Intrigues behind release of cash to devolved units

A showdown looms between the county and national governments over selective release of funds for devolved functions, with fears emerging that the next crop of governors might be slapped with huge debts.

Governors are threatening to sue Treasury Cabinet Secretary Henry Rotich for failing to release funds to counties on time, prompting them to take loans that attract high interest rates.

They also want counties to be exempted from using the Integrated Financial Management System (Ifmis), meant to enhance transparency and accountability in the public sector, until appropriate infrastructure is put in place.

But, Mr Rotich has remained adamant that the financial crisis is not as critical as portrayed by the county bosses whom he accused of demanding funds to stay idle in their county accounts.

The CS said that the Ministry gives priority to counties with high absorption rates, of previous allocations.

Mr Rotich maintained that though the Constitution and the Public Finance Management Act is clear that funds for devolved functions must be disbursed to counties by 15th of every month, the same Constitution also emphasises on the need for prudent utilisation of public funds.

“The Constitution has given us this power to optimise expenditure in the country. We want orderly flow of funds,” Mr Rotich said when he appeared before the Senate Finance Committee chaired by Mandera Senator Billow Kerrow (URP).

He said that Sh35.9 billion for counties is lying idle at the Central Bank yet there are other government programmes that require funding.

MICROMANAGING COUNTIES
Mr Rotich cited Makueni and Mandera counties with Sh2.8 billion and Sh2.7 billion at the Central Bank.

Mr Rotich said counties like West Pokot that have a balance of Sh173 million must be given priority when the Treasury releases funds, because the funds are never available at once.

“We are giving priority to counties with less than Sh500 million in the accounts. Five counties out of 47 have already received their allocations for October and more others will get the funds next week,” Mr Rotich said on Wednesday at Parliamentary Buildings.

County governments with more than Sh2 billion in their accounts will have to wait longer before additional funds can be disbursed.

He admitted that there is a bit of delays especially at the beginning of the year because the government relies on collected revenue to meet its financial obligations.

But, Senators demanded to know why the CS was ignoring a schedule approved by the Senate that indicates how the funds should be channelled to counties.

They claimed Mr Rotich was usurping the role the Senate and the Members of County Assemblies (MCAs) by purporting to oversight the devolved units.

“Does it mean the schedule that the Senate passed to guide your office is just a mere paper? The law does not give you powers to decide how much money should go to a particular county,” Mr Peter Mositet (Kajiado, TNA) said.

Dr Boni Khalwale (Kakamega, UDF) claimed that Mr Rotich was still stuck with the old Constitution where unused funds was returned to the Treasury.

“Don’t attempt to micromanage counties in the guise that they are not spending funds. Why do you bother looking at those accounts when you know the money will not be returned to the national government? Dr Khalwale asked.

Mr Kerrow said counties were grappling with poor delivery of essential services due to insufficient funds.

“There is a serious cash flow challenges due to the delays in disbursement of funds to counties. The country shall end up with billions of shillings in form of loans taken by counties,” Mr Kerrow said.

FIGHTING E-PROCUREMENT
He said the next governors would inherit huge debts because some governors are taking short term loans that the next office holders might find difficult to clear.

The Cabinet Secretary said debts borrowed by counties are not supposed to extend to the other financial year and warned that governors who fail to comply with the law when borrowing would be individually held liable.

“The Constitution allows short term borrowing but at the end of the financial year, the accounts must be zero. You can’t carry a debt to another financial year because by the end of the year, the counties will have received all their allocations,” he said.

Mr Kerrow faulted claims by the CS that poor cash management practices is to blame for some governors missing out on the funds.

He said the requisition forms for the funds clearly require the counties to specify whether the funds are for development or recurrent expenditures.

“I don’t know if you if you have seen the application forms for the funds. The funds still at the counties have been committed to programs and are waiting to be paid when the projects are completed,” Mr Kerrow said.

Mr Rotich said governors are resisting online procurement because they fear being held liable for financial flaws at the counties.

He said it was improper for governors to push for suspension of the system on grounds that it was not working in counties that had Internet connectivity challenges.

Mr Rotich said they are enhancing capacity at the counties on financial management and e-procurement.

“We are building capacity for those counties that face challenges. Unfortunately we train staff and later on they are transferred or sacked,” Mr Rotich said.

LACK OF INFRASTRUCTURE
As a result, some counties have had to wait for qualified personnel to travel from Nairobi to their counties to assist them operate the system.

He said abandoning the system is not an option but the government would continue training the county staff.

The Senators criticised the government for rolling out the system to counties before ensuring they had the right infrastructure in place to support it.

“Even after money has been credited to county accounts, governors can’t access the funds because of system failures. On paper the cash flow is there but in effect there is no money at the counties,” Mr Kerrow said.

The senators cited counties in northern Kenya as the most affected because they lack electricity and high speed internet.