Counties waste taxpayers’ billions on hefty allowances

Auditor General Edward Ouko. [File]

County governments are wasting hundreds of millions of shillings in dubious projects and travel allowances, undermining the gains made from devolution in recent years, according to an audit report.

An analysis by The Financial Standard on the audit reports from the Auditor General’s office on counties’ expenditure has revealed mouthwatering levels of waste and misappropriation of public funds in blatant disregard of the law.

This comes even as President Uhuru Kenyatta talks tough on fighting corruption and casts doubt on the Government’s ability or political goodwill to prevent the looting of tax-payers monies at both levels of government.

A report by the National Taxpayers Association (NTA) indicates that most of the 47 counties have stagnated in raising own source revenue and are relying more on central government transfers.

This is against guidelines from the National Treasury.

At the same time, counties are holding on to Sh44.3 billion in pending bills owed to suppliers as of June 2018.

The figure was expected to have risen considerably over the last year.

In Garissa County, for example, the county administration is accused of growing the wage bill by more than 60 per cent and flouting public finance legislation. This prompted the Auditor General to conclude that county officials flouted the law and mismanaged public funds.

 “The County Executive wage bill increased by Sh1 billion (69.4 per cent) compared with the previous financial year,” said the Auditor General in his report in part.

The County Executive further spent Sh17 million for consultancy services on the security survey and threat analysis without following procedure.

Tharaka-Nithi County, on the other hand, spent Sh565 million on local and domestic travel, with more than Sh116 million of this flagged as unsupported expenditure.  This trend was replicated across several counties where county officials drew millions in allowances for domestic travel.

Turkana County, which is facing severe hunger, is reported to have spent Sh247 million in domestic travel, of which Sh56 million was unsupported while Nandi County’s local travel bill for the 2016/2017 financial year hit Sh323 million.

The hefty perks have raised concern that the 47 administrative units are allocating more of tax-payers funds towards county officials and leaving little for development expenditure. Majority of the counties struggled to absorb more than 40 per cent of their developmental budgets with many averaging between 25 and 40 per cent absorption rates.

Early this year, Treasury released new guidelines promising tighter financial scrutiny on counties with the State projecting to grow counties’ internally generated revenue four-fold.

Article 175 (b) of the Constitution indicates that the 47 counties should not only devolve political and administrative functions but also fiscal functions with internally generated revenues forming the main channel for raising funds.

In the 2019/2020 budget policy statement, the Treasury has recommended a review of laws on county taxes as well as a stricter implementation of expenditure laws to reduce counties’ reliance on national government transfers.

 “As far as County Governments’ fiscal performance is concerned, the main challenges relate to weaknesses in own-source revenue (OSR) and the unstable pattern of financial activity within each budget period,” said the Treasury in part.

In the last financial year, County Governments had targeted to raise Sh49.2 billion in own-source revenue but only managed to collect Sh32.5 billion, similar to collections realised in the 2016/2017 financial year.  “In general, Counties’ OSR performance has deteriorated in the last three years both as a proportion of targeted collections and in absolute terms,” explains the Treasury in part. Treasury data indicates counties’ locally generated revenue funded 15.5 per cent of expenditure in the 2013/2014 financial year, which fell to 13.1 per cent in 2014/2015 and 11.9 per cent in 2015/2016.

In the last financial year, counties managed to fund just ten per cent of their budgets from own source revenue.

This means the national government will be hard pressed to support the devolved units for much longer, putting a strain on the Treasury that is already struggling to raise enough revenue to fund a Sh6 trillion public debt burden.

It also means counties will continue to accrue billions in pending bills owed to suppliers and holding back crucial cash flow necessary for these businesses, most of which are Small and Micro Enterprises (SMEs), to remain afloat. 

In the 2016/2017 financial year, for example, Wajir County stood out for having Sh1.1 billion in pending bills of which Sh317 million was in unsupported expenditure. Mandera County reported a 30 per cent drop in own-source revenue from Sh80 million collected in the 2015/2016 financial year to Sh55 million reported last year.

Tharaka Nithi County recorded Sh666 million in pending bills with the Auditor General giving the county administration an adverse opinion for non-compliance with Article 222 (6) of the Constitution. “Public money has not been applied lawfully and in an effective way,” said the Auditor General in part.

Some of the key outstanding issues include unbanked and un-reconciled local revenue amounting to Sh96 million with county officials racking up Sh540 million in domestic expenditure of which Sh102 million was unsupported.

Embu County recorded an almost 50 per cent drop in own-source revenue from Sh803 million collected in the 2015/2016 financial year to Sh391 million collected in the last financial year.

“Sh10 million was not spent by the County Executive as part of the Sh174 million that was set aside to support education,” said the report in part.

The Treasury has proposed a set of legislative and policy interventions that it says, if implemented, could grow counties’ own source revenue from the current Sh32 billion to Sh120 billion.

This follows a policy document published last year and approved by Cabinet whose implementation is scheduled to commence in June this year.

 “To support the implementation of this policy, the National Government is initiating legislative reforms at the national level intended to improve the performance of counties’ revenue sources including property and entertainment taxes; business and liquor licences; tourism levies; outdoor advertising fees and several decentralised user charges,” explains the Treasury in part.

Aside from assisting counties to determine their revenue potential and improve revenue forecasting, the policy will also standardise institutions and processes charged with managing revenue collection at the counties.