11 December 2018

Kenya: Counties' Nightmare in Paying Huge Debts

Counties have been lately put under intense pressure to pay debts running into billions of shillings they owe contractors and suppliers.

Treasury Cabinet Secretary Henry Rotich and senators say counties must immediately clear the debts, some of which go back before the advent of devolution as they were inherited from the previous local authorities.

However, while paying debt should not be such a tall order when funds are available, the problems facing counties run deeper than just having enough cash to pay up.

Counties have been so overwhelmed by the debts that they have been compelled to form task forces to help them pore through the maze of documents as they seek to authentic every bill before them.

But even after creating such teams, a number of counties are still struggling to deal with the huge debts that are threatening to cripple their operations.

Kisii Governor James Ongwae aptly captured the dire situation at the counties when he appeared before the Senate last year in April.

"Telling a county to pay Sh1 billion can be very difficult. The fakeness of some of the debts is shocking. Somebody (has been) asking to be paid Sh7 million for doing nothing," he said.

Nairobi City County Government which inherited Sh58 billion bill appointed a task force led by veteran constitutional lawyer and former anti-graft tsar PLO Lumumba. However, eight months into the job, there is no indication as yet whether the team has made any progress with the debt currently standing at Sh64 billion.

Periodic statements

Though Governor Sonko promised periodic statements on the taskforce's progress, he has gone mute indicating the Herculean task involved in streamlining the county government's procurement system to stem runaway graft.

The task force which has four months left in its tenure is also tasked with coming up with a foolproof procurement system for Nairobi county as mandated by Governor Mike Sonko.

The task force was also expected to give an exact account of the genuine debt and recommend payment. For those found to be fraudulent, the team is requited to initiate criminal proceedings against the suspects.

Laikipia Governor Ndiritu Muriithi inherited a Sh1.3 billion contractor and supplier claims which he placed before an audit team upon assuming office.

The team verified claims worth Sh500 million while the rest, Sh800 million was found to lack prerequisite documents with some only having an invoice to back their claims.

In February, the then acting County Secretary, Karanja Njora, told a meeting called by the County Assembly Public Accounts Committee (PAC) that out of the 908 pending bills inherited from the previous administration, 434 had no supporting documents.

Some contracts were said to have been even awarded verbally while the cost of some projects were highly inflated.

"In one of the files from a claimant, it is indicated that he rehabilitated 15 kilometres of road while a visit to the ground has revealed that only five kilometres was done. We shall only pay for the five kilometres," Mr Njora told the committee.

"We inherited a bill of Sh1.1 billion which we were expected to pay. But surprisingly, nearly half of the claimants do not have any document to pursue the payments and the money they are demanding from us is about Sh500 million."

On his part, Nakuru Governor Lee Kinyanjui last July allowed release of Sh1.2 billion to settle contractors' bills with a pledge to settle any other claims of the Sh2.8 billion pending bills once established to be genuine.

"The audit has revealed massive graft within the procurement department that necessitated a review of processes with greater emphasis on adopting a digitised system that facilitates a write-protected oversight mechanism," he said.

The audit report, generated by a team formed to look into the authenticity of the debts, showed that procurement laws were ignored, the Public Finance Management Act violated and massive corruption was the order of the day.

"Most pending bills lacked crucial records such as engineers report/certificates, project inspection reports, and joint measurements among others," read part of the report dated January 8, 2018.

Pending bills

The pending bills, said the report, were also linked to failure (by the county government) to adhere to budget timelines as provided in the Public Finance Management Act/ Regulations," the report further stated.

According to the audit, the current Nakuru County administration inherited from the defunct local authorities debt amounting to more than Sh1 billion while pending bills from the previous county administration led by Kinuthia Mbugua were estimated at more than Sh3 billion.

Last month, Meru Governor Kiraitu Murungi's received authorisation from his assembly members to allocate Sh2 billion to settle pending bills.

Up on assuming office, Mr Kiratu formed a pending bills verification committee to examine a Sh1.3 billion debt incurred by his predecessor.

Pundits aver that the lack of proper continuity from one administration to another is one of the reasons the debts have been filing.

Governors fail to adhere to procurement regulations and dish out tenders to allies without proper documentation.

When a new administration comes in, they are unable to lay their hands on proper documents to supports claims and that is where the debt nightmare starts.

Failure to conduct proper handover from the staff of an outgoing regime to the incoming one has also been cited as the cause of a lot of loose ends in country transactions.

With such a mess, new government are forced to carry out a forensic audit, which takes long making the debts to continue piling up.

Despite these complicated challenges, CS Rotich insists that counties have to pay as soon as possible.

"First time governors must continue paying pending bills they inherited as government is perpetual," he said.

The government, the CS added, is mulling a change in public procurement regulations to cap delays in payment of claims at 60 days for both county and national government debts.

He said bureaucracy within public offices had frustrated genuine businesses while perpetrating graft that made implementation of projects costly.


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