, Standard]

Controller of Budget (CoB) Margaret Nyakang’o has said county governments owe pension institutions Sh85.05 billion in outstanding pension scheme liabilities.

Dr Nyakang’o, who appeared before the Senate Public Investments and Special Funds Committee in Nairobi yesterday, noted that counties owe Lapfund Sh48.79 billion, LapTrust Sh32.95 billion while CPF is owed Sh3.91 billion as of March 31.

Appearing before the committee chaired by Vihiga Senator Godfrey Osotsi, the CoB said only 32 counties had submitted data on outstanding pension contributions. The remaining 15 had not given their submissions, which calls for investigations.

“A comparison of data from counties and pension institutions revealed some discrepancies including instances where some counties reported no outstanding balances for pension fund schemes, in contrast, the reports from pension institutions showed pending amounts and examples where figures declared by counties needed to tally with what the pension institutions have,” she said.

Dr Nyakango told the committee that  Nairobi had the highest balance of Sh42.76 billion, accounting for 57.8 per cent of the total outstanding amount followed by Mombasa at Sh10.65 billion, accounting for 14.4 per cent. Tana River, Marsabit, Kiambu, Busia, Lamu, Baringo and Kwale did not report any huge amounts due to pension schemes institutions.

The budget boss said that in the last few years, the office of CoB has been monitoring pending bills, especially among county governments and it has been observed that underperformance in revenue collection leads to budget deficit and unfunded commitments.

The CoB explained that delays in approving supplementary budgets to adopt prior year pending bills in the current budget led to payment delays while delays by the National Treasury to disburse funds to county governments led to outstanding payments at the end of the financial year.

“Claims not settled within the financial year due to inadequate supporting documentation or disputes leads to pending bills, while diversion of funds for payment of pending bills to other activities and lack of adherence to systems and procedures leads to diversion of funds to other purposes,” said Dr Nyakango.

The CoB blamed the situation on political interference and refusal by successive governments to honour obligations,  Integrated Financial Management Information System (Ifmis)-related challenges such as the system allowing de-commitment of a valid Ifmis commitment creating room for more expenditure are some of the challenges faced.

Interest and penalties

She said discrepancies between pension data from counties and the pension schemes have led to questions on the outstanding amounts while there are interest and penalties that cannot be accommodated within the budget. Nyakango urged counties not to divert funds meant for pensions such as payroll deductions, which she said should be paid alongside staff salaries. 

“The National Treasury should release the equitable share of revenue raised nationally to counties in line with the funds’ disbursement schedule while counties should develop a realistic budget for their own source revenue to avoid hidden budget deficits and enable them to finance their budgets,” she said. She urged counties and pension funds to develop a plan for settling outstanding debts.

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