The office of the Controller of Budget now wants parliamentarians to amend the law and compel county governments to clear pending bills within a specified period.
Deputy Controller of Budget Stephen Masha said Parliament should consider amending the Public Finance Management Act, 2012 and ensure counties pay creditors within 30 or 60 days, to avoid accumulation of the bills, which is hurting the devolved units.
Masha, who appeared before the Senate Finance Committee, further proposed that the law be amended to ensure that pending bills start accumulating interests from the lapse of the payment period.
The request for amendment of the law to tame the spiraling cases of pending bills in counties was made even as Treasury threatened not to disburse allocations to 15 counties that have not cleared their pending bills.
“Should counties fail to pay within this period, then pending bills should attract an interest as days go by. This will lead to a smoother implementation of the budget,” said Masha.
He added that payment should be on “First-In First-Out” basis. “This will ensure compliance with various accounting standards, which treat debt repayment as a first charge on revenue,” he explained.
He further called for the enhancement of technical capacity in budgeting and accounting in county treasuries to ensure adherence to the principles of public finance.
Treasury CS Ukur Yatani had warned counties that they had until December 1 to pay pending bills, which by October 28 stood at Sh64.2 billion. Failure to which, he said, their monies would be locked as stipulated in Section 97 of the Public Finance Management Act.
A resolution of the Intergovernmental Budget and Economic Council (Ibec) chaired by Deputy President William Ruto and whose members include all Governors, had agreed on having the bills paid by beginning of this month.
Ibec resolved that county governments would pay eligible pending bills on a priority basis as a first charge on the county revenue fund by end of financial year 2019/20.
Affected counties include Machakos (Sh1.1 billion), Nairobi (Sh21 billion), Vihiga (Sh1.8 billion), Isiolo (Sh1.09 billion), Tana River (Sh1.09 billion), Migori (Sh970 million), Tharaka Nithi (Sh921 million), Bomet (Sh893 million), Kirinyaga (Sh1.05 billion), Nandi (Sh1.12 billion), Mombasa (Sh4.07 billion), Kiambu (Sh1.56 billion), Garissa (Sh1.57 billion) and Baringo (Sh35 million).
Masha said counties that have been blocked from receiving monies should be allowed to develop a plan on how they intend to clear their bills.
“Some counties cannot clear their pending bills in one financial year. A good example if Vihiga county, which needs up to two years to pay its creditors,” he said.
He said his office in collaboration with the National Treasury would then make follow ups to ensure creditors are paid.
History of disregarding the law
Senators wondered if counties would adhere to the new laws if the current legislation is amended.
“Counties have a history of disregarding the law. We might amend the law, but they may still not adhere to the requirements,” said Machakos Senator Boniface Kabaka.
Bungoma Senator Moses Wetangula wondered if the office of Controller of Budget ever bothers to check whether the pending bills are for actual goods and services offered.
Masha said that pending bills largely arise due to overestimation of own source revenue. “When you over estimate own source revenue, there will be a deficit in the budget. As CoB, we want counties to be giving us their budget estimates early enough so that we can advise accordingly,” he said.