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Treasury mandarins who burned economy with cooked figures

Tuesday November 19 2019

Henry Rotich and Kamau Thugge

Former National Treasury Cabinet Secretary Henry Rotich (right) and former Treasury PS Kamau Thugge in the Anti-Corruption Court on July 23, 2019. FILE PHOTO | NATION MEDIA GROUP 

OTIATO GUGUYU
By OTIATO GUGUYU
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The last thing former Cabinet Secretary Henry Rotich and Dr Kamau Thugge did before being hounded out of office was pay themselves Sh3.7 million each as allowances for preparing the 2019 budget.

It turns out the current budget, and previous ones were shambolic, riddled with cooking books and hiding billions of shillings that were secretly plugged with additional debt.

The Nation has uncovered patronage practised by the Rotich-Thugge leadership that propagated a cultish silence at Treasury even while the Constitution was being disregarded and debt, and GDP figures altered.

CLOSED CLUB

According to sources who spoke on condition of anonymity, Treasury has been a closed club where the Public Service Commission has little say. Instead, the men who have run Kenya into an economic storm are hand-picked and sneaked into Treasury building through a backdoor of Kenya Revenue Authority.

“This is an issue that has been raised by the Kenya National Audit Office since 2013, but the management has been going slow on it. It is something that is being worked on to get Treasury to advertise for the top posts,” a senior source with direct knowledge of Treasury workings, but who is not authorised to speak to the press, told Smart Company.

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Another senior official, who also talked to this paper, said that only one director-general Public Debt Management Office, where Haron Sirima sits, had been hired competitively with the rest serving in crucial posts on contracts.

“You can’t give people one year renewable contracts and expect them to have a long-term view; they will just work with ministries that give them kickbacks because their thinking is short-term,” a source said.

FODDER FOR ONLINE JOKES

As the country stares at the face of debt distress and extremely vulnerable to any shock from drought to inflation, economic policy that seems to contradict is not helping the President with some suggesting Uhuru Kenyatta appoints an economic council to advise him akin to the Kibaki days.

While amiable on camera, mixing freely with people and churning fodder for online jokes and memes, Mr Kenyatta is feared by his men.

At an August morning meeting, a dejected team of Treasury officials made their way to State House; their bosses had been fired and locked up, and Labour CS Ukur Yatani and Dr Julius Muia named in acting capacity.

SHOCKING TRUTH

The Treasury mandarins had given the new CS the reality, the truth, Kenya’s debt had surpassed the 50 percent GDP in December 2016, the budget had a Sh100 billion hole that could not be funded, the numbers had been fiddled so much that the debt figures appearing in the budget had written out over Sh70 billion.

“The CS is bold. He told the President the truth, and he was shocked. The President asked the CS to redo the budget, and ostracised the team, saying, if this is the team that helped the other leadership cover up, then he had no confidence in them,” a source privy to the August meeting told Smart Company.

CS Yatani has opened a can of worms that has exposed the National Treasury for what it really is; his frank admission to Parliament, journalists and the nation at large has exposed the fact the Kenya is running a Sh3 trillion budget on empty coffers.

Yatani said the government expected revenue shortfalls following underperformance of Sh123.5 billion last year and last minute adjustments to Finance Bill, 2019, in August.

However, instead of cutting spending, Treasury moved the money around to productive sectors rather than make budget cuts as President Kenyatta had suggested in August.

ORCHESTRATED FLAWS

“Expenditure projections for fiscal 2019/20 have been revised to accommodate the weak revenue performance through trade-offs and reallocations of the existing budgetary provisions and additional expenditure on productive areas of spending across the government,” Yatani said.

In fact, the team drew up a supplementary budget that sought to increase spending by 2.8 per cent to Sh3.13 trillion in its 2019/20 budget, as seen in parliamentary documents tabled last week.

The ministry blew spending by Sh85.5 billion for developmental projects and an additional Sh6.5 billion for counties in a budget review that will only reduce recurrent expenditure by Sh5.6 billion.

The President was right; the team of Treasury mandarins had lost confidence, there was little they could change having created the budget in the first place and addicted to debt-funded expensive budgets.

Sources indicate that each member of the team has had his fair share of blame. Take Bernard Ndungu for instance, the current position of Director General Accounting Services & Quality Assurance, who is said to have led to the accumulation of short-term Treasury bills to keep the government running.

“Ndungu has kept the pressure to borrow at all costs, saying, he needed money to pay counties, keep things running, now we have Treasury bills of up to Sh900 billion and we went for a further almost Sh70 billion,” the source said.

