Doing business with counties has become risky because of routine delays in payments, resulting in bankruptcy suits and social conflicts.
The delayed release of funds by the National Treasury, coupled with poor revenue collection by the counties, has seen the counties struggle to meet their financial obligations, as their pending bills keep increasing.
But governors, who have to face the wrath of the public, say they are not to blame and accuse the National Treasury of slowing county business and job creation through frequent delays in disbursing funds.
The counties' difficulties come amid tough austerity measures planned by the Treasury, which is seeking to cut back on major spending. Legally, the counties are entitled to at least 15 per cent of the government’s audited revenues. The Public Finance Act 2012 mandates the National Treasury to disburse funds to the counties at the beginning of every month, but not later than the 15th day from the beginning of the quarter.
But this has not been the case, according to the disbursement schedule released by the Treasury. The counties have consistently suffered due to delayed and insufficient funds and, as a result, cannot repay their debts, pay staff salaries or embark on projects that touch the day-to-day lives of Kenyans.
Council of Governors (CoG) Chairman Josphat Nanok said the government has an obligation to fund the counties, and must do it in time. He said the government must, henceforth, prioritise the disbursement of county funds and sort out its own mess to prevent absorption challenges.
“The slow disbursement of funds has hampered the implementation of development projects. In fact, we are halfway through the financial year and three-quarters of counties are yet to receive their allocations,” the Turkana governor said.
In September, Sh19.5 billion was released to the counties, easing the strain on 32 that had not received any money for the 2018/2019 financial year.
The latest Kenya Gazette notice by Treasury Cabinet Secretary Henry Rotich indicates that all counties have received cash from the national government, pushing the allocation to the 47 units to Sh23.5 billion by September.
The notice showing disbursements as at September 28 indicates that Kiambu County had received Sh1.1 billion of its gazetted allocation of Sh9.3 billion. It is followed by Mombasa, whose allocation is Sh8.2 billion but had received Sh1 billion. Kitui County came third, having received Sh1 billion of its Sh8.7 billion allocation.
Going by the latest disbursement schedule, Kirinyaga has the lowest allocation so far, with Sh205 million, followed by Vihiga and Nyandarua counties with Sh222 million and Sh246 million only.
CoGs Finance and Economic Affairs Committee Vice-Chairperson Wycliffe Oparanya told the Nation the delay in disbursement has contributed to pending bills.
As at June 30, 2018, the county governments had accumulated pending bills amounting to Sh108.41 billion. The Controller of Budget (CoB) attributed this partly to the delayed disbursements by the National Treasury.
“Most suppliers have not been paid. We have watched helplessly as some of them are being auctioned because they have delivered the services but we are unable to pay because finances have not come. We must come up with a proper formula to address this issue experienced over the last five years,” Mr Oparanya said.
“Services at the National Treasury should be devolved so that county officials do not waste time travelling every week to seek approvals from the Treasury, the Central Bank and the CoB,” proposed, the Kakamega governor.
The CoG has resolved to revive the Pesa Mashinani campaign to increase county allocations. The county bosses said they must support the calls for a referendum, if the allocations are to be increased.
Already, an internal audit has been launched to see how counties have implemented devolution.
A special committee co-chaired by governors Kivutha Kibwana (Makueni) and Kiraitu Murungi (Meru) has been established to come up with the referendum question for counties touching on finances and other concerns.
“The council, through the committee, will consult the county assemblies’ forum to agree on a common position on these issues,” Mr Nanok said.
But even as the governors cry foul over delays, the CoB Agnes Odhiambo has raised concern on the counties’ high expenditure on personnel emoluments.
In her 2017/2018 Annual budget implementation report, she said the high expenditure on personnel emoluments is unsustainable and will crowd out spending on development activities.
In that period, counties spent an aggregate of Sh151.09 billion on personnel emoluments, which accounted for 49.7 per cent of the total expenditure, and an increase of 15.4 per cent from Sh130.97 billion incurred in the 2016/2017 financial year.
Only three counties, Kilifi, Marsabit, and Mandera reported expenditure on personnel emoluments that was within the maximum allowed limit of 35 per cent of their total expenditure in the 2017/2018 financial year, with 33.8 per cent, 28.7 per cent and 24.9 per cent respectively.
“There is, therefore, a need for county governments to ensure that this expenditure is contained at sustainable levels and in compliance with Regulation 25 (1) (b) of the Public Finance Management (County Governments) Regulations, 2015, which set a limit on a county government’s expenditure on wages and benefits at 35 per cent of total revenue,” Mrs Odhiambo said.
She also wants counties to improve their local revenue collection to reduce their dependence on the Treasury for top-up funds for development.
Article 209 (3) of the Constitution, 2010 empowers a County Government to generate revenue from own sources which consist of: property rates, entertainment taxes and any other tax that is authorised to impose by an Act of Parliament.
But in 2017/2018, counties collected Sh32.49 billion, representing 66 per cent of the annual target of Sh49.22 billion, and a marginal decrease from Sh32.52 billion realised in the 2016/2017 financial year.
“The low performance of local revenue collections should be addressed to avoid hidden budget deficits and facilitate full implementation of planned activities,” Mrs Odhiambo said.