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Pain as governors set for exit with Sh104b unpaid bills

FINANCIAL STANDARD
By Patrick Alushula | Jan 11th 2022 | 4 min read
By Patrick Alushula | January 11th 2022
FINANCIAL STANDARD

Council of Governors (COG) Chairman Martin Wambora at COG Head Offices in Nairobi, January 5, 2022. [Boniface Okendo, Standard]

Contractors and suppliers of goods and services are staring at an extended wait for Sh103.73 billion owed to them, with nearly half of governors retiring in August and others unsure of re-election.

The 47 counties owed suppliers and contractors Sh105.7 billion by the end of June last year and only paid out Sh1.97 billion - a measly 1.9 per cent of the pending bills in three months to September.

The latest report by the Controller of Budget Margaret Nyakang’o shows 30 counties did not make any payments towards the settlement of the bills they self-reported at the beginning of the financial year.

Some counties, including Nairobi, which has the highest amount of pending bills (Sh54.32 billion), has not submitted any plan for settling the outstanding amount.

The slow pace of settling the pending bills is against the backdrop of the prevailing election fever and the fact that 21 governors are serving their second terms and therefore ineligible for re-election come August.

Eleven out of the top 21 counties in terms of the value of pending bills are devolved units where governors are serving their last terms.

Mombasa tops the list of counties with the highest pending bills, with Governor Joho set to retire in August. 

The county owes contractors and suppliers Sh4.47 billion followed by Machakos (Sh2.8 billion), Kwale (Sh2.29 billion), Narok (Sh2.17 billion) and Embu (Sh2.01 billion), where the governors are also serving their last terms.

Others in this category are Kilifi (Sh1.99 billion), Narok (Sh2.17 billion), Kilifi (Sh1.99 billion), Murang’a (Sh1.89 billion), Trans Nzoia (Sh1.89 billion), Turkana (Sh1.79 billion), Siaya (Sh919.13 million) and Migori (Sh905.87 million).

The impending change of guard leaves contractors and suppliers of goods and services to counties in limbo and adds to the Sh232.76 billion that is stuck in State corporations, ministries and departments.

Counties that did not make any payments towards pending bills in three months to September last year include Baringo, Bungoma, Busia, Elgeyo Marakwet, Homa Bay, Isiolo, Kajiado, Kilifi, Kisumu, Kwale, Lamu and Machakos.

Others are Marsabit, Meru, Migori, Nairobi, Nakuru, Nandi, Narok, Nyamira, Nyandarua, Samburu, Tana River, Tharaka Nithi, Trans Nzoia, Turkana, Uasin Gishu, Vihiga, Wajir and West Pokot.

Devolved units, unlike the national government, are synonymous with massive replacement of staff when new governors take charge - a situation that disrupts continuity - and looks set to hurt chances of contractors and suppliers getting their money on time.

This raises fears that new governors may opt for a fresh audit of the pending bills accumulated by their predecessors before agreeing to start settling them - a painful process for suppliers and contractors.

Regime changes may also see some ongoing projects stopped as new county chiefs drop focus on incomplete projects in favour of their blueprints.

The Commission on Revenue Allocation (CRA) last November asked exiting governors to settle all their pending bills before the general election to avoid saddling new administrations with legacy challenges.

“Some governors are serving their final term in office, therefore, the 2022 election is likely to see about 50 per cent change in county leadership,” said CRA Chairperson Jane Kiringai.

The public finance management framework requires that pending bills are settled on time as specified in contract agreements to avoid the accumulation of arrears.

“Failure to make payments when due constitutes a severe material breach of public finance principles as provided under Article 201 of the Constitution and violates the Public Finance Management Act, 2012,” further notes Controller of Budget Nyakang’o.

Regulation 41 (2) of the Public Finance Management (County Governments) 2015 states that “debt service payments shall be a first charge on the county revenue fund.”

Accounting officers are further required to ensure finalised and signed contracts are budgeted first before new projects are considered to ensure county governments do not default on their debt obligations.

Many counties have failed to follow these regulations and are now being urged to develop and implement pending bills payment plans to ensure the entire stock of bills are cleared in the current financial year.

But oversight institutions and county officers are struggling to ensure that the payment plans are adhered to and the pending bills settled per the law.

Counties such as Kisumu, Machakos, Makueni, Marsabit, Meru, Migori, Homabay, Isiolo and Kajiado did not settle any pending bills between June and September last year despite having prepared a payment plan to do so.

Kiambu County, on the other hand, is on the spot for accumulating pending bills amounting to Sh5.56 billion— equivalent to 34.3 per cent of its approved budget for 2021/22.

Kilifi County has Sh1.99 billion as pending bills but provided a payment plan for Sh974.84 million in the current financial year, putting at risk the payment of Sh1.02 billion that has been omitted.

“The County Treasury needs to review its pending bills payment plan to include all outstanding pending bills. Further, pending bills should be settled on a first-in-first-out basis,” advises the Controller of Budget.

Kisumu, with pending bills amounting to Sh2.09 billion, prepared a payment plan of Sh848.75 million in the current financial year and was yet to settle anything by the end of September last year. The Kisumu plan means the county does not intend to settle Sh1.24 billion or nearly 60 per cent of the pending bills in the current financial year ending June 2022. This means contractors and suppliers may have to wait until after the elections to start chasing after their dues.

Mombasa County, where Governor Joho is serving his last term, had accumulated pending bills of Sh4.47 billion as of the end of June last year and paid a paltry Sh41 million in the three months to September.

The county, however, prepared a plan to settle Sh451 million by the end of June this year, meaning Joho’s successor will inherit over Sh4 billion in pending bills.

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