BACKDOOR APPOINTMENTS

Despite holding the senior position, Ndungu was never competitively appointed. He joined Treasury in 2013 as the accountant-general.

Sources say the former director at PwC was sneaked in through KRA where his tenure is renewed yearly for a position that should be held for a three-year term. He is currently seeking a renewal.

To push the impunity, Ndungu was appointed to the board of KRA on behalf of Treasury, the same organisation that practically pays him.

“Kindly direct your questions to the PS and the CS as the appointing authorities. Otherwise happy to address policy and technical issues relating to my directorate,” Ndungu said in a text message. Emails sent to Treasury and KRA went unanswered by the time of going to press.

Last year when President Kenyatta appointed Gerome Ochieng as the Principal Secretary for ICT, a Treasury source contacted this writer with information that his replacement as the Integrated Financial Management Information System (Ifmis) director was being engineered in the clandestine fashion that was the norm at Treasury.

Stanley Kamanguya, linked to Ndungu, was a consultant from ICT Authority when he was seconded to Treasury where he took over the position as head of Ifmis.

“The team at ICT is very demoralised. They have forced an accountant to head Ifmis and appointed him arbitrarily instead of going through PSC,” the source said at the time.

Kamanguya says he has clearance from Public Service, adding that we should not obtain information from the grapevine. “Nobody can sit at the office without PSC clearance. Hiring can be done through secondment or advertisement,” he said.

INHERITED BUDGET FLAWS

While it was during his time that governors raised the alarm over suspect items that were sneaked into county budgets, which include South Sudan peace process, State House affairs and Free Primary Education, he says the issues were there long before he came to office.

According to Kamanguya, the blame lay both on the counties as with Treasury since county officials needed to check their budgets before signing them off as it was not the responsibility of Treasury to draft each items for counties.

He said the matter was taken up all the way to the Senate after a committee did a report that included the Council of Governors, and the controller of budget.

“The report identified broader issues, including capacity of users, requirements were developed, things that were there before I showed up at Treasury,” he said.

“Recommendations were made including the role of different entities and ensuring proper records,” he said.

DOUBLE-DEALING

Dr Geofrey Mwau, Director-General and National Treasury adviser on Intergovernmental Fiscal Relations Fred Owegi have also been hired on contract from KRA, while Mr Albert Mwenda holds two crucial positions despite the fact that he is not a civil servant.

Mr Mwenda is both the acting director-general, budget, fiscal & economic affairs and acting director intergovernmental relations.

“These are the people that handle the trillion-shilling budget and debt and they are acting, or on short term contracts,” the source said.

The only position filled by the public service was the director-general public debt management office where Mr Haron Sirima, who was deputy CBK governor in 2011, served as the deputy director of debt management at the Finance ministry.

His appointment was fought so hard that despite the fact that he was appointed on June 5, 2018, he was shut out of Treasury building and forced to work from his private office on Nairobi’s Mama Ngina Street for several months.

During this time, director of resource mobilisation at the unit Jackson Kinyanjui was still listed as acting director-general on Treasury’s website. He has since been kicked out and charged alongside CS Rotich and Dr Thugge.

“He came in after Christmas (2018) and has been at Treasury for a while now,” a source not authorised to speak to the press, told this journalist in February this year.

NEW APPOINTMENTS

Sirima is now going ahead to strengthen his office with an official policy published last week where he seeks to appoint agents to provide technical advice or undertake administrative functions for the management of debts provided that control and accountability for these functions remain with the Cabinet Secretary.

He, however, insists that the process must be competitive, in line with the new public debt policy that reads: “Competitively recruit and appoint registrar of the national government Securities.”

Treasury sources say some faces have been moved around despite being unable to show capacity elsewhere.

Take acting director general, public investments & portfolio management, Mr Stanley Kamau. He served as the director at public private procurement, where Kenya has had nothing to show for PPP projects.

Now he was moved to PIPM after Esther Koimett was moved to Transport as Principal Secretary and directly oversees government interest in parastatals and companies such as Safaricom.

THREATENED TO PROSECUTE

While he is supposed to coordinate revenue from State-owned companies, regulators and private firms, the role has been given to KRA after Treasury was unable to get regulators to submit 90 per cent of their surpluses.

Kenya Revenue Authority, which was given the mandate to collect the money for Treasury, has even threatened to prosecute 10 State agencies over Sh12 billion they failed to hand over to the taxman last year.

KRA collected Sh9.5 Billion from nine regulatory authorities leaving 10 others in arrears.

The National Treasury collected Sh24.6 billion in the last financial year from parastatals, regulators and private firms where it has shareholding against a target of Sh36.7 billion.