Ballooning wage bill gobbles up cash for counties’ development

Latest data on expenditure indicates compensation for employees in counties has increased by 131 per cent from Sh64 billion in the 2013/2014 financial year to Sh148 billion in the 2017/2018 period.

The growth of the wage bill to unsustainable levels in counties is threatening the success of devolution as county executives and assembly officials take the lion’s share of expenditure.

This comes amidst a revenue shortfall in the national government that could cut the equitable share that counties receive from Treasury in next year’s budget.

Recent data on county government expenditure indicates compensation of employees has increased by 131 per cent from Sh64 billion in the 2013/2014 financial year to Sh148 billion over the 2017/2018 period.

This means salaries and remuneration take close to 40 per cent of the county expenditure while another 22 per cent (Sh89 billion) is spent on administrative costs.

This excludes other payments of allowances and consultancy fees paid out during other county operations and projects, leaving little spending on development projects and social benefits.

Some counties splurged more than half of their budgets on employees’ salaries in disregard of the Public Finance Management (PFM) Act 2013.

Counties that recorded the largest wage bill in absolute terms during the 2017/2018 year included Laikipia, Homabay and Nyeri which spend Sh2.1 billion, Sh2.9  billion and Sh2.9 billion respectively on the compensation of employees - representing 50 per cent of total revenue.

This comes despite warnings from the Auditor General Edward Ouko and the National Treasury against the wasteful allocation of funds to salaries and allowances.

Kakamega County, which recorded the highest absolute wage bill paying Sh5.3 billion, consumed more than 48 per cent of the county’s Sh11 billion spending bill.

This is despite the Auditor General Edward Ouko raising significant queries on the county’s staff costs in the previous financial year.

“Included in the use of goods and services figure of Sh388 million is an amount of Sh44.9 million being per diem allowances paid out to staff on duty away from their workstation,” said the Auditor General following an audit on Kakamega County Assembly finances for the period ended June 2017.

“However, the cash advancements were directly expenses without necessary documents to support the expenditure.”

Mr Ouko found an extra Sh7 million paid out to county assembly officials in sitting allowances for attending committee meetings even though they never attended such meetings.

“Review of the attendance register maintained for various committee meetings revealed that sitting allowances were paid to more number of members than the number registered in attendance and which should have been recovered,” said Ouko in his audit report.

Some counties, on the other hand, recorded significantly lower wage bills as a proportion of their expenditure, including Nairobi (Sh590 million), Tharaka Nithi (Sh131 million) and Narok (Sh3.1 billion).

The high spending pattern is worsening financial constraints experienced by many counties, with some turning to costly and opaque commercial facilities from the domestic and external markets to bridge budget deficits.

In the last financial year, Nakuru, Mombasa and Nairobi counties paid the highest interest on their debt, with Nakuru spending Sh2.1 billion out of its Sh10.8 billion expenditure as interest.

Last month, National Treasury Cabinet Secretary Henry Rotich released a circular warning that county governments, government ministries, and departments were violating the Public Finance Management Act through taking overdrafts and loan facilities to fund budgetary activities.

“The mandate of mobilising external resources, which include loans and grants, is vested in the Cabinet Secretary to the National Treasury and Planning,” he said in the terse circular.

“Given the presidential directive, all government accounting officers must ensure that all ongoing projects are completed before initiating new projects and sanctioning of new projects must receive express authority from the National Treasury,” read the circular in part.

An analysis of spending patterns across the counties, however, indicates that governors will continue to procure more debt in the next financial year. 

This is despite Treasury’s warning, precipitating the perennial tussle between the two administrative levels.

Treasury earlier this year proposed reducing the equitable share due to counties as part of the central government’s austerity measures to free up more resources to bridge the deficit in the 2018/2019 budget.

The proposal that would have seen the 47 counties lose tens of billions of direct transfers was, however, shot down in Parliament, forcing the Government to turn elsewhere for budget cuts.

Kenya’s public debt has steadily risen over the past three years, with the total amount crossing the Sh5 trillion mark earlier this year, raising new concern the country could be unable to meet its future obligations.

The high county wage bill is likely to see the National Treasury propose more budget cuts to counties in the next financial year or use those flouting of the PFM Act as a justification for more delays in disbursing funds.

This means fewer resources for spending on development projects to improve the economic fortunes of county residents as well as higher debt that could grow to unsustainable levels, creating the same financial burdens that sunk the now-defunct local authorities